Inmet Mining Corporation
TSX : IMN

Inmet Mining Corporation

May 01, 2007 13:19 ET

Inmet's 2007 First Quarter Earnings 27 percent Higher than the Same Quarter Last Year

TORONTO, ONTARIO--(Marketwire - May 1, 2007) -

All amounts in Canadian dollars unless indicated otherwise

Highlights



- Higher net income per share

Net income per share this quarter was $2.09 compared to $1.65 for the
same period in 2006.

- Higher operating cash flow per share

Operating cash flow before working capital increased to $110 million
or $2.28 per common share compared to $66 million or $1.36 for the
same period in 2006.

- On target for production in 2007
We produced 19,500 tonnes of copper, 22,100 tonnes of zinc and
56,000 ounces of gold in the first quarter. This means we are on
target to achieve our annual objective of 83,000 tonnes of copper,
87,000 tonnes of zinc and 249,000 ounces of gold.

- Strong performance at Cayeli

Cayeli milled 259,000 tonnes in the first quarter and is on target to
process 1.1 million tonnes in 2007.

- Revised capital cost estimate for Las Cruces

Now that detailed engineering is at the final stage and construction
is well underway, we have increased our capital cost estimate by
22 percent to (euro)463 million, which includes (euro)40 million of
contingency. We still expect production to begin in the first quarter
of 2008.

- Agreement to sell shares of Wolfden Resources Inc.

Zinifex Canadian Enterprises Inc. made a cash offer of $3.81 per
share to acquire all of the issued and outstanding common shares of
Wolfden Resources Inc. We entered into a lock-up agreement with
Zinifex relating to this offer, and expect the transaction to close
in May. We own 13.5 million Wolfden shares and will record a gain of
approximately $12 million in net income when the transaction closes.


Key financial data

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

three months ended March 31

2007 2006 change

FINANCIAL HIGHLIGHTS

(thousands, except per share amounts)

Sales
Gross sales $ 286,614 $ 210,234 + 36%
Net income
Net income $ 101,078 $ 79,561 + 27%
Net income per share $ 2.09 $ 1.65 + 27%
Adjusted net income(1) $ 101,078 $ 55,656 + 82%
Adjusted net income per share(1) $ 2.09 $ 1.16 + 80%
Cash flow(1)
Cash flow provided by operating
activities (before working
capital) $ 109,894 $ 65,525 + 68%
Cash flow provided by operating
activities per share (before
working capital) $ 2.28 $ 1.36 + 68%
-------------------------------------------------------------------------

OPERATING HIGHLIGHTS

Production(2)

Copper (tonnes) 19,500 19,500 -
Zinc (tonnes) 22,100 18,600 + 19%
Gold (ounces) 56,000 62,600 - 11%

Cash costs

Copper (US $ per pound)(1),(3) $ 0.10 $ 0.40 - 75%
Gold (US $ per ounce)(1) $ 448 $ 372 + 20%
-------------------------------------------------------------------------

As at March 31 As at December 31
FINANCIAL CONDITION 2007 2006
--------------------------------------

Current ratio 5.7 to 1 5.1 to 1
Long-term debt to total
capitalization 11% 10%
Net working capital balance
(millions) $ 728 $ 666
Cash balance (millions) $ 698 $ 640
Shareholders' equity (millions) $ 1,166 $ 1,073

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

(1) See reconciliation of non-GAAP measures on page 29 to see how these
costs are calculated.
(2) Inmet's share.
(3) Cayeli and Pyhasalmi zinc production and Ok Tedi gold production are
included as metal credits.

The business environment

The following have a significant impact on our business.

-------------------------------------------------------------------------
three months ended March 31
2007 2006
-------------------------------------------------------------------------

Metal prices
Copper (per pound) US $ 2.81 US $ 2.55
Zinc (per pound) US $ 1.38 US $ 1.08
Gold (per ounce) US $ 559 US $ 454
Treatment charges(1)
Copper (per tonne) US $ 73 US $ 87
Zinc (per tonne)(2) US $ 124 US $ 99
Freight charges(1)
Copper (per tonne) US $ 30 US $ 34
Zinc (per tonne) US $ 24 US $ 15
Statutory tax rates

Cayeli 27% 30%
Pyhasalmi 26% 26%
Ok Tedi 37% 37%

Exchange rates

1 US $ to C$ $ 1.17 $ 1.15
1 euro to C$ $ 1.54 $ 1.39
-------------------------------------------------------------------------

(1) Per dry metric tonne of concentrate.
(2) Zinc treatment charges are based on a zinc price of US$1,400 per
tonne and reflect provisional terms.


Metal prices

Higher copper and zinc prices increased our gross sales this quarter by $29 million. Higher metal prices increased our earnings and cash flow, but also increased certain costs such as income taxes and the royalties we pay at Cayeli.

Treatment charges

Treatment charges are one component of smelter processing charges. We also pay smelters for content losses and price participation. Copper treatment charges were lower than the first quarter of last year because we negotiated more favourable contract terms with smelters. We expect zinc treatment charges to be significantly higher in 2007 compared to 2006 once contract negotiations conclude. In exchange, we are paying significantly less price participation when metal prices are higher.

Freight charges

High fuel prices, the ice season in the Baltic, and lack of available vessels to meet higher demand from China, resulted in a 108 percent increase in shipping rates as measured by the Baltic Dry Index. The copper freight charge per tonne we realized this quarter was six percent lower than the same period last year, mainly because we received a more favourable rate under a new sales contract for Troilus concentrate. The zinc freight charge we realized this quarter was significantly higher because shipments last year were made to destinations closer to our operations.

We anticipate generally higher freight rates this year compared to 2006.

Exchange rates

Canadian dollar revenue and earnings were higher because the value of the Canadian dollar relative to the US dollar and the euro was lower this quarter than in the first quarter of 2006.

First 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 these forward-looking statements are reasonable. However, actual events and results could be substantially different because of the risks and uncertainties associated with our business or events that happen after the date of this press release. You should not place undue reliance on forward-looking statements. As a general policy, we do not update forward-looking statements except as required by securities laws and regulations.



Our financial results

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

(thousands, except per share amounts) three months ended March 31
2007 2006 change
-------------------------------------------------------------------------

EARNINGS FROM OPERATIONS(1)
Cayeli $ 59,572 $ 30,219 + 97%
Pyhasalmi 31,442 19,166 + 64%
Troilus 2,812 (937) + 400%
Ok Tedi 40,015 37,557 + 7%
Other (488) (486) -
-------------------------------------------------------------------------
133,353 85,519 + 56%
-------------------------------------------------------------------------

DEVELOPMENT AND EXPLORATION

Corporate development and exploration (842) (1,454) + 42%
-------------------------------------------------------------------------

CORPORATE COSTS

General and administration (2,840) (2,370)
Investment and other income 7,290 1,793
Interest expense (438) (391)
Income and capital taxes (35,650) (27,441)
Non-controlling interest 205 -
-------------------------------------------------------------------------
(31,433) (28,409) - 11%
-------------------------------------------------------------------------
Net income before other items $ 101,078 $ 55,656 + 82%
Gain on sale of Izok - 23,905 -
-------------------------------------------------------------------------
Net income $ 101,078 $ 79,561 + 27%
-------------------------------------------------------------------------
Basic net income per share $ 2.09 $ 1.65 + 27%
-------------------------------------------------------------------------
Diluted net income per share $ 2.09 $ 1.64 + 27%
-------------------------------------------------------------------------
Weighted average shares outstanding 48,278 48,097
-------------------------------------------------------------------------
(1) Sales less smelter processing charges and freight, cost of sales,
depreciation and provisions for mine rehabilitation.

Key changes in 2007

-------------------------------------------------------------------------
(millions) three months ended March 31
-------------------------------------------------------------------------

EARNINGS FROM OPERATIONS

Sales

Higher metal prices denominated in Canadian dollars $ 41
Higher sales volumes 15

Costs

Higher operating costs (5)
Other (3)
-------------------------------------------------------------------------

Increase in earnings from operations, compared to 2006 48

CORPORATE COSTS

Higher taxes from higher income (8)
Gain on sale of Izok recorded in the previous year (24)
Higher interest and dividend income 6
-------------------------------------------------------------------------
Increase in net income, compared to 2006 $ 22
-------------------------------------------------------------------------


Understanding our performance

Metal prices and exchange rates

Copper prices increased during the latter part of this quarter. The average London Metal Exchange (LME) copper cash price this quarter was US $2.69, compared to US $2.24 in 2006 - an increase of 20 percent. Zinc prices were also higher this quarter. The average LME zinc cash price this quarter was US $1.57, compared to US $1.02 in 2006 - an increase of 53 percent. The price of gold continued to increase this quarter, mainly because of the decrease in value of the US dollar. The gold price we ultimately realized was slightly lower because we had hedged some of our production at Troilus and Ok Tedi.

The decreasing value of the Canadian dollar relative to the US dollar and the euro increased our gross sales by $8 million compared to the first quarter of last year, but it also increased our costs. Net income this quarter is therefore $4 million higher than the first quarter of last year because of foreign exchange differences.

The following table shows the metal prices, in US dollars and Canadian dollars, and exchange rates we realized this quarter.



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

three months ended three months ended
March 31 March 31
2007 2006 2007 2006 C$ change
-------------------------------------------------------------------------
Copper (per pound) US $2.81 US $2.55 C$3.29 C$2.93 + 12%
Zinc (per pound) US $1.38 US $1.08 C$1.61 C$1.24 + 30%
Gold (per ounce) US $ 559 US $ 454 C$ 654 C$ 522 + 25%
-------------------------------------------------------------------------
1 US$ to C$ $1.17 $1.15
1 euro to C$ $1.54 $1.39
-------------------------------------------------------------------------


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 investments and provisions for mine rehabilitation.



1. Gross sales were up by 36 percent this quarter...

-------------------------------------------------------------------------
three months ended March 31
(thousands) 2007 2006 change
-------------------------------------------------------------------------

Gross sales by operation

Cayeli $ 117,734 $ 71,215 + 65%
Pyhasalmi 65,340 49,109 + 33%
Troilus 30,242 18,683 + 62%
Ok Tedi(1) 73,298 71,227 + 3%
-------------------------------------------------------------------------
$ 286,614 $ 210,234 + 36%
-------------------------------------------------------------------------

Gross sales by metal

Copper $ 143,324 $ 119,083 + 20%
Zinc 89,781 53,404 + 68%
Gold 41,057 29,249 + 40%
Other 12,452 8,498 + 47%
-------------------------------------------------------------------------
$ 286,614 $ 210,234 + 36%
-------------------------------------------------------------------------

(1) Our 18 percent share of Ok Tedi's sales
... because of higher copper, zinc and gold prices
-------------------------------------------------------------------------

(millions) three months ended March 31

-------------------------------------------------------------------------
Higher copper prices, denominated in C$ $ 8
Higher zinc prices, denominated in C$ 21
Higher gold prices and other metal prices, denominated in C$ 12
Higher sales volumes 35
-------------------------------------------------------------------------
Increase in gross sales, compared to 2006 $ 76
-------------------------------------------------------------------------


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 metal's forward price 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 we settle the sale (finalization adjustment).

