Inmet Mining Corporation
TSX : IMN

Inmet Mining Corporation

October 27, 2011 20:01 ET

Inmet Announces Third Quarter Net Income From Continuing Operations of $101 Million Compared to $68 Million in the Third Quarter of 2010

TORONTO, CANADA--(Marketwire - Oct. 27, 2011) -

All amounts in Canadian dollars unless indicated otherwise

Inmet (TSX:IMN) announces third quarter net income from continuing operations of $101 million compared to $68 million in the third quarter of 2010.

Third quarter highlights

  • Earnings from operations up from last year

Earnings from operations were $116 million this quarter compared to $102 million in the same quarter of last year. This is the result of our continuing ramp up at Las Cruces and a significant increase in pyrite sales volumes at Pyhäsalmi, offset somewhat by higher operating costs, and lower realized copper prices at Çayeli this quarter. A high proportion of Çayeli's sales this quarter were not yet finalized so they were valued using September 30 forward prices.

  • Foreign exchange gains increase net income

We recognized foreign exchange gains of $30 million in the quarter, mainly on the cash, and long-term bonds we hold in US dollars.

  • Higher operating cash flows

Our cash flow provided by operating activities was $121 million this quarter. This represents an increase of $41 million over the third quarter of 2010, mainly because our net working capital was lower and because of the higher production from Las Cruces. Reduced working capital reflects lower accounts receivable at Çayeli and Pyhäsalmi related to the timing of collections from customers and a decrease in metal prices at the end of this quarter.

  • Las Cruces production increased

Las Cruces produced 11,400 tonnes of cathode copper in the third quarter, including a record 4,500 tonnes in August. Reactor performance and reliability improved this quarter, and by the end of September, all eight reactors had operated reliably for 30 consecutive days. We expect cathode copper production of approximately 4,700 tonnes for October, and anticipate reaching production design capacity by the end of the year.

  • Update on Environmental and Social Impact Assessment (ESIA) approval

We continue to await ESIA approval for the Cobre Panama project. The government's review and assessment process has been methodical and thorough. Our final step in the process this quarter was to submit our responses to the second round of questions posed by the Panamanian environmental authority and other consulting ministries and the public file indicates that the Panamanian government has completed its technical review.

Key financial data

three months ended
September 30
nine months ended
September 30
(thousands, except per share amounts) 2011 2010 Change 2011 2010 change
FINANCIAL HIGHLIGHTS
Sales
Gross sales $ 261,757 $ 225,960 +16 % $ 737,986 $ 548,287 +35 %
Net income
Net income from continuing operations $ 101,205 $ 67,986 +49 % $ 216,660 $ 168,851 +28 %
Net income from continuing operations per share $ 1.46 $ 1.04 +40 % $ 3.31 $ 3.00 +10 %
Net income from discontinued operations - $ 33,569 -100 % $ 83,439 $ 76,762 +9 %
Net income from discontinued operations per share - $ 0.60 -100 % $ 1.27 $ 1.37 -7 %
Net income attributable to Inmet shareholders $ 101,205 $ 91,678 +10 % $ 300,099 $ 244,944 +23 %
Net income per share $ 1.46 $ 1.64 -11 % $ 4.58 $ 4.37 +5 %
Cash flow
Cash flow provided by operating activities $ 120,650 $ 79,585 +52 % $ 331,757 $ 164,403 +102 %
Cash flow provided by operating activities per share (1) $ 1.74 $ 1.42 +23 % $ 5.07 $ 2.93 +73 %
Capital spending (2) $ 57,034 $ 44,327 +29 % $ 149,565 $ 68,757 +118 %
OPERATING HIGHLIGHTS
Production(3)
Copper (tonnes) 21,700 17,100 +27 % 58,600 47,900 +22 %
Zinc (tonnes) 23,000 20,800 +11 % 62,500 60,100 +4 %
Gold (ounces) - - - - 37,900 -100 %
Pyrite (tonnes) 210,100 62,000 +239 % 594,300 397,200 +50 %
Copper cash cost (US $ per pound)(4) $ 0.69 $ 0.77 -10 % $ 0.88 $ 0.59 +49 %
as at
September 30
as at
December 31
FINANCIAL CONDITION 2011 2010
Current ratio 7.6 to 1 3.4 to 1
Gross debt to total equity 1 % 1 %
Net working capital balance (millions) $ 1,239 $ 626
Liquidity balance including cash and long-term bonds (millions) $ 1,738 $ 699
Gross debt (millions) $ 18 $ 17
Shareholders' equity (millions) $ 3,479 $ 2,555
(1) Cash flow provided by operating activities divided by average shares outstanding for the period.
(2) The nine months ended September 30, 2011 includes capital spending of $90 million at Cobre Panama and $44 million at Las Cruces. The nine months ended September 30, 2010 includes capital spending of $65 million at Cobre Panama and $52 million at Las Cruces, reduced by positive cash flow from pre-operating costs net of revenues and working capital changes at Las Cruces of $60 million.
(3) Inmet's share. 2010 production does not include our share of Ok Tedi.
(4) Copper cash cost per pound is a non-GAAP financial measure – see Supplementary financial information on pages 29 to 31. Copper cash costs this quarter and year to September were higher because Las Cruces is ramping up to full production. We did not include Las Cruces' results in cash costs in the first half of 2010 because it had not yet reached commercial production.