We made the following finalization adjustments for sales recorded in the fourth quarter of 2006 that were settled this quarter:

- we reduced copper sales by US $1 million

- we reduced zinc sales by US $5 million.

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

- 20 million pounds of copper provisionally priced at US $3.07 per

pound

- 36 million pounds of zinc provisionally priced at US $1.47 per pound.

The finalization adjustment we record for these sales will depend on the actual price we receive on final settlement.

...and also because of higher sales volume



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

three months ended March 31

2007 2006 change

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

Sales volumes

Copper (tonnes) 20,000 17,600 + 14%

Zinc (tonnes) 25,200 19,400 + 30%

Gold (ounces) 61,800 55,000 + 12%

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


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

Sales volumes of copper and gold this quarter was higher than the first quarter of last year because of the timing of shipments at Troilus and Ok Tedi in the previous year. Sales volumes of zinc were higher because of higher production and because zinc shipments from Cayeli in late 2006 were deferred to 2007.



Production

three months ended March 31 objective

Inmet's share 2007 2006 change 2007

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

Copper (tonnes)

Ok Tedi 8,200 9,200 33,800

Cayeli 7,500 6,500 33,200

Pyhasalmi 3,200 3,100 12,900

Troilus 600 700 3,300

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

19,500 19,500 - 83,200

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

Zinc (tonnes)

Cayeli 11,900 10,100 48,600

Pyhasalmi 10,200 8,500 38,400

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

22,100 18,600 + 19% 87,000

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

Gold (ounces)

Troilus 33,200 37,700 157,900

Ok Tedi 22,800 24,900 91,200

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

56,000 62,600 - 11% 249,100

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

Pyrite (tonnes)

Pyhasalmi 160,500 141,800 + 13% 537,000

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

In the first quarter of 2007:

- copper production was consistent with 2006 because higher throughput
at Cayeli offset the impact of lower throughput and grades at Ok Tedi

- zinc production was higher because of higher throughput at Cayeli and
higher grades at Pyhasalmi

- gold production was lower because of lower grades at both Troilus and
Ok Tedi.


2007 outlook for sales

We expect sales of all metals this year to be consistent with our 2007 production estimates. Gold production was lower than target this quarter, but we still expect to achieve the original objective we set for the year.

The total amount we will receive in Canadian dollars is affected by US dollar denominated metal prices and the exchange rate between the US dollar and Canadian dollar.

2. Cash costs this quarter were lower than 2006

We measure cost performance at our operations by tracking costs per pound of copper or ounce of gold in US dollars.

Cash costs include:

- direct production costs, such as labour, fuel, consumables and other

costs directly related to the production of metals

- plus smelter processing charges and freight

- less revenue from the sale of by-product metals (metal credits).

The table below shows our cash cost by operation.



-------------------------------------------------------------------------
revised
three months ended March 31 objective
(US $) 2007 2006 change 2007
-------------------------------------------------------------------------

Cash cost per pound
of copper
Cayeli(1) $ 0.19 $ 0.34 - 44% $ 0.08
Pyhasalmi(1,2) (1.50) (0.51) -194% (1.61)
Ok Tedi(3) 0.65 0.74 - 12% 0.61
-------------------------------------------------------------------------
$ 0.10 $ 0.40 - 75% $ 0.04
Cash cost per ounce of
gold
Troilus(4,5) $ 448 $ 372 + 20% $ 348
-------------------------------------------------------------------------

To estimate the by-product 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 this quarter was 75 percent lower than the same period last year mainly because of:



- higher zinc and gold metal credits from higher metal prices and
higher zinc production
- lower copper treatment charges.


The table below shows the breakdown in our cash cost per pound of copper this quarter, and in the first quarter of 2006:



-------------------------------------------------------------------------
revised
three months ended March 31 objective
(US $) 2007 2006 change 2007
-------------------------------------------------------------------------

Cash cost per pound of
copper
Direct production costs $ 1.06 $ 0.94 + 13% $ 0.97
Royalties and variable
compensation 0.04 0.06 - 33% 0.11
Smelter processing
charges and freight 0.94 1.03 - 9% 1.00
Metal credits (1.94) (1.63) - 19% (2.04)
-------------------------------------------------------------------------
$ 0.10 $ 0.40 - 75% $ 0.04
-------------------------------------------------------------------------


Our gold cash cost per ounce was higher this quarter compared to the same period in 2006 because of lower production and higher consumable costs.



Direct production costs and cost of sales

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

Our cost of sales this quarter was 20 percent higher than 2006...

-------------------------------------------------------------------------
three months ended March 31
(thousands) 2007 2006 change
-------------------------------------------------------------------------

Cost of sales by operation
Cayeli $ 24,297 $ 17,750 + 37%
Pyhasalmi 12,923 12,611 + 2%
Troilus 22,028 15,301 + 44%
Ok Tedi(1) 19,504 19,640 - 1%
Other 488 486 -
-------------------------------------------------------------------------
$ 79,240 $ 65,788 + 20%
-------------------------------------------------------------------------

(1) Our 18 percent share of Ok Tedi's cost of sales.
...mainly because sales volumes were higher

-------------------------------------------------------------------------
(millions) three months ended March 31
-------------------------------------------------------------------------

Higher sales volume $ 9
Labour costs 1
Other 3
-------------------------------------------------------------------------
Increase in cost of sales, compared to 2006 $ 13
-------------------------------------------------------------------------

Smelter processing charges and freight
--------------------------------------

Higher sales volumes increased smelter processing charges

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

three months ended March 31

(thousands) 2007 2006 change

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

Smelter processing charges and freight

by operation

Cayeli $ 31,168 $ 21,576 + 44%

Pyhasalmi 18,614 15,343 + 21%

Troilus 2,693 2,158 + 25%

Ok Tedi(1) 12,131 12,585 - 4%

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

$ 64,606 $ 51,662 + 25%

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

Smelter processing charges and freight

by metal

Copper $ 27,479 $ 26,677 + 3%

Zinc 33,715 22,695 + 49%

Other 3,412 2,290 + 49%

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

$ 64,606 $ 51,662 + 25%

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

(1) Includes our 18 percent share of Ok Tedi's processing charges and

freight.


2007 outlook for costs

We have revised our 2007 copper cash cost objective to US $0.04 per pound reflecting higher expected labour and energy costs at Cayeli. We expect to meet our 2007 objective for gold cash costs.



3. Depreciation was higher this quarter

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

three months ended March 31

(thousands) 2007 2006 change

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

Depreciation by operation

Cayeli $ 2,697 $ 1,670 + 61%

Pyhasalmi 2,361 1,989 + 19%

Troilus 2,709 2,161 + 25%

Ok Tedi 1,648 1,445 + 14%

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

$ 9,415 $ 7,265 + 30%

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


Deprecation was higher at Cayeli, Pyhasalmi and Troilus compared to the first quarter of last year, because sales volumes were higher. Depreciation at Cayeli was also higher because of the depreciation of the shaft development capital.

2007 outlook for depreciation

We expect depreciation to be approximately $40 million for 2007.

CORPORATE COSTS

This includes 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. Interest income was higher because of higher cash balances



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

three months ended March 31

(thousands) 2007 2006

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

Gain on sale of Izok $ - $ 23,905

Interest and dividend income 7,879 1,580

Foreign exchange loss (145) (82)

Other (444) 295

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

$ 7,290 $ 25,698

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


In 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. This quarter we entered into a lock-up agreement with Zinifex Canadian Enterprises Inc. relating to Zinifex's cash offer of $3.81 per share to acquire all of the issued and outstanding common shares of Wolfden.

Interest income was higher this quarter compared to the same period last year because we had higher cash balances.

2007 outlook for investment and other income

The sale of Wolfden shares to Zinifex is subject to the terms and conditions of the offer, which we believe is customary for a transaction of this kind. We expect the transaction to close in May, and have enough capital losses to offset the expected $12 million gain on the sale of the shares.

Investment and other income will be 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 strength or weakness in the Canadian dollar relative to the other currencies compared to when we initially invested in the operations, or the foreign exchange rate at which funds were accumulated. The amount of the gain or loss, if any, will depend on the amount distributed and foreign exchange rates.

2. Income tax expense was higher than 2006



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

three months ended March 31

(thousands) 2007 2006 change

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

Cayeli $ 13,671 $ 9,399 + 45%

Pyhasalmi 6,907 4,017 + 72%

Ok Tedi 14,617 13,733 + 6%

Corporate 455 292 + 56%

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

$ 35,650 $ 27,441 + 30%

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


Taxes were higher at Cayeli and Pyhasalmi because of higher earnings.

2007 outlook for income tax expense

We are not expecting any further changes in statutory tax rates at our operations in 2007.



Results of our operations

Cayeli

-------------------------------------------------------------------------
three months ended March 31 objective
2007 2006 change 2007
-------------------------------------------------------------------------

Tonnes of ore milled
(000's) 259 223 + 16% 1,060
Tonnes of ore milled
per day 2,900 2,500 + 16% 3,000
-------------------------------------------------------------------------
Grades (percent) copper 3.5 3.7 - 5% 3.8
zinc 6.2 6.3 - 2% 6.3
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 83 79 + 5% 82
zinc 75 72 + 4% 73
-------------------------------------------------------------------------
Production
(tonnes) copper 7,500 6,500 + 15% 33,200
zinc 11,900 10,100 + 18% 48,600
-------------------------------------------------------------------------


Cayeli stepped up its production rate in line with expectation

Cayeli produced 259,000 tonnes this quarter - 16 percent higher than the first quarter of 2006. This was mainly because of improvements made to the operation in 2006, including commissioning a new ore handling system that allows Cayeli to handle ore from the lower parts of the mine much more efficiently.

Higher throughput and recoveries this quarter more than offset lower grades. Copper production was 15 percent higher than in the first quarter of 2006, and zinc production was 18 percent higher.

2007 outlook for production

Cayeli expects ore production over the following months to be in line with the annual objective of 1.1 million tonnes.

Unit costs were significantly lower

Cash costs were significantly lower than the first quarter of 2006 because of lower smelter processing charges, a result of lower treatment charges and 2006 finalization adjustments.