Third quarter press release

Where to find it

Our financial results 4
Key changes in 2011 4
Understanding our performance 5
Earnings from operations 7
Corporate costs 12
Results of our operations 14
Çayeli 15
Las Cruces 17
Pyhäsalmi 19
Status of our development project 21
Cobre Panama 21
Managing our liquidity 23
Financial condition 26
Accounting changes 27
Supplementary financial information 29

In this press release, Inmet means Inmet Mining Corporation and we, us and our mean Inmet and/or its subsidiaries and joint ventures. This quarter refers to the three months ended September 30, 2011. Revised objective is as of October 27, 2011.

Adoption of International Financial Reporting Standards

We have prepared our third quarter 2011 consolidated financial statements and other financial information according to International Financial Reporting Standards, and restated our 2010 comparative financial statements and other financial information following our IFRS accounting policies. See Adoption of International Financial Reporting Standards on page 27 for more information.

Forward looking information

Securities regulators encourage companies to disclose forward-looking information to help investors understand a company's future prospects. This press release contains statements about our future financial condition, results of operations and business.

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

Our financial results

three months ended
September 30
nine months ended
September 30
(thousands, except per share amounts) 2011 2010 change 2011 2010 change
EARNINGS FROM OPERATIONS (1)
Çayeli $ 37,147 $ 48,396 -23 % $ 123,891 $ 111,694 +11 %
Las Cruces 32,631 21,381 +53 % 84,682 21,381 +296 %
Pyhäsalmi 46,471 26,985 +72 % 111,967 74,817 +50 %
Other - 5,275 -100 % - 29,666 -100 %
116,249 102,037 +14 % 320,540 237,558 +35 %
DEVELOPMENT AND EXPLORATION
Corporate development and exploration (4,688 ) (2,758 ) +70 % (22,661 ) (8,061 ) +181 %
CORPORATE COSTS
General and administration (9,987 ) (3,985 ) +151 % (26,667 ) (15,606 ) +71 %
Investment and other income 35,778 3,197 +1,019 % 34,736 7,722 +350 %
Stand by costs - - - - (6,753 ) -100 %
Finance costs (2,377 ) (5,239 ) -55 % (7,094 ) (8,882 ) -20 %
Income and capital taxes (33,770 ) (25,266 ) +34 % (82,194 ) (37,127 ) +121 %
(10,356 ) (31,293 ) -67 % (81,219 ) (60,646 ) +34 %
Net income from continuing operations 101,205 67,986 +49 % 216,660 168,851 +28 %
Income from discontinued operation (net of taxes) - 33,569 -100 % 83,439 76,762 +9 %
Non-controlling interest - 9,877 -100 % - 669 -100 %
Net income attributable to Inmet shareholders $ 101,205 $ 91,678 +10 % $ 300,099 $ 244,944 +23 %
Income from continuing operations per common share $ 1.46 $ 1.04 +40 % $ 3.31 $ 3.00 +10 %
Diluted income from continuing operations per common share $ 1.46 $ 1.04 +40 % $ 3.30 $ 2.99 +10 %
Basic net income per common share $ 1.46 $ 1.64 -11 % $ 4.58 $ 4.37 +5 %
Diluted net income per common share $ 1.46 $ 1.64 -11 % $ 4.57 $ 4.36 +5 %
Weighted average shares outstanding 69,331 56,107 +24 % 65,454 56,107 +17 %
(1) Gross sales less smelter processing charges and freight, cost of sales including depreciation and provisions for mine reclamation at closed properties.