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

revised

three months ended March 31 objective

(US $) 2007 2006 change 2007

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

Cash cost per pound

of copper

Direct production costs $ 0.97 $ 0.88 + 10% $ 0.90

Royalty payments 0.11 0.08 + 38% 0.20

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

Total direct production

costs 1.08 0.96 + 13% 1.10

Smelter processing charges

and freight 0.90 1.30 - 31% 1.25

Metal credits(1) (1.79) (1.92) + 7% (2.27)

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

Cash costs $ 0.19 $ 0.34 - 44% $ 0.08

Depreciation and other

non-cash costs 0.13 0.14 - 7% 0.13

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

Total costs $ 0.32 $ 0.48 - 33% $ 0.21

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

(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 US $0.09 per pound higher than

2006

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

(US $ per pound) three months ended March 31

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

Lower unit costs from higher copper production $ (0.15)

Higher costs from higher consumable volumes 0.08

Higher labour costs 0.09

Higher consumable costs 0.06

Other 0.01

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

Increase in direct production costs, compared to 2006 $ 0.09

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


2007 outlook for costs

We expect a cash cost of US $0.08 per pound of copper for the year. This is a US $0.10 per pound increase from our original objective reflecting the increased cost of labour and energy we are expecting.



Capital spending higher than 2006

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

three months ended March 31 objective

(thousands of US$) 2007 2006 change 2007

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

Capital spending $ 4,300 $ 3,400 + 26% $ 15,200

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


Of the US $4.3 million spent in the first quarter, US $1.8 million was for the shaft extension project.

2007 outlook for capital spending

Capital spending for the rest of 2007 is allocated to completing the infrastructure project, mine development, a spare hoist motor and for sustaining and other capital.



Operating earnings almost doubled

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

three months ended March 31

2007 2006 change

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

Sales (tonnes) copper 8,200 5,800 + 41%

zinc 15,700 11,400 + 38%

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

Operating earnings (millions) $ 59.6 $ 30.2 + 97%

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

Operating cash flows (millions) $ 59.6 $ 27.0 +121%

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

...mainly because of higher metal prices and higher zinc sales volumes

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

(millions) three months ended March 31

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

Higher metal prices, denominated in Canadian dollars $ 19

Higher sales volumes 14

Higher royalty costs (1)

Higher operating costs (2)

Other (1)

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

Increase in operating earnings, compared to 2006 $ 29

Increased tax expense because of higher earnings (3)

Changes in working capital 6

Other 1

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

Increase in operating cash flow, compared to 2006 $ 33

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


The positive change in working capital is from lower accounts receivable, offset significantly by lower accounts payable.

PYHASALMI



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

three months ended March 31 objective

2007 2006 change 2007

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

Tonnes of ore milled

(000's) 326 353 - 8% 1,370

Tonnes of ore milled

per day 3,600 3,900 - 8% 3,750

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

Grades (percent) copper 1.0 0.9 + 11% 1.0

zinc 3.4 2.6 + 31% 3.1

sulphur 39 41 - 5% 41

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

Mill recoveries

(percent) copper 95 95 - % 94

zinc 92 94 - 2% 92

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

Production

(tonnes) copper 3,200 3,100 + 3% 12,900

zinc 10,200 8,500 + 20% 38,400

pyrite 160,500 141,800 + 13% 537,000

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

Pyhasalmi expects to meet its annual objectives despite lower throughput
this quarter


Mill throughput was 8 percent lower this quarter than the first quarter of 2006 for two reasons: hard, angular material made grinding more difficult, and there was a failure of the main conveyor belt. Grinding capacity is now back to normal and the belt has been repaired. A new belt will be installed during the next scheduled shut down in the second quarter.

Zinc production was 20 percent higher than the first quarter of last year because Pyhasalmi began mining the higher grade stopes it had deferred at the end of 2006.

2007 outlook for production

We expect Pyhasalmi to meet its production objectives for 2007.

Cash costs were down because of high metal credits

A higher zinc price, combined with higher zinc and pyrite production, significantly increased metal credits compared to the first quarter of last year.



-------------------------------------------------------------------------
three months ended March 31 objective
(US $) 2007 2006 change 2007
-------------------------------------------------------------------------

Cash cost per pound of
copper
Direct production costs $ 1.62 $ 1.57 + 3% $ 1.45
Smelter processing charges
and freight 2.01 1.75 + 15% 1.79
Metal credits(1) (5.13) (3.83) - 34% (4.85)
-------------------------------------------------------------------------
Cash costs $ (1.50) $ (0.51) -194% $ (1.61)
Depreciation and other
non-cash costs 0.31 0.27 + 15% 0.31
-------------------------------------------------------------------------
Total costs $ (1.19) $ (0.24) -396% $ (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, and
a euro to US dollar exchange rate of US $1.25. For every US $0.05 per
pound change in the price of zinc, cash costs would change by US
$0.11 per pound.


Direct production costs this quarter were US $0.05 per pound higher than

2006

This was mainly because of the weakening of the US dollar, since our direct production costs, which are in euros, were actually lower than in the first quarter of 2006.



-------------------------------------------------------------------------
(US $ per pound) three months ended March 31
-------------------------------------------------------------------------
Weakened US dollar compared to the euro $ 0.14
Lower costs due to higher copper production (0.06)
Lower consumables cost (0.02)
Higher labour costs 0.02
Lower utility costs (0.03)
-------------------------------------------------------------------------
Increase in direct production costs, compared to 2006 $ 0.05
-------------------------------------------------------------------------


2007 outlook for costs

We expect to meet the cash cost target of negative US $1.61 per pound of copper.

Minimum capital spending during the quarter



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

three months ended March 31 objective

(thousands) 2007 2006 change 2007

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

Capital spending (euro)200 (euro)200 - (euro)7,000

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


2007 outlook for capital spending

We expect Pyhasalmi to reach its capital spending objective for 2007. The (euro)7 million in capital will be spent on developing an ore pass, replacing mine mobile equipment, acquiring mill equipment such as the copper rougher and scavenger circuits, and on other sustaining capital.

Operating earnings higher than last year



-------------------------------------------------------------------------
three months ended March 31
2007 2006 change
-------------------------------------------------------------------------
Sales (tonnes) copper 3,400 3,200 + 6%
zinc 9,500 8,000 + 19%
pyrite 133,900 124,800 + 7%
-------------------------------------------------------------------------
Operating earnings (millions) $ 31.4 $ 19.2 + 64%
-------------------------------------------------------------------------
Operating cash flows (millions) $ 40.5 $ 23.5 + 72%
-------------------------------------------------------------------------
...mainly because of higher metal prices and higher sales volumes
-------------------------------------------------------------------------
(millions) three months ended March 31
-------------------------------------------------------------------------
Higher metal prices, denominated in Canadian dollars $ 10
Higher sales volumes 4
Higher operating costs in Canadian dollars (1)
Other (1)
-------------------------------------------------------------------------
Increase in operating earnings, compared to 2006 $ 12
Increased tax expense because of higher earnings (3)
Changes in working capital 8
-------------------------------------------------------------------------
Increase in operating cash flow, compared to 2006 $ 17
-------------------------------------------------------------------------


The positive change in working capital is mainly from the collection of accounts receivable.

TROILUS



-------------------------------------------------------------------------
three months ended March 31 objective
2007 2006 change 2007
-------------------------------------------------------------------------

Tonnes of ore milled
(000's) 1,635 1,608 + 2% 6,700
Tonnes of ore milled
per day 18,200 17,900 + 2% 18,400
-------------------------------------------------------------------------
Strip ratio 0.9 1.8 - 50% 1.2
-------------------------------------------------------------------------
Grades gold (grams/tonne) 0.79 0.90 - 12% 0.88
copper (percent) 0.05 0.05 - 0.06
-------------------------------------------------------------------------
Mill recoveries (percent)
gold 80 81 - 1% 83
copper 84 86 - 2% 87
-------------------------------------------------------------------------
Production gold (ounces) 33,200 37,700 - 12% 157,900
copper (tonnes) 600 700 - 14% 3,300
-------------------------------------------------------------------------


Gold production affected by lower grades

As expected, gold production this quarter was 12 percent lower than in the first quarter of 2006, mainly because Troilus mined a higher grade area at the bottom of the J4 pit in 2006.

2007 outlook for production

We expect Troilus to achieve its production objectives for 2007.

Mining towards the end of 2007 and in 2008 will be exclusively from the 87 pit. The ore from this pit has higher copper grades. A study will be completed in the second quarter to determine the most cost-effective method of increasing the copper cleaner capacity to recover more copper and the associated gold.

Lower production increased the cost per ounce

Costs were higher mainly because Troilus spent more on equipment repairs and maintenance, and gold production was lower in 2007.



-------------------------------------------------------------------------
three months ended March 31 objective
(US $) 2007 2006 change 2007
-------------------------------------------------------------------------

Cash cost per ounce of gold
Direct production costs $ 498 $ 443 + 12% $ 443
Smelter processing charges
and freight 58 62 - 6% 55
Metal credits(1) (108) (133) - 19% (150)
-------------------------------------------------------------------------
Cash cost $ 448 $ 372 + 20% $ 348
Depreciation and other
non-cash costs 56 65 - 14% 66
-------------------------------------------------------------------------
Total cost $ 504 $ 437 + 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 and a
US dollar to Canadian dollar exchange rate of $1.10.

Direct production costs this quarter were US $55 per ounce higher than

2006

-------------------------------------------------------------------------
(US $ per ounce) three months ended March 31
-------------------------------------------------------------------------
Weaker Canadian dollar $ (8)
Higher costs due to lower production 41
Higher consumable costs 19
Other 3
-------------------------------------------------------------------------
Increase in direct production costs, compared to 2006 $ 55
-------------------------------------------------------------------------


2007 outlook for unit costs

We expect to achieve the cash cost objective of US $348 per ounce of gold.

Capital spending at Troilus is for sustaining capital



-------------------------------------------------------------------------
three months ended March 31 objective
(thousands) 2007 2006 change 2007
-------------------------------------------------------------------------
Capital spending $ 200 $ 400 - 50% $ 3,000
-------------------------------------------------------------------------


2007 outlook for capital spending

Because of the mine's short remaining life, capital expenditures for the rest of the year are limited to sustaining capital. The mine will spend approximately $3 million on copper cleaner cells in the mill, on the tailings dam lift and embankment enforcements, and on other sustaining capital expenditures.

Higher sales volumes increased earnings



-------------------------------------------------------------------------
three months ended March 31
2007 2006 change
-------------------------------------------------------------------------
Sales gold (ounces) 39,700 30,400 + 31%
copper (tonnes) 700 600 + 17%
-------------------------------------------------------------------------
Operating earnings (millions) $ 2.8 $ (0.9) +411%
-------------------------------------------------------------------------
Operating cash flows (millions) $ 0.5 $ (3.4) +115%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(millions) three months ended March 31
-------------------------------------------------------------------------
Higher metal prices denominated in Canadian dollars $ 6
Higher operating costs and depreciation (2)
-------------------------------------------------------------------------
Increase in operating earnings, compared to 2006 $ 4
Changes in working capital 1
Other (1)
-------------------------------------------------------------------------
Increase in operating cash flow, compared to 2006 $ 4
-------------------------------------------------------------------------
OK TEDI
-------------------------------------------------------------------------
three months ended March 31 objective
(100 percent) 2007 2006 change 2007
-------------------------------------------------------------------------
Tonnes of ore milled
(000's) 6,600 6,670 - 1% 27,500
Tonnes of ore milled
per day 73,300 74,100 - 1% 76,000
-------------------------------------------------------------------------
Strip ratio 1.3 2.0 - 35% 1.1
-------------------------------------------------------------------------
Grades copper (percent) 0.8 0.9 - 11% 0.8
gold (grams/tonne) 0.8 1.0 - 20% 0.8
-------------------------------------------------------------------------
Mill recoveries (percent)
copper 85 85 - 87
gold 71 68 + 4% 70
-------------------------------------------------------------------------
Production copper (tonnes) 45,300 51,300 - 12% 188,000
gold (ounces) 126,700 138,400 - 8% 507,000
-------------------------------------------------------------------------


Lower grades impact production but annual objective remains the same

Copper production this quarter was 12 percent lower than in the first quarter of 2006, while gold production was 8 percent lower. This was mainly the result of mining in areas with lower copper and gold grades, in accordance with the mine plan.

2007 outlook for production

We expect Ok Tedi to meet its 2007 annual production objective.

Costs lower because of higher metal credits



-------------------------------------------------------------------------
three months ended March 31 objective
(US $) 2007 2006 change 2007
-------------------------------------------------------------------------
Cash cost per pound of
copper
Direct production costs $ 0.92 $ 0.77 + 19% $ 0.85
Variable compensation - 0.07 -100% 0.06
Smelter processing charges
and freight 0.57 0.60 - 5% 0.45
Metal credits(1) (0.84) (0.70) - 20% (0.75)
-------------------------------------------------------------------------
Cash cost $ 0.65 $ 0.74 - 12% $ 0.61
Depreciation and other
non-cash costs 0.11 0.07 + 57% 0.07
-------------------------------------------------------------------------
Total costs $ 0.76 $ 0.81 - 6% $ 0.68
-------------------------------------------------------------------------
(1) We used a gold price of US $630 per ounce to estimate the metal
credit in the 2007 objective for cash costs per pound of copper.


Direct production costs this quarter were US $0.15 per pound higher than
2006



-------------------------------------------------------------------------
(US $ per pound) three months ended March 31
-------------------------------------------------------------------------
Increase in costs from lower production $ 0.11
Higher labour costs 0.04
-------------------------------------------------------------------------
Increase in direct production costs, compared to 2006 $ 0.15
-------------------------------------------------------------------------


2007 outlook for costs

We expect to achieve the cash cost objective of US $0.61 per pound of copper. Negotiations on the Community Mine Continuation Agreements (CMCAs) have progressed well and are expected to be completed in the second quarter.

Capital spending was higher because of the mine waste management program

Ok Tedi's capital spending this quarter was for the purchase of trucks, work on the mine waste management program, the pressure filtration plant and the in-pit crusher.



-------------------------------------------------------------------------
three months ended March 31 objective
(100 percent) 2007 2006 change 2007
-------------------------------------------------------------------------
Capital spending $ 30,600 $ 12,300 +149% $ 209,000
-------------------------------------------------------------------------


2007 outlook for capital spending

Ok Tedi plans to spend US $140 million in 2007 on its mine waste management program, US $20 million for the capital required for pit drainage, and the rest for mine equipment and other sustaining capital.

Operating earnings were higher because of higher metal prices

Sales volumes this quarter were lower than they were in the first quarter of 2006, mainly because of the timing of shipments. Concentrate inventory accumulated to approximately 140,000 tonnes at March 31, an increase of approximately 14,000 tonnes from December 31.



-------------------------------------------------------------------------
three months ended March 31
(18 percent) 2007 2006 change
-------------------------------------------------------------------------
Sales copper (tonnes) 7,700 8,000 - 4%
gold (ounces) 22,200 24,600 - 10%
-------------------------------------------------------------------------
Operating earnings (millions) $ 40.0 $ 37.6 + 6%
-------------------------------------------------------------------------
Operating cash flows (millions) $ 8.0 $ 34.5 - 77%
-------------------------------------------------------------------------
...mainly because of higher metal prices
-------------------------------------------------------------------------
(millions) three months ended March 31
-------------------------------------------------------------------------
Higher metal prices, denominated in Canadian dollars $ 5
Lower sales volumes (3)
Lower variable compensation costs 1
Higher costs (1)
-------------------------------------------------------------------------
Increase in operating earnings, compared to 2006 2
Increased tax expense (5)
Changes in net working capital (25)
Other 1
-------------------------------------------------------------------------
Increase in operating cash flow, compared to 2006 $ (27)
-------------------------------------------------------------------------


The negative change in working capital is mainly because of higher accounts receivable.

Status of our development projects

Las Cruces

Quarterly development update

Capital cost update

We completed a detailed review of the Las Cruces project costs this quarter, since detailed engineering was substantially advanced, almost all equipment had been procured or purchased and most construction contracts had been awarded.

Our revised capital estimate is (euro)463 million. This is a 22 percent increase from the (euro)380 million capital estimate we prepared about one year ago. In addition to adjustments for price inflation and growth, we increased our provision for contingencies to (euro)40 million or 9 percent of the total capital cost.

We still expect to begin producing copper cathode in the first quarter of 2008. The life-of-mine production forecast remains at 72,000 tonnes of cathode copper per year (100 percent) at a cash cost of approximately (euro)0.40 per pound of cathode produced.

The additional capital costs will be funded by the owners. We are required to pay 70 percent of these costs, or (euro)58 million. After deducting the cash already spent and the undrawn amount of the loan facility, our remaining cash contribution to complete the project will be approximately (euro)125 million.

Project progress

The project progressed well this quarter:



- Removal of overburden and pre-stripping - the mining contractor
removed an additional 2.5 million cubic metres of overburden material
from the area of the future pit, making excellent progress toward
reaching the ore, which is expected late this year.

- Detailed engineering - at the end of March, detailed engineering was
75 percent complete.

- Recruiting of employees - by the end of March, the project employed
652 people, of which 583 were contractors.

- Preparation of the site for plant construction - construction of
civil works for the main process plant facilities and the primary
supply pond dam is ongoing. Structural steel, piping, electrical and
mechanical work will start in May.

- Began construction of the tailings storage system - the process of
constructing the berms required to encapsulate tailings is underway.

- Contracts awarded - major contracts were awarded this quarter for
civil works, electro-mechanical works, structural and steel
fabrication, site earthworks, and for commissioning services.

- Erection of office buildings - the main office building is complete.

- Poured concrete foundations - foundations have been laid in most
areas.


CERATTEPE

Quarterly development update

Since August 2006, Cerattepe has been affected by a ruling of the local Erzurum Administrative Court that stated that government authorities had incorrectly exempted the operating licences for the property from environmental assessment regulations.

In April, the Danistay (Turkish Administrative Supreme Court) directed the local court to review its decision on procedural grounds. The Danistay's decision reinstates the validity of the operating licences, but does not finally resolve their status. As the licences are once again valid we can resume permitting and on-site work on the project pending a new decision from the local court. We are doing this.

An active campaign of community dialogue and engagement continues to solidify support for the project. This quarter we continued to work with Deutsche Montan Technologie GmbH (DMT), a German mining engineering firm that is in the process of updating the capital and operating costs of the project. Preparation of the ropeway landing site and construction of the connection road is nearly complete.

Our objective is to begin production in 2009. We can resume onsite activity shortly after we receive all required permits for full-scale construction.

PETAQUILLA

Quarterly development update

AMEC Americas Limited has been awarded the contract for Front End Engineering and Design (FEED) services and Golder Associates has been awarded the work on the Social and Environmental Impact Assessment (SEIA).

Managing our liquidity



-------------------------------------------------------------------------
three months ended
March 31
(millions) 2007 2006
-------------------------------------------------------------------------

CASH FROM OPERATING ACTIVITIES

Cayeli $ 60 $ 27
Pyhasalmi 40 23
Troilus 1 (3)
Ok Tedi 8 34
General and administration (3) (2)
Other (1) (4)
-------------------------------------------------------------------------
105 75
-------------------------------------------------------------------------

CASH FROM INVESTING AND FINANCING

Capital spending (52) (25)
Long-term borrowings 14 -
Funding from non-controlling shareholder 5 2
Financial assurance deposits (10) (30)
Subsidies received - 5
Foreign exchange on cash held in foreign currency (3) 3
Other (1) 1
-------------------------------------------------------------------------
(47) (44)
-------------------------------------------------------------------------
Increase in cash 58 31
Cash and short-term investments
Beginning of period 640 252
-------------------------------------------------------------------------
End of period $ 698 $ 283
-------------------------------------------------------------------------

CASH FROM OPERATING ACTIVITIES

-------------------------------------------------------------------------
(millions) three months ended March 31
-------------------------------------------------------------------------
Increased earnings from operations(see page 5) $ 48
Non-cash changes in operating earnings:
Increased tax expense (11)
Changes in working capital (14)
Other 7
-------------------------------------------------------------------------
Increase in operating cash flow, compared to 2006 $ 30
-------------------------------------------------------------------------


Operating cash flows this quarter were higher than in the first quarter of 2006 because operating earnings were higher. The negative change in working capital is mainly because of lower accounts payable at Cayeli and Ok Tedi.

2007 outlook for operating activities

High metal prices would continue to result in strong earnings and increased operating cash flows. The level of operating cash flows will depend on earnings and the accumulation or reduction of working capital.

CASH FROM INVESTING AND FINANCING

Capital spending



-------------------------------------------------------------------------
three months ended revised
March 31 objective
(millions) 2007 2006 2007
-------------------------------------------------------------------------
Cayeli $ 5 $ 4 $ 17
Pyhasalmi - 1 10
Troilus - 1 3
Ok Tedi 6 3 41
Las Cruces 38 14 492
Cerattepe 2 1 15
Accruals and other 1 1 -
-------------------------------------------------------------------------
$ 52 $ 25 $ 578
-------------------------------------------------------------------------


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

Las Cruces borrowed an additional (euro)9 million this quarter, bringing the total amount borrowed under its credit facility to (euro)59 million. Las Cruces also provided (euro)5.3 million this quarter to secure future contractual obligations for the construction of the process plant.