Key changes in 2011

(millions) three months ended
September 30
nine months ended
September 30
see page
EARNINGS FROM OPERATIONS
Sales
Higher copper prices denominated in Canadian dollars
$ - $ 71 7
Other changes in prices denominated in Canadian dollars 6 19 7
Higher sales volumes 29 156 7
Costs
Higher operating costs, including costs that vary with income and cash flows (10 ) (88 ) 10
2010 earnings from Troilus (5 ) (30 )
Higher depreciation (9 ) (48 ) 11
Other 3 3
Higher earnings from operations compared to 2010 14 83
CORPORATE COSTS
Costs related to proposed merger with Lundin - (6 ) 12
Higher exploration and administrative costs (8 ) (20 ) 12
Standby charges in 2010 - 7 13
Foreign exchange changes 30 19 13
Higher income taxes (9 ) (45 ) 13
Higher interest income 3 6 12
Other 3 4
Higher net income from continuing operations compared to 2010 33 48
Higher (lower) income from discontinued operation – Ok Tedi (34 ) 7 13
Non-controlling interest in 2010 10 -
Higher net income attributable to Inmet shareholders compared to 2010 $ 9 $ 55

Understanding our performance

Metal prices

The table below shows the average metal prices we realized in US dollars and Canadian dollars, this quarter and year to date compared to 2010. The prices we realize include finalization adjustments – see Gross sales on page 7.

three months ended September 30 nine months ended September 30
2011 2010 change 2011 2010 change
US dollar metal prices
Copper (per pound) US $3.54 US $3.41 +4 % US $3.97 US $3.25 +22 %
Zinc (per pound) US $0.92 US $0.95 -3 % US $0.99 US $0.92 +8 %
Canadian dollar metal prices
Copper (per pound) C $3.47 C $3.54 -2 % C $3.88 C $3.37 +15 %
Zinc (per pound) C $0.90 C $0.99 -9 % C $0.97 C $0.95 +2 %

Copper

Copper prices declined substantially in September after remaining steady earlier in the year. Prices on the London Metals Exchange (LME) fell from US $4.27 per pound on July 1 to US $3.23 per pound on September 30. LME copper prices averaged US $4.07 per pound this quarter – a 24 percent increase over the third quarter of 2010. Our realized copper price of US $3.54 per pound this quarter is significantly lower than the LME average price, mainly because of Çayeli. A high proportion of Çayeli's sales this quarter were not yet finalized so they were valued using September 30 forward prices.

Zinc

Zinc prices on the LME went down 19 percent this quarter, from US $1.06 per pound at the start of the quarter to $0.86 per pound on September 30. Zinc prices averaged US $1.01 per pound this quarter, slightly lower than last quarter's average price of US $1.02 per pound and an 11 percent increase over the third quarter of 2010.

Pyrite

Prices for sulphur remained steady this quarter and we expect to realize similar prices over the rest of the year.