Our restricted cash balance of $46 million at March 31, 2007 includes:



- $12 million in trust for future rehabilitation at Ok Tedi

- $14 million of cash collateralized letters of credit for Inmet

- $20 million related to issuing letters of credit to suppliers, the
local townships and for dewatering at Las Cruces.


2007 outlook for investing and financing

We expect capital spending to be $578 million in 2007. Of that amount, we expect to spend $492 million for the continuing development of the Las Cruces mine based on its new cost estimate, and $28 million for the mine waste management program at Ok Tedi. The remaining expenditures are mostly for sustaining capital.

COMMON SHARES



-------------------------------------------------------------------------
Common shares outstanding as of March 31, 2007
and May 1, 2007 48,277,726
-------------------------------------------------------------------------
Deferred share units outstanding as of March 31 76,668
(redeemable on a one-for- one basis for common shares)
-------------------------------------------------------------------------


Dividend declaration

The board of directors has declared an eligible dividend of $0.10 per common share payable on June 15, 2007 to shareholders of record as at May 30, 2007.

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 March 31, 2007.



-------------------------------------------------------------------------
C$ marked-to-
market gain
Type of (loss) at
contract Expiry Quantity Price March 31 2007
-------------------------------------------------------------------------
Gold
forward
sales
Troilus 2007 43,700 ounces US $352 per oz.
2008 58,200 ounces US $352 per oz.
-------------------------------------------------------------
101,900 ounces US $352 per oz. $(40 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 million)(1)
Currency
forward
sales
Las
Cruces 2008 US $215 million (euro)171.80 million $ 20 million
-------------------------------------------------------------
Interest
rate swaps
Las
Cruces 2008
to 2014 US $179 million 5.2 percent $ (2)million
(reducing in
conjunction with
debt repayment
schedule)
-------------------------------------------------------------

(1) At a gold price of US $662 per ounce.


Accounting changes

We adopted several new CICA - Handbook sections.

Section 3855 - Financial instruments - recognition and measurement

This section establishes standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. It requires that financial assets and liabilities including derivatives be recognized on the balance sheet when we become a party to the contractual provisions of the financial instrument or a non-financial derivative contract. All financial instruments should be measured at fair value on initial recognition except for certain related party transactions. Measurement in subsequent periods depends on whether the financial instruments have been classified as held-for-trading, available-for-sale, held-to-maturity, loans and receivables, or other liabilities.

Effective January 1, 2007, we classify cash and short-term investments, accounts receivable, investments, restricted cash, accounts payable and accrued liabilities as held-for-trading and record them on the balance sheet at fair value. We record long-term debt at amortized cost.

3865 - Hedges

This section specifies when and how we can use hedge accounting for hedging strategies: fair value hedges, cash flow hedges and hedges of a foreign currency exposure of a net investment in a self-sustaining foreign operation.

All of our hedges at January 1, 2007 qualified for cash flow hedge accounting. The contracts are reflected at fair value on the balance sheet.

1530 - Comprehensive income

This section calls for a statement of comprehensive income and its components. Other comprehensive income includes unrealized gains and losses on financial assets classified as available-for-sale, unrealized foreign currency translation amounts arising from self-sustaining foreign operations, and changes in the fair value of the effective portion of cash flow hedging instruments.

Effective January 1, 2007, we include unrealized fair value of our cash flow hedges, investments and foreign currency translation adjustment in accumulated other comprehensive income, net of tax. The change in fair value this quarter of the effective portion of our cash flow hedges, investments and foreign currency translation adjustments is included in other comprehensive income for the period, net of tax.

Turn to note 2 on page 38 in the Interim consolidated financial statements for more details about the transitional adjustments.

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 2006 annual report.

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, construction of mine and processing facilities, cost increases due to inflation, permitting, legal proceedings and relations with local communities will continue to exist and could have a negative effect on the project. A local non-governmental group has initiated several legal proceedings claiming that various governmental approvals for the project were not granted according to regulatory requirements. We believe these claims are without merit and are vigorously defending against them. Two of these proceedings were dismissed in 2006. The other two proceedings are outstanding.

Development at Cerattepe

Recently the Danistay (Turkish Administrative Supreme Court) directed the local court to review its decision to cancel our operating licences for the project. The Danistay's decision does not finally resolve the status of the licences but they remain valid pending a new decision from the local court. There remains a risk that the licences could yet again be cancelled, in which case we would have to suspend permitting and on-site work.

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 net
our 2007 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 US $10
and copper refining charge
per pound 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 have interests in four mining operations in locations around the world: Cayeli, Pyhasalmi, Troilus and Ok Tedi. We also have interests in two development properties, Las Cruces and Cerattepe, and one pre-development property, Petaquilla.

Annual and special meeting of shareholders

Will be held on

- Tuesday, May 1, 2007

- 2:30 p.m. Eastern Time

- The Toronto Board of Trade

- Room A, Fourth Floor

- 1 First Canadian Place (Adelaide Street entrance)

- Toronto, Ontario

- audio webcast with slides available at

www.newswire.ca/en/webcast/index.cgi?okey=60043 or

www.inmetmining.com.

You can also dial in by calling

- Local or international: +1.416.644.3421

- Toll-free within North America: +1.800.732.6179

First quarter conference call

Will be held on

- Wednesday, May 2, 2007

- 11:00 a.m. (ET)

- webcast available at

www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1795860

or www.inmetmining.com.

You can also dial in by calling

- Local or international: +1.416.644.3419

- Toll-free within North America: +1.800.732.9303



INMET MINING CORPORATION

Non-GAAP measures

Reconciliation of copper cash costs to statements of earnings



-------------------------------------------------------------------------
(millions of Canadian dollars, three months ended March 31
except where otherwise noted) 2007 2006
-------------------------------------------------------------------------
Cost of sales per financial statements $ 56 $ 50
Smelter processing charges and freight per
financial statements 62 49
Zinc, gold and other sales (117) (77)
Inventory and receivable changes 5 (2)
Less - non-cash items (1) (1)
-------------------------------------------------------------------------
Operating costs net of metal credits $ 5 $ 19
-------------------------------------------------------------------------
US $ to C$ exchange rate $ 1.17 $ 1.15
Inmet's share of copper production
(000's pounds) 41,400 41,400
-------------------------------------------------------------------------
Copper cash cost (per pound) US $ 0.10 US $0.40
-------------------------------------------------------------------------

Reconciliation of gold cash costs to
statements of earnings

-------------------------------------------------------------------------
(millions of Canadian dollars, three months ended March 31
except where otherwise noted) 2007 2006
-------------------------------------------------------------------------
Cost of sales per financial statements $ 22 $ 15
Smelter processing charges and freight
per financial statements 2 2
Copper and other sales (5) (5)
Inventory and receivable changes (2) 4
-------------------------------------------------------------------------
Operating costs net of metal credits $ 17 $ 16
-------------------------------------------------------------------------
US $ to C$ exchange rate $ 1.17 $ 1.15
Inmet's share of gold production (ounces) 33,200 37,700
-------------------------------------------------------------------------
Gold cash cost (per ounce) US $ 448 US $ 372
-------------------------------------------------------------------------

Reconciliation of net income to adjusted
net income

-------------------------------------------------------------------------
(thousands of Canadian dollars, three months ended March 31
except where otherwise noted) 2007 2006
-------------------------------------------------------------------------
Net income per financial statements $ 101,078 $ 79,561
Deduct gain on sale of Izok - 23,905
-------------------------------------------------------------------------
Adjusted net income $ 101,078 $ 55,656
-------------------------------------------------------------------------
Weighted average shares outstanding 48,278 48,097
-------------------------------------------------------------------------
Adjusted net income per share $ 2.09 $ 1.16
-------------------------------------------------------------------------
Reconciliation of operating cash flow to
operating cash flow before working capital
-------------------------------------------------------------------------
(thousands of Canadian dollars, three months ended March 31
except where otherwise noted) 2007 2006
-------------------------------------------------------------------------
Operating cash flow per financial statements $ 104,980 $ 74,560
Deduct: Net change in non-cash working capital
per financial statements (4,914) 9,035
-------------------------------------------------------------------------
Operating cash flow before working capital $ 109,894 $ 65,525
-------------------------------------------------------------------------
Weighted average shares outstanding 48,278 48,097
-------------------------------------------------------------------------
Operating cash flow before working capital
per share $ 2.28 $ 1.36
-------------------------------------------------------------------------

INMET MINING CORPORATION

Quarterly review
(unaudited)

Latest Four Quarters

-------------------------------------------------------------------------
(thousands of Canadian 2007 2006 2006 2006
dollars, except First Fourth Third Second
per share amounts) quarter quarter quarter quarter
-------------------------------------------------------------------------

STATEMENTS OF EARNINGS

Gross sales $ 286,614 $ 258,911 $ 301,100 $ 317,624
Smelter processing
charges and freight (64,606) (65,005) (60,270) (63,668)
Cost of sales (79,240) (66,593) (73,892) (78,425)
Depreciation (9,415) (9,057) (9,025) (8,225)
--------------------------------------------------
133,353 118,256 157,913 167,306

Corporate development
and exploration (842) (4,136) (2,708) (1,456)
General and
administration (2,840) (6,128) (2,618) (2,624)
Investment and
other income 7,290 16,697 2,257 2,587
Interest expense (438) (425) (412) (391)
Capital tax expense
(recovery) (274) - 41 (246)
Income tax expense (35,376) (26,679) (42,902) (33,240)
Non-controlling
interest 205 (165) 11 154
--------------------------------------------------
Net income $ 101,078 $ 97,420 $ 111,582 $ 132,090
--------------------------------------------------
Net income per
common share $ 2.09 $ 2.02 $ 2.31 $ 2.74
--------------------------------------------------

Diluted net income per
common share $ 2.09 $ 2.02 $ 2.31 $ 2.74
--------------------------------------------------

Previous Four Quarters

-------------------------------------------------------------------------
(thousands of Canadian 2006 2005 2005 2005
dollars, except First Fourth Third Second
per share amounts) quarter quarter quarter quarter
-------------------------------------------------------------------------

STATEMENTS OF EARNINGS

Gross sales $ 210,234 $ 190,901 $ 178,170 $ 157,720
Smelter processing
charges and freight (51,662) (46,131) (42,184) (36,654)
Cost of sales (65,788) (67,305) (64,569) (67,219)
Depreciation (7,265) (7,879) (7,849) (8,256)
--------------------------------------------------
85,519 69,586 63,568 45,591

Corporate development
and exploration (1,454) (2,893) (1,888) (1,883)

General and
administration (2,370) (2,119) (1,351) (1,815)