Exchange rates

Exchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter and year to date compared to 2010.

three months ended
September 30
nine months ended
September 30
2011 2010 change 2011 2010 change
Exchange rates
1 US$ to C$ $ 0.98 $ 1.04 -6 % $ 0.98 $ 1.04 -6 %
1 euro to C$ $ 1.38 $ 1.34 +3 % $ 1.38 $ 1.36 +1 %
1 euro to US$ $ 1.42 $ 1.29 +10 % $ 1.41 $ 1.32 +7 %

Our sales are affected by the conversion of US dollar revenue to Canadian dollars. Compared to the same quarter last year, the value of the Canadian dollar went up 6 percent relative to the US dollar, and down 3 percent relative to the euro.

Our earnings are affected by changes in foreign currency exchange rates when we:

  • translate the results of our operations from their functional currency (US dollars or euros) to Canadian dollars
  • revalue US dollars and euros that we hold in cash and long-term bonds at Corporate.

Treatment charges down for zinc

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

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

Treatment charges for copper concentrates this year were higher than in 2010 based on agreements we have signed with customers. Additionally, treatment charges for copper concentrates this quarter were higher because of spot market shipments we made. Spot smelter processing charges were higher because the earthquake in Japan in March caused temporary stoppages in copper smelter production, lowering short-term demand for copper concentrates. Treatment charges for zinc concentrates are lower than last year, reflecting a tightening zinc concentrate market.

three months ended
September 30
nine months ended
September 30
(US$) 2011 2010(1) change 2011 2010(1) change
Treatment charges
Copper (per dry metric tonne of concentrate) US $67 US $53 +26 % US $58 US $52 +12 %
Zinc (per dry metric tonne of concentrate) US $225 US $244 -8 % US $225 US $246 -9 %
Price participation
Copper (per pound) US $0.02 US $0.02 - US $0.02 US $0.02 -
Zinc (per pound) US ($0.01 ) US ($0.01 ) - US ($0.01 ) US ($0.01 ) -
Freight charges
Copper (per dry metric tonne of concentrate) US $46 US $51 -10 % US $49 US $49 -
Zinc (per dry metric tonne of concentrate) US $26 US $30 -13 % US $25 US $31 -19 %
(1) 2010 charges exclude Ok Tedi charges.

Statutory tax rates remain consistent

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

2011 2010 change
Statutory tax rates
Çayeli 24 % 24 % -
Las Cruces 30 % 30 % -
Pyhäsalmi 26 % 26 % -

Earnings from operations

three months ended
September 30
nine months ended
September 30
(thousands) 2011 2010 change 2011 2010 change
Gross sales $ 261,757 $ 225,960 +16 % $ 737,986 $ 548,287 +35 %
Smelter processing charges and freight (37,043 ) (34,358 ) +8 % (102,498 ) (102,731 ) -
Cost of sales:
Direct production costs (75,406 ) (65,355 ) +15 % (224,057 ) (160,100 ) +40 %
Inventory changes (4,836 ) (2,938 ) +65 % (6,337 ) (6,430 ) -1 %
Other non-cash expenses (900 ) (2,210 ) -59 % (3,544 ) (4,362 ) -19 %
Depreciation (27,321 ) (19,062 ) +43 % (81,010 ) (37,106 ) +118 %
Earnings from operations $ 116,249 $ 102,037 +14 % $ 320,540 $ 237,558 +35 %

Significantly higher gross sales

three months ended
September 30
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September 30
(thousands) 2011 2010 change 2011 2010 change
Gross sales by operation
Çayeli $ 93,168 $ 96,204 -3 % $ 274,050 $ 253,667 +8 %
Las Cruces 86,364 61,849 +40 % 255,977 61,849 +314 %
Pyhäsalmi 82,225 58,014 +42 % 207,959 160,701 +29 %
Other (Troilus) - 9,893 -100 % - 72,070 -100 %
$ 261,757 $ 225,960 +16 % $ 737,986 $ 548,287 +35 %
Gross sales by metal
Copper $ 176,632 $ 159,300 +11 % $ 513,102 $ 316,824 +62 %
Zinc 47,616 39,951 +19 % 142,779 126,222 +13 %
Gold - 8,625 -100 % - 54,917 -100 %
Other 37,509 18,084 +107 % 82,105 50,324 +63 %
$ 261,757 $ 225,960 +16 % $ 737,986 $ 548,287 +35 %