Investment and other
income (expense) 25,698 985 (3,401) 3,449
Interest expense (391) (392) (409) (433)
Capital tax expense (245) (499) (198) (199)
Income tax expense (27,196) (19,022) (20,387) (13,151)
--------------------------------------------------
Net income 79,561 $ 45,646 $ 35,934 $ 31,559
--------------------------------------------------
Net income per
common share $ 1.65 $ 0.95 $ 0.80 $ 0.75
--------------------------------------------------
Diluted net income
per common share $ 1.64 $ 0.95 $ 0.80 $ 0.75
--------------------------------------------------



INMET MINING CORPORATION

Consolidated balance sheets

March 31 December 31
(thousands of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
(unaudited)
Assets

Current assets:

Cash and short-term investments $ 698,189 $ 640,186
Restricted cash 734 -
Accounts receivable 125,930 122,645
Inventories 54,122 58,323
Future income tax asset 6,022 7,567
--------------------------
884,997 828,721
Restricted cash (note 4) 45,366 35,759
Property, plant and equipment 611,213 548,637
Investments (note 5) 74,807 53,002
Future income tax asset 16,454 21,750
Deferred charges - 2,408
Derivatives (note 6) 19,716 -
Other assets 28,608 42,663
--------------------------
$1,681,161 $1,532,940
-------------------------------------------------------------------------

Liabilities

Current liabilities:

Accounts payable and accrued liabilities $ 156,594 $ 163,106
Long-term debt (note 7) 128,642 109,080
Reclamation liabilities 66,729 65,812
Derivatives (note 6) 49,003 -
Other liabilities 21,561 30,617
Future income tax liabilities 40,038 42,366
Non-controlling interest 53,041 49,125
--------------------------
515,608 460,106
--------------------------

Commitments (note 8)

Shareholders' equity

Share capital 337,338 337,338
Contributed surplus 66,999 66,999
Stock based compensation 990 915
Retained earnings 777,825 669,385
Accumulated other comprehensive loss (note 9) (17,599) (1,803)
--------------------------
1,165,553 1,072,834
--------------------------
$1,681,161 $1,532,940
-------------------------------------------------------------------------
(see accompanying notes)



INMET MINING CORPORATION

Segmented balance sheets

2007 As at March 31

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

Assets

Cash and short-term
investments $256,899 $225,869 $155,363 $ -
Other current assets 10,615 34,569 56,735 21,949
Restricted cash 14,300 - - -
Property, plant and equipment 561 120,699 72,957 31,308
Investments 74,807 - - -
Derivatives - - - -
Other assets 30,179 476 - 6,291
-------------------------------------------
$387,361 $381,613 $285,055 $59,548
-------------------------------------------
-------------------------------------------

Liabilities

Current liabilities $5,182 $27,556 $36,788 $14,316
Long-term debt 16,966 - - -
Reclamation liabilities 25,575 3,488 13,420 4,321
Derivatives - - - 39,955
Other liabilities 7,594 3,908 - -
Future income tax liabilities - 20,177 7,093 -
Non-controlling interest - - - -
-------------------------------------------
$55,317 $55,129 $57,301 $58,592
-------------------------------------------
-------------------------------------------


(unaudited) OK TEDI LAS CRUCES TOTAL
---------------------------------------------------- ---------
(thousands of Canadian (Papua New
dollars) Guinea) (Spain)
Assets
Cash and short-term
investments $44,932 $15,126 $698,189
Other current assets 49,251 13,689 186,808
Restricted cash 11,917 19,149 45,366
Property, plant and equipment 46,257 339,431 611,213
Investments - - 74,807
Derivatives - 19,716 19,716
Other assets 2,609 5,507 45,062
-------------------- -----------
$154,966 $412,618 $1,681,161
-------------------- -----------
-------------------- -----------

Liabilities

Current liabilities $42,763 $29,989 $156,594
Long-term debt - 111,676 128,642
Reclamation liabilities 17,536 2,389 66,729
Derivatives 6,963 2,085 49,003
Other liabilities 1,567 8,492 21,561
Future income tax liabilities - 12,768 40,038
Non-controlling interest - 53,041 53,041
-------------------- -----------
$68,829 $220,440 $515,608
-------------------- -----------
-------------------- -----------

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

(unaudited) OK TEDI LAS 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
-------------------- -----------
-------------------- -----------

INMET MINING CORPORATION

Consolidated statements of earnings

(unaudited)

(thousands of Canadian dollars Three Months Ended March 31
except per share amounts) 2007 2006
-------------------------------------------------------------------------
Gross sales $286,614 $210,234
Smelter processing charges and freight (64,606) (51,662)
Cost of sales (79,240) (65,788)
Depreciation (9,415) (7,265)
-------------------------------------------------------------------------
133,353 85,519
Corporate development and exploration (842) (1,454)
General and administration (2,840) (2,370)
Investment and other income (note 10) 7,290 25,698
Interest expense (438) (391)
Capital tax expense (274) (245)
Income tax expense (note 11) (35,376) (27,196)
Non-controlling interest 205 -
-------------------------------------------------------------------------
Net income $101,078 $79,561
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic net income per common share (note 12) $2.09 $1.65
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted net income per common share (note 12) $2.09 $1.64
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average shares
outstanding (000's) 48,278 48,097
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(see accompanying notes)


INMET MINING CORPORATION

Segmented statements of earnings
(unaudited)

2007 For the three months ended March 31



CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian dollars) (Turkey) (Finland) (Canada)
Gross sales $ - $117,734 $65,340 $30,242
Smelter processing
charges and freight - (31,168) (18,614) (2,693)
Cost of sales (488) (24,297) (12,923) (22,028)
Depreciation - (2,697) (2,361) (2,709)
-------------------------------------------
(488) 59,572 31,442 2,812
Corporate development
and exploration (747) (209) (461) 575
General and administration (2,840) - - -
Investment and other income 8,135 (452) - 292
Interest expense (438) - - -
Capital tax expense (274) - - -
Income tax expense (181) (13,671) (6,907) -
Non-controlling interest - - - -
-------------------------------------------
Net income $3,167 $45,240 $24,074 $3,679
-------------------------------------------
-------------------------------------------

OK TEDI LAS CRUCES TOTAL
---------------------------------------------------- ---------
(thousands of Canadian (Papua New
dollars) Guinea) (Spain)
Gross sales $73,298 $ - $286,614
Smelter processing
charges and freight (12,131) - (64,606)
Cost of sales (19,504) - (79,240)
Depreciation (1,648) - (9,415)
--------------------- ---------
40,015 - 133,353
Corporate development
and exploration - - (842)
General and administration - - (2,840)
Investment and other income - (685) 7,290
Interest expense - - (438)
Capital tax expense - - (274)
Income tax expense (14,617) - (35,376)
Non-controlling interest - 205 205
--------------------- ---------
Net income $25,398 ($480) $101,078
--------------------- ---------
--------------------- ---------


2006 For the three months ended March 31

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

Gross sales $ - $71,215 $49,109 $18,683
Smelter processing
charges and freight - (21,576) (15,343) (2,158)
Cost of sales (486) (17,750) (12,611) (15,301)
Depreciation - (1,670) (1,989) (2,161)
-------------------------------------------
(486) 30,219 19,166 (937)
Corporate development
and exploration (582) (313) (513) (46)
General and administration (2,370) - - -
Investment and other income 25,698 - - -
Interest expense (391) - - -
Capital tax expense (245) - - -
Income tax expense (47) (9,399) (4,017) -
-------------------------------------------
Net income (loss) $21,577 $20,507 $14,636 ($983)
-------------------------------------------
-------------------------------------------


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

Gross sales $71,227 $ - $210,234
Smelter processing
charges and freight (12,585) - (51,662)
Cost of sales (19,640) - (65,788)
Depreciation (1,445) - (7,265)
--------------------- ---------
37,557 - 85,519
Corporate development
and exploration - - (1,454)
General and administration - - (2,370)
Investment and other income - - 25,698
Interest expense - - (391)
Capital tax expense - - (245)
Income tax expense (13,733) - (27,196)
--------------------- ---------
Net income (loss) $23,824 $ - $79,561
--------------------- ---------
--------------------- ---------



INMET MINING CORPORATION

Consolidated statements of cash flows
(unaudited)

Three Months Ended March 31
(thousands of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Cash provided by (used in) operating
activities(1)
Net income $101,078 $79,561
Add (deduct) items not affecting cash:
Gain on disposition of investments (note 9) - (24,291)
Depreciation 9,415 7,265
Future income tax (1,735) 1,491
Accretion expense on reclamation liabilities 924 885
Deferred revenue - 236
Non-controlling interest (205) -
Other 897 874
Reclamation costs (480) (496)
Net change in non-cash working
capital (note 3) (4,914) 9,035
------------------------
104,980 74,560
------------------------

Cash provided by (used in) investing activities

Capital spending (51,935) (24,889)
Acquisitions and dispositions - 1,629
Sale (purchase) of short-term investments 120,176 (49,803)
Other (46) (40)
------------------------
68,195 (73,103)
------------------------

Cash provided by (used in) financing activities

Long-term debt borrowings 13,840 -
Financial assurance deposits (note 4) (9,930) (29,697)
Funding by non-controlling shareholder 4,648 2,050
Loan repayment (1,000) -
Subsidies received 137 4,850
Debt issue costs - (445)
Other (335) -
------------------------
7,360 (23,242)
------------------------

Foreign exchange change on cash held
in foreign currency (2,509) 3,038
------------------------
Increase in cash 178,026 (18,747)
Cash:
Beginning of period 384,610 251,895
------------------------
End of period 562,636 233,148
Short-term investments 135,553 49,803
------------------------
Cash and short-term investments $698,189 $282,951
-------------------------------------------------------------------------

(see accompanying notes)

(1) Cash used in operations includes the
following payments:

Interest $640 $579
Taxes $12,371 $11,264
-------------------------------------------------------------------------

INMET MINING CORPORATION

Segmented statements of cash flows

(unaudited)

2007 For the three months ended March 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 $3,969 $51,242 $26,523 $4,625
Net change in non-cash
working capital (7,568) 8,348 13,973 (4,140)
-------------------------------------------
(3,599) 59,590 40,496 485
-------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (24) (7,332) (284) (166)
Short-term investments 91,825 17,576 - -
Other - - - (46)
-------------------------------------------
91,801 10,244 (284) (212)
-------------------------------------------
-------------------------------------------
Cash provided by (used in)
financing activities (335) - - (1,000)
-------------------------------------------
Foreign exchange change on
cash held in foreign
currency - (2,491) 589 -
-------------------------------------------
Intergroup funding
(distributions) (6,420) (669) (4,698) 727
-------------------------------------------
Increase (decrease) in cash 81,447 66,674 36,103 -