Key components of the increase in sales:

increasing gross sales at Las Cruces, higher pyrite sales at Pyhäsalmi, no sales at Troilus


(millions)
three months ended
September 30
nine months ended
September 30
Higher copper prices, denominated in Canadian dollars $ 1 $ 64
Higher (lower) zinc prices, denominated in Canadian dollars (5 ) 1
Changes in other metal prices 11 19
2010 gross sales from Troilus (10 ) (72 )
Higher sales volumes at our other mines 39 178
Higher gross sales, compared to 2010 $ 36 $ 190

We record sales that settle during the reporting period using the metal price on the day they settle. For sales that have not settled, we use an estimate based on the month we expect the sale to settle and the forward price of the metal at the end of the reporting period. We recognize the difference between our estimate and the final price by adjusting our gross sales in the period when we settle the sale (finalization adjustment).

This quarter, we recorded $3 million in negative finalization adjustments from second quarter sales.

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

  • 24 million pounds of copper provisionally priced at US $3.18 per pound
  • 24 million pounds of zinc provisionally priced at US $0.84 per pound.

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

(millions of pounds) copper zinc
October 2011 18 19
November 2011 6 5
Unsettled sales at September 30, 2011 24 24

Significantly higher copper, zinc and pyrite sales volumes, no gold sales volumes

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

  • Copper production volumes were up this quarter and year to date mainly because of higher production at Las Cruces. Copper sales volumes were higher than production volumes this quarter mainly because of the timing of shipments to our customers at Çayeli and Pyhäsalmi.
  • Zinc sales volumes this quarter and year to date were higher than 2010 due to higher production volumes, and the timing of shipments to our customers.
  • There were no gold production or sales volumes because Troilus stopped operating in June 2010 and we sold our interest in Ok Tedi in January 2011.
  • Pyhäsalmi's pyrite sales volumes were higher than in 2010 because of increased customer demand in Europe and China.
three months ended
September 30
nine months ended
September 30
Sales volumes 2011 2010(1) change 2011 2010(1) change
Copper (tonnes) 23,100 18,000 +28 % 60,000 47,700 +26 %
Zinc (tonnes) 23,900 18,400 +30 % 67,000 59,700 +12 %
Gold (ounces) - 6,700 -100 % - 46,000 -100 %
Pyrite (tonnes) 269,200 136,000 +98 % 633,200 395,100 +60 %

Production

three months ended September 30
nine months ended September 30
revised objective
Inmet's share(2) 2011 2010(1) change 2011 2010(1) change 2011(3)
Copper (tonnes)
Çayeli 7,100 7,300 -3 % 20,100 21,500 -7 % 28,400
Las Cruces 11,400 5,800 +97 % 28,000 13,600 +106 % 43,500
Pyhäsalmi 3,200 3,900 -18 % 10,500 10,800 -3 % 13,300
Troilus - - - - 2,000 -100 % -
21,700 17,000 +28 % 58,600 47,900 +22 % 85,200
Zinc (tonnes)
Çayeli 13,900 11,700 +19 % 36,900 38,200 -3 % 48,000
Pyhäsalmi 9,100 9,100 - 25,600 21,900 +17 % 31,900
23,000 20,800 +11 % 62,500 60,100 +4 % 79,900
Gold (ounces)
Troilus - - - - 37,900 -100 % -
Pyrite (tonnes)
Pyhäsalmi 210,100 62,000 +239 % 594,300 397,000 +50 % 800,000
(1) 2010 volumes have been revised to exclude Ok Tedi.
(2) Inmet's share: 100 percent for Çayeli, Pyhäsalmi and Troilus. Our share of Las Cruces was 70 percent until December 15, 2010 and 100 percent after that.
(3) 2011 objective was revised for Çayeli's to reduce its copper production and increase its zinc production. All other production objectives are unchanged.

2011 outlook for sales

We use our production objectives to estimate our sales target.