Cash:

Beginning of period 39,899 159,195 119,260 -
-------------------------------------------
End of period 121,346 225,869 155,363 -
Short-term investments 135,553 - - -
-------------------------------------------
Cash and short-term
investments $256,899 $225,869 $155,363 $ -
-------------------------------------------
-------------------------------------------

OK TEDI LAS 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 $23,535 $ - $109,894
Net change in non-cash
working capital (15,527) - (4,914)
--------------------- ---------
8,008 - 104,980
--------------------- ---------
Cash provided by (used in)
investing activities
Capital spending (6,463) (37,666) (51,935)
Short-term investments 10,775 - 120,176
Other - - (46)
--------------------- ---------
4,312 (37,666) 68,195
--------------------- ---------
--------------------- ---------

Cash provided by (used in)
financing activities (877) 9,572 7,360
--------------------- ---------
Foreign exchange change on
cash held in foreign
currency (483) (124) (2,509)
--------------------- ---------
Intergroup funding
(distributions) - 11,060 -
--------------------- ---------
Increase (decrease) in cash 10,960 (17,158) 178,026

Cash:

Beginning of period 33,972 32,284 384,610
--------------------- ---------
End of period 44,932 15,126 562,636
Short-term investments - - 135,553
--------------------- ---------
Cash and short-term
investments $44,932 $15,126 $698,189
--------------------- ---------
--------------------- ---------



2006 For the three months ended March 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 ($3,231) $24,880 $17,259 $1,467
Net change in non-cash
working capital (3,761) 2,104 6,224 (4,855)
-------------------------------------------
(6,992) 26,984 23,483 (3,388)
-------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (68) (6,773) (545) (900)
Short-term investments (49,803) - - -
Other 1,629 - - (40)
-------------------------------------------
(48,242) (6,773) (545) (940)
-------------------------------------------
-------------------------------------------
Cash used in financing
activities (19,946) - - -
-------------------------------------------

Foreign exchange change on
cash held in foreign
currency - 377 2,043 -
-------------------------------------------

Intergroup funding
(distributions) 9,823 228 (1,792) 4,328
-------------------------------------------
Increase (decrease) in cash (65,357) 20,816 23,189 -

Cash:
Beginning of period 123,843 36,578 58,138 -
-------------------------------------------
End of period 58,486 57,394 81,327 -
Short-term investments 49,803 - - -
-------------------------------------------

Cash and short-term
investments $108,289 $57,394 $81,327 $ -
-------------------------------------------
-------------------------------------------

OK TEDI LAS 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 $25,150 $ - $65,525
Net change in non-cash
working capital 9,323 - 9,035
--------------------- ---------
34,473 - 74,560
--------------------- ---------

Cash provided by (used in)
investing activities
Capital spending (2,550) (14,053) (24,889)
Short-term investments - - (49,803)
Other - - 1,589
--------------------- ---------
(2,550) (14,053) (73,103)
--------------------- ---------
Cash used in financing
activities (861) (2,435) (23,242)
--------------------- ---------
Foreign exchange change on
cash held in foreign
currency 220 398 3,038
--------------------- ---------
Intergroup funding
(distributions) (18,338) 5,751 -
--------------------- ---------
Increase (decrease) in cash 12,944 (10,339) (18,747)
Cash:
Beginning of period 16,031 17,305 251,895
--------------------- ---------
End of period 28,975 6,966 233,148
Short-term investments - - 49,803
--------------------- ---------
Cash and short-term
investments $28,975 $6,966 $282,951
--------------------- ---------
--------------------- ---------

INMET MINING CORPORATION

Consolidated statements of retained earnings
(unaudited)

Three Months Ended March 31
(thousands of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Retained earnings, beginning of period,
as previously reported $669,385 $258,386
Adjustment for financial instruments (note 2) 7,362 -
------------------------
Retained earnings, restated 676,747 258,386
Net income 101,078 79,561
-------------------------------------------------------------------------
Retained earnings, end of period $777,825 $337,947
-------------------------------------------------------------------------

(see accompanying notes)

Consolidated statements of comprehensive income

Three Months Ended March 31
(thousands of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Net income $101,078 $79,561
------------------------

Other comprehensive income for the
period (note 9)
Changes in fair value of gold forward sales
contracts(net of tax of $103) 3,149 -
Changes in fair value of interest rate swap
contracts(1) (134) -
Changes in fair value of foreign exchange
forward contracts(2) 821 -
Changes in fair value of investments
(net of tax of $1,228) 16,900 -
Currency translation adjustment (3,243) 8,353
------------------------
17,493 8,353
Comprehensive income $118,571 $87,914
-------------------------------------------------------------------------
(1) Net of tax of $81 and non-controlling interest of $57.
(2) Net of tax of $504 and non-controlling interest of $353.



INMET MINING CORPORATION

Notes to the consolidated financial statements



1. Significant accounting policies

Our interim consolidated financial statements do not include all the
disclosure required under generally accepted accounting principles
for annual financial statements. The interim consolidated financial
statements, however, 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 interim consolidated
financial statements should be read in conjunction with our annual
consolidated financial statements included in our 2006 Annual report.
These financial statements have not been reviewed by our external
auditors.

2. Changes in accounting policies

Effective January 1, 2007, we adopted the following new CICA Handbook
sections:

Section 1506 - Accounting changes
This section specifies that a voluntary change in accounting
principles:

(a) can only be made if the change results in more reliable and
relevant information

(b) must be accompanied by restated amounts for prior periods and the
reasons for the change

(c) must describe the nature and amount of the change, if it is a
change to an estimate.

We have not made any voluntary change in accounting principles since
we adopted these standards.

The following three sections do not permit us to restate prior
periods.

Section 3855 - Financial instruments - recognition and measurement

This section establishes standards for recognizing and measuring
financial assets, financial liabilities and non-financial
derivatives. It requires that financial assets and liabilities
including derivatives be recognized on the balance sheet when we
become a party to the contractual provisions of the financial
instrument or a non-financial derivative contract. All financial
instruments should be measured at fair value on initial recognition
except for certain related party transactions. Fair value is the
amount at which an item could be exchanged between willing parties.

Measurement in subsequent periods depends on whether the financial
instruments have been classified as held-for-trading, available-for-
sale, held-to-maturity, loans and receivables, or other liabilities.

We have designated certain financial assets and liabilities and
adopted the following new accounting policies:

Cash and short-term investments, accounts receivable, restricted cash
and accounts payable and accrued liabilities

We classify these assets and liabilities as held-for-trading. We
record them at fair value and record any changes in their fair value
in net income. We calculate fair value using published price
quotations in an active market, where applicable. Our December 31,
2006 carrying values for these assets and liabilities already
approximated fair value, because of their short terms to maturity,
and we did not make any adjustments to the opening values.

Most of our sales contracts set prices on a specified future date
based upon market commodity prices. Variations between the prices
recorded on the date of revenue recognition and the actual final
price due to changes in market prices result in the existence of an
embedded derivative in accounts receivable. We adjust accounts
receivable every period to reflect the change in the value of the
contract based on the market price in the period, and then record the
change in fair value in revenue once the contract has settled.

Investments

We classify our investments as available-for-sale and record them at
fair value. We record changes in their fair value net of tax in other
comprehensive income. The change in fair value of an investment
appears in net income only when it is sold or impaired. We calculate
fair value using the bid price of the investment as quoted in an
active market. We have made adjustments to the opening values of our
investments (note 5).

Long-term debt

We classify all of our long-term debt as other than held-for-trading.
At December 31, 2006 our long-term debt approximated fair value, and
we did not make any adjustments to the opening values (note 7).
We previously capitalized any costs spent to issue debt to Other
assets. Effective January 1, 2007, we will record transaction costs
related to issuing debt in net income or, for development properties,
capitalize them to Property, plant and equipment.

Derivative and other contracts

We record our non-financial derivative contracts at fair value on the
balance sheet. Marked-to-market adjustments on these instruments are
included in net income, unless the instruments are designated as part
of a cash flow hedge relationship. We identify and separately account
for embedded derivatives in contracts that were entered into or
substantively modified on or after January 1, 2003. We use settlement
date accounting for all contracts to buy or sell financial assets.

3865 - Hedges

This section specifies when and how we can use hedge accounting for
the following hedging strategies: fair value hedges, cash flow hedges
and hedges of a foreign currency exposure of a net investment in a
self-sustaining foreign operation.

We only have cash flow hedging relationships. We recognize the
effective portion of a change in fair value in Other comprehensive
income, and then classify the accumulated amount to net income as the
losses are realized. We recognize the ineffective portion of a change
in fair value in net income.

On January 1, 2007, we designated our existing derivative contracts
related to gold forward sales contracts at Troilus and Ok Tedi, the
foreign exchange forward contract and the interest rate swap contract
at Las Cruces, as part of a cash flow hedge relationship. The fair
values of these contracts are recorded on the balance sheet (note 6).

1530 - Comprehensive income
This section calls for a statement of comprehensive income and its
components. Other comprehensive income (AOCI) includes unrealized
gains and losses on our investments, unrealized foreign currency
translation arising from self-sustaining foreign operations, and
changes in the fair value of the effective portion of cash flow
hedging instruments.

The table below shows you the effect of adopting these standards on
our balance sheet as at January 1. We have not restated prior
periods.

(thousands of December 31 January 1 January 1
Canadian dollars) 2006 2007 2007
---------------------------------------------------------------------
Adjustments Restated
on adoption opening
of new balances
As reported standards Ref in 2007

Assets

Current assets:

Cash and short-term
investments $640,186 $- $640,186
Accounts receivable 122,645 - 122,645
Inventories 58,323 - 58,323
Future income tax asset 7,567 - 7,567
-------------------------------------------
828,721 - 828,721
Restricted cash 35,759 - 35,759
Property, plant and
equipment 548,637 13,795 a 562,432
Investments (note 5) 53,002 3,677 b 56,679
Future income tax asset 21,750 (5,696) d 16,054
Deferred charges 2,408 (2,408) c -
Derivatives (note 6) - 17,965 c 17,965
Other assets 42,663 (13,795) a 28,868
-------------------------------------------
$1,532,940 $13,538 $1,546,478
---------------------------------------------------------------------
Liabilities
Accounts payable and
accrued liabilities $163,106 (5,444) d $157,662
Long-term debt 109,080 - 109,080
Reclamation liabilities 65,812 - 65,812
Derivatives (note 6) - 51,494 c 51,494
Other liabilities 30,617 (7,958) c 22,659
Future income tax
liabilities 42,366 (2,166) d 40,200
Non-controlling interest 49,125 3,539 d 52,664
-------------------------------------------
460,106 39,465 499,571
-------------------------------------------
Shareholders' equity
Share capital 337,338 - 337,338
Contributed surplus 66,999 - 66,999
Stock based compensation 915 - 915
Retained earnings 669,385 7,362 d 676,747
Accumulated other
comprehensive loss (note 9) - (35,092) (35,092)
Foreign currency
translation account (1,803) 1,803 e -
-------------------------------------------
1,072,834 (25,927) 1,046,907
-------------------------------------------
$1,532,940 $13,538 $1,546,478
---------------------------------------------------------------------

(a) We have reclassified costs to issue debt for the credit facility
at Las Cruces to Property, plant and equipment. These were
previously capitalized.