  • We expect copper production in 2011 to be 85,200 tonnes. Copper production at Las Cruces should be more than 50 percent higher than it was in 2010 as the operation ramps up to its nameplate capacity of 72,000 tonnes of copper cathode, and because we increased our ownership from 70 percent to 100 percent in December 2010. We have reduced our copper production for Çayeli from 30,900 tonnes to 28,400 tonnes for the year to reflect lower recoveries year to date.
  • We expect 2011 zinc sales and production volumes to be slightly lower than 2010 volumes because of lower grades and recoveries at Çayeli. Notwithstanding this, zinc grades at this operation year to date are higher than anticipated and we have increased our zinc production objective by 2,300 tonnes.
  • We do not expect any gold sales in 2011.
  • Pyhäsalmi expects to produce and sell 800,000 tonnes of pyrite in 2011. It signed a five year sales contract in March 2011 with a customer in the Far East for up to 400,000 tonnes of pyrite per year, and now has long term agreements covering sales of up to 760,000 tonnes annually.

Our Canadian dollar sales revenues are affected by the US dollar denominated metal price we receive, and the exchange rate between the US dollar and Canadian dollar. Since mid-September this year, there has been a weakening in the economic environment and a decline in base metal prices. Our estimates for our 2011 operating earnings and cash flows reflect this decline. See Results of our operations on page 14 for more information.

Higher smelter processing charges this quarter

three months ended
September 30
nine months ended
September 30
(thousands) 2011 2010 change 2011 2010 change
Smelter processing charges and freight by operation
Çayeli $ 20,615 $ 18,672 +10 % $ 56,859 $ 58,369 -3 %
Las Cruces 388 27 +1,337 % 864 27 +3,100 %
Pyhäsalmi 16,040 15,454 +4 % 44,775 39,809 +12 %
Other (Troilus) - 205 -100 % - 4,526 -100 %
$ 37,043 $ 34,358 +8 % $ 102,498 $ 102,731 -
Smelter processing charges and freight by metal
Copper $ 12,781 $ 12,524 +2 % $ 32,410 $ 34,007 -5 %
Zinc 18,595 16,171 +15 % 53,969 52,149 +3 %
Other 5,667 5,663 - 16,119 16,575 -3 %
$ 37,043 $ 34,358 +8 % $ 102,498 $ 102,731 -
Smelter processing charges by type, and freight
Copper treatment and refining charges $ 4,882 $ 4,591 +6 % $ 11,081 $ 12,160 -9 %
Zinc treatment charges 10,438 9,089 +15 % 29,097 29,952 -3 %
Copper price participation 448 416 +8 % 1,162 1,253 -7 %
Zinc price participation (705 ) (508 ) +39 % (1,264 ) (1,946 ) -35 %
Content losses 11,809 10,721 +10 % 34,595 33,117 +4 %
Freight 9,819 9,614 +2 % 26,887 27,006 -
Other 352 435 -19 % 940 1,189 -21 %
$ 37,043 $ 34,358 +8 % $ 102,498 $ 102,731 -

Lower zinc treatment charges per tonne than last year reflects better terms with smelters due to a tightening zinc concentrate market; however zinc treatment charges this quarter were nominally higher than the third quarter of 2010 due to significantly higher zinc sales volumes.

2011 outlook for smelter processing charges and freight

We expect costs for copper treatment and refining to be higher in 2011 based on agreements we have signed with customers. We sell approximately 90 percent of our copper concentrate under long-term contracts.

Spot smelter processing charges for copper concentrates have now normalized, after being significantly higher earlier this year than they were in 2010 because the earthquake in Japan in March caused temporary stoppages in copper smelter production, lowering short-term demand for copper concentrates. We expect spot prices to be lower for the remainder of 2011 due to production interruptions and declining grades at operating mines.

We expect copper price participation to be minimal.

We expect total zinc smelter processing charges, including price participation, to be lower than in 2010 because of a tightening zinc concentrate market and our long-term contracts reflect this.

We expect our ocean freight costs to be similar to 2010.

Las Cruces sells its copper cathode production directly to buyers in the Spanish and Mediterranean markets, so it does not incur smelter processing charges and has relatively low freight costs.

Higher direct production costs and cost of sales

three months ended
September 30
nine months ended
September 30
(thousands) 2011 2010 change 2011 2010 change
Direct production costs by operation
Çayeli $ 25,253 $ 22,333 +13 % $ 71,520 $ 65,342 +9 %
Las Cruces 35,869 30,797 +16 % 108,597 30,797 +253 %
Pyhäsalmi 14,284 12,225 +17 % 43,940 40,056 +10 %
Other (Troilus) - - - - 23,905 -100 %
Total direct production costs 75,406 65,355 +15 % 224,057 160,100 +40 %
Inventory changes 4,836 2,938 +65 % 6,337 6,430 -1 %
Other non-cash expenses 902 2,210 -59 % 3,544 4,362 -19 %
Total cost of sales (excluding depreciation) $ 81,144 $ 70,503 +15 % $ 233,938 $ 170,892 +37 %

Direct production costs

Direct production costs are higher this year, mainly because we began recognizing operating results at Las Cruces in our consolidated income statement effective July 1, 2010, partly offset by the closure of Troilus mid-year in 2010. At Çayeli, consumables, ground control and royalty costs were higher, as anticipated in our guidance. Pyhäsalmi realized higher consumable and ground support costs, as well as incremental costs associated with producing more pyrite this year to meet higher customer demand.

Inventory changes

Copper inventories at Çayeli and Pyhäsalmi were down at the end of this quarter because of the timing of shipments.

2011 outlook for cost of sales (excluding depreciation)

We expect consolidated direct production costs to be higher in 2011 because we will recognize a full year of production costs in the income statement for Las Cruces. This will be somewhat offset by the closure of Troilus.

Our budget for 2011 assumes our costs will be similar to 2010 at Pyhäsalmi, and higher than 2010 at Çayeli. Costs at Las Cruces will increase as production increases, but costs per pound of copper produced should decrease significantly.

Certain variable costs may continue to affect our earnings, depending on metal prices:

  • royalties at Çayeli are affected by its net income
  • royalties at Las Cruces are affected by its net sales.

Higher depreciation

three months ended
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nine months ended
September 30
(thousands) 2011 2010 change 2011 2010 change
Depreciation by operation
Çayeli $ 6,215 $ 5,618 +11 % $ 16,469 $ 16,432 -
Las Cruces 18,796 10,552 +78 % 57,635 10,552 +446 %
Pyhäsalmi 2,310 2,072 +11 % 6,906 6,088 +13 %
Other (Troilus) - 820 -100 % - 4,034 -100 %
$ 27,321 $ 19,062 +43 % $ 81,010 $ 37,106 +118 %

Depreciation was higher this year mainly because Las Cruces began to depreciate its operating assets in the income statement on July 1, 2010 and because this operation's production was higher. There was no depreciation at Troilus in 2011 because it stopped operating in June 2010.

2011 outlook for depreciation

We expect depreciation to be higher in 2011 mainly because we will recognize Las Cruces' operating results in earnings for the entire year. This will be offset somewhat by the closure of Troilus.

Corporate costs

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

Corporate development and exploration

Costs year to date are approximately $15 million higher than 2010. In the first quarter, we incurred approximately $6 million of expenses related to the arrangement agreement to merge with Lundin Mining Corporation. We and Lundin Mining Corporation agreed to mutually terminate our arrangement agreement on March 29, 2011. All of the costs incurred in connection with the proposed merger were expensed and classified as corporate development and exploration in the consolidated statement of earnings. In addition, we incurred $2 million in expenditures in the first quarter to drill the Balboa deposit at Cobre Panama. Work on the Balboa deposit has continued and we began capitalizing drilling and evaluation costs for this deposit in the second quarter based on the positive results to date. See Status of development project – Cobre Panama on page 21 for more information. Increased costs compared to 2010 also reflect our higher budget for 2011 to explore for world class deposits.

General and administration

General and administration costs are largely for management remuneration, governance and strategy. Costs year to date were $11 million higher than 2010 ($6 million in the third quarter) mainly because of increased human resources and other spending as we move forward with Cobre Panama, and the impact of share-based compensation plans adopted earlier this year.