(b) We have designated investments we previously accounted for at
cost as available for sale, and recorded them at fair value.

(c) We have reflected derivatives that were previously off balance
sheet at fair value. We have recorded hedge gains and losses that
were previously deferred, along with the accumulated ineffective
portion of the hedges, in opening retained earnings.

(d) All adjustments are net of tax and non-controlling interest.

(e) We have reclassified the foreign currency translation account to
AOCI.

3. Statement of cash flows

The tables below show the components of our net change in non-cash
working capital by segment for the three months ending March 31.

For the three months ended March 31, 2007

-------------------------------------------------------------------------
(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------
Accounts
receivable $(906) $14,595 $12,851 $(6,609) $(20,702) $(771)
Inventories - 2,567 (832) 2,189 (674) 3,250
Accounts payable
and accrued
liabilities (3,258) (13,923) (1,361) 280 (11,749) (30,011)
Taxes payable (3,406) 5,103 3,315 - 17,609 22,621
Other 2 6 - - (11) (3)
-------------------------------------------------------------------------
$(7,568) $8,348 $13,973 $(4,140) $(15,527) $(4,914)
-------------------------------------------------------------------------

For the three months ended March 31, 2006

-------------------------------------------------------------------------
(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------
Accounts
receivable $191 $(2,205) $6,527 $1,021 $(5,293) $241
Inventories - (10) 143 (4,711) (485) (5,063)
Accounts payable
and accrued
liabilities (2,445) 1,319 (2,755) (1,165) 3,575 1,471
Taxes payable (1,450) 2,993 2,309 - 11,548 15,400
Other (57) 7 - - (22) (72)
-------------------------------------------------------------------------
$(3,761) $2,104 $6,224 $(4,855) $9,323 $9,035
-------------------------------------------------------------------------

4. Restricted cash

The table below shows our restricted cash balances.

---------------------------------------------------------------------
March 31 December 31
(thousands) 2007 2006
---------------------------------------------------------------------
Cash collateralized for letters of credit -
Las Cruces - current $734 -
Collateralized cash for letter of credit
facility 14,300 14,300
In trust for Ok Tedi rehabilitation 11,917 10,982
Cash collateralized for letters of credit -
Las Cruces - long-term 19,149 10,477
---------------------------------------------------------------------
$46,100 $35,759
---------------------------------------------------------------------

The letters of credit that Las Cruces issued are for:

- (euro) 5.3 million to secure payments that will ultimately be
paid for the construction of the plant

- (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 licences are granted

- (euro) 2.0 million for dewatering and other purposes.

5. Investments

The table below shows our investments.

---------------------------------------------------------------------
March 31 January 1 December 31
(thousands) 2007 2007 2006
(fair value) (fair value (historical
- adjusted) cost - as
reported)
---------------------------------------------------------------------
Wolfden Resources Inc. $50,490 $39,690 $39,705
Premier Gold Mines Ltd. 20,412 13,041 10,920
Other 3,905 3,948 2,377
---------------------------------------------------------------------
$74,807 56,679 $53,002
---------------------------------------------------------------------

6. Derivatives

The table below shows the fair value of our derivatives.

---------------------------------------------------------------------
March 31 January 1 December 31
(thousands) 2007 2007 2006
(fair value) (fair value (historical
- adjusted) cost - as
reported)
---------------------------------------------------------------------
Derivative asset:
Las Cruces currency
forward sale $19,716 $17,965 $-
---------------------------------------
Derivative liabilities:
Troilus gold forward sales 39,955 43,156 -
Ok Tedi gold forward sales 6,963 7,220 -
Las Cruces interest rate swaps 2,085 1,118 -
---------------------------------------------------------------------
$49,003 $51,494 $-
---------------------------------------------------------------------

7. Long-term debt

---------------------------------------------------------------------
March 31 December 31
(thousands) 2007 2006
---------------------------------------------------------------------
Credit facility - Tranche A $64,781 $53,792
- Tranche B 26,221 23,054
Promissory note 16,966 16,786
Loans from non-controlling shareholder 20,674 15,448
---------------------------------------------------------------------
$128,642 $109,080
---------------------------------------------------------------------

Credit facility

Las Cruces borrowed an additional (euro) 7 million this quarter under
Tranche A, the US $240 million senior secured facility, and an
additional (euro) 2 million under Tranche B, the (euro) 69 million
senior secured bridge financing facility. The credit facility loans
approximate fair value because the loans accrue interest at
prevailing market rates.

Loans from non-controlling shareholder

Las Cruces received (euro) 10 million of intercompany loan advances
this quarter. 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) 3 million), is reflected in long-term
debt at March 31, 2007. Loans from non-controlling shareholders
approximate fair value because the loans accrue interest at
prevailing market rates.

8. Commitments

Our operations had the following capital commitments as at March 31,
2007:

- Cayeli has committed approximately US $3.3 million to the shaft
deepening project, which it will spend later in the year.

- Las Cruces has committed (euro) 146 million to engineering,
procurement and construction management and additional
construction work related to the pit and plant.

9. Accumulated other comprehensive loss (AOCL)

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

---------------------------------------------------------------------
(thousands)
---------------------------------------------------------------------
Unrealized losses on gold forward sales contracts
(net of tax of $2,166) $(44,958)
Unrealized gains on foreign exchange forward contract(1) 8,803
Unrealized losses on interest rate swap contracts(2) (168)
Unrealized gains on investments (net of tax of $643) 3,034
Currency translation adjustment (1,803)
-----------
AOCI, January 1, 2007 $(35,092)
Other comprehensive income for the three months
ending March 31, 2007 17,493
-----------
AOCI, March 31, 2007 $(17,599)
---------------------------------------------------------------------
AOCI March 31, 2007 comprises:
Unrealized losses on gold forward sales contracts
(net of tax of $2,063) $(41,809)
Unrealized gains on foreign exchange forward contract(3) 9,624
Unrealized losses on interest rate swap contracts(4) (302)
Unrealized gains on investments (net of tax of $1,871) 19,934
Currency translation adjustment (5,046)
---------------------------------------------------------------------
AOCI, March 31, 2007 $(17,599)
---------------------------------------------------------------------

1. Net of tax of $5,389 and non-controlling interest of $3,773.

2. Net of tax of $103 and non-controlling interest of $72.

3. Net of tax of $5,893 and non-controlling interest of $4,126.

4. Net of tax of $184 and non-controlling interest of $129.

The table below shows the breakdown of the currency translation

adjustment included in AOCL.

---------------------------------------------------------------------
March 31 December 31
(thousands) 2007 2006
---------------------------------------------------------------------
Pyhasalmi (euro functional currency) $6,058 $5,637
Las Cruces (euro functional currency) 8,710 8,095
Cayeli (US dollar functional currency) (12,628) (9,278)
Ok Tedi (US dollar functional currency) (7,186) (6,257)
---------------------------------------------------------------------
$(5,046) $(1,803)
---------------------------------------------------------------------

The Canadian dollar to US dollar exchange rate was $1.15 at March 31,
2007, and $1.17 at December 31, 2006. The Canadian dollar to euro
exchange rate was $1.54 at March 31, 2007, and $1.54 at December 31,
2006.

10. Investment and other income

---------------------------------------------------------------------
three months ended
March 31
(thousands) 2007 2006
---------------------------------------------------------------------
Gain on sale of Izok $- $23,905
Interest and dividend income 7,879 1,580
Hedge ineffectiveness (393) -
Foreign exchange loss (145) (82)
Pension expense (18) (26)
Other (33) 321
---------------------------------------------------------------------
$7,290 $25,698
---------------------------------------------------------------------

Sale of Izok development property and acquisition of Wolfden
common shares

In 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.

Interest and dividend income

Interest income was higher for the first quarter of 2007, compared to
the same period in 2006, because of higher cash balances.

11. Income tax expense

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

For the three months ended March 31, 2007

---------------------------------------------------------------------
(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Total
---------------------------------------------------------------------
Current income taxes $386 $11,356 $6,865 $18,504 $37,111
Future income taxes (205) 2,315 42 (3,887) (1,735)
---------------------------------------------------------------------
$181 $13,671 $6,907 $14,617 $35,376
---------------------------------------------------------------------

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

(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Total
---------------------------------------------------------------------
Current income taxes $47 $7,939 $3,971 $13,748 $25,705
Future income taxes - 1,460 46 (15) 1,491
---------------------------------------------------------------------
$47 $9,399 $4,017 $13,733 $27,196
---------------------------------------------------------------------

12. Net income per share

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

---------------------------------------------------------------------
three months ended
March 31
(thousands) 2007 2006
---------------------------------------------------------------------
Net income available to common shareholders $101,078 $79,561
---------------------------------------------------------------------
(thousands)
---------------------------------------------------------------------
Weighted average common shares outstanding 48,278 48,097
Plus incremental shares from assumed
conversions:
Stock options - 122
Deferred share units 77 76
---------------------------------------------------------------------
Diluted weighted average common shares
outstanding 48,355 48,295
---------------------------------------------------------------------
(Canadian dollars per share)
---------------------------------------------------------------------
Basic net income per common share $2.09 $1.65
---------------------------------------------------------------------
Dilutive effect from assumed conversions
of stock options per common share and
deferred share units per common share - (0.01)
---------------------------------------------------------------------
Diluted net income per common share $2.09 $1.64
---------------------------------------------------------------------
---------------------------------------------------------------------

13. Subsequent event

This quarter we entered into a lock-up agreement with Zinifex
Canadian Enterprises Inc. relating to Zinifex's cash offer of
$3.81 per share to acquire all of the issued and outstanding common
shares of Wolfden.

Our sale of Wolfden shares to Zinifex is subject to the terms and
conditions of the offer, which we believe is customary for a
transaction of this kind. We expect the transaction to close in May,
and have enough capital losses to offset the expected $12 million
gain on the sale of the shares. At March 31, 2007, we have recorded
$11 million unrealized marked-to-market gain on our shares in
Wolfden, in accumulated other comprehensive income.



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

Contact Information

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

    or

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