Investment and other income

three months ended
September 30
nine months ended
September 30
(thousands) 2011 2010 2011 2010
Interest income $ 4,829 $ 1,990 $ 11,806 $ 5,347
Foreign exchange gains 30,483 661 19,390 463
Dividend and royalty income 466 650 1,533 2,539
Other - (104 ) 2,007 (627 )
$ 35,778 $ 3,197 $ 34,736 $ 7,722

Interest income

Interest income was higher this quarter and year to date compared to last year because our long-term bond portfolio had higher yields and our cash and long-term bond balances were higher.

Foreign exchange gains

We have foreign exchange gains or losses when we revalue certain foreign denominated assets and liabilities.

Our foreign exchange gains were from:

three months ended
September 30
nine months ended
September 30
(thousands) 2011 2010 2011 2010
Translation of US dollar cash and held-to-maturity investments held at corporate $ 23,406 $ 35 $ 12,367 $ 25
Translation of Turkish lira taxes payable at Çayeli 3,187 780 4,314 459
Translation of other monetary assets and liabilities 3,890 (154 ) 2,709 (21 )
$ 30,483 $ 661 $ 19,390 $ 463

We continue to hold the proceeds we received from the sale of our equity interest in Ok Tedi in US dollars, and plan to use this money to fund our US dollar denominated capital program at Cobre Panama. We have recognized total foreign exchange gains of $12 million year to date ($23 million this quarter) on these funds because the US dollar appreciated in value relative to the Canadian dollar. Çayeli's income taxes are denominated in Turkish lira. This operation recognized a foreign exchange gain of $4 million ($3 million this quarter) from the revaluation of its income taxes payable due to the appreciation of the US dollar (Çayeli's functional currency) relative to the Turkish lira.

2011 outlook for investment and other income

Investment and other income is affected by cash and held to maturity investments, and by interest rates and exchange rates.

Stand-by costs

In the first quarter of 2010, we could not mine ore at Las Cruces because of water levels in the pit. We expensed $7 million in operating and maintenance costs for the water purification plant because they did not relate to production activities. We recognized these expenses as stand-by costs because we were not yet at commercial production.

Income tax expense

three months ended
September 30
nine months ended
September 30
(thousands) 2011 2010 change 2011 2010 change
Çayeli $ 19,274 $ 7,418 $ 42,866 $ 23,022
Las Cruces 5,240 10,782 15,174 (4,074 )
Pyhäsalmi 10,491 6,273 24,889 16,783
Corporate and other (1,235 ) 793 (735 ) 1,396
$ 33,770 $ 25,266 $ 82,194 $ 37,127
Consolidated effective tax rate 25 % 27 % -2 % 28 % 18 % +10 %

Our tax expense changes as our earnings change.

The consolidated effective tax rate is higher year to date compared to last year, mainly because in 2010 Las Cruces recognized a tax recovery on a foreign exchange loss from its intercompany US dollar denominated debt. The foreign exchange eliminates on consolidation, but the tax recovery does not, since there is no corresponding tax expense on the foreign exchange gain. Additionally, taxes at Çayeli were higher this year as it recognized a tax expense on a foreign exchange gain from its US dollar denominated cash (Çayeli's income taxes are denominated in Turkish lira).

2011 outlook for income tax expense

We expect statutory tax rates at our operations to remain the same as they were in 2010 unless a statutory tax rate change is enacted.

Discontinued operation

We sold our 18 percent equity interest in Ok Tedi in January 2011, and have reported our results relating to Ok Tedi as discontinued operations retroactively. After-tax income of $83 million in 2011 includes net earnings of $17 million in January, before the sale, and a gain on sale of $66 million net of withholding taxes. We paid Papua New Guinea withholding taxes of $28 million on the sale. We did not pay any Canadian taxes, and we have reduced our tax-effected Canadian tax loss pools by about $2 million.

Results of our operations

2011 estimates

Our financial review by operation includes estimates for our 2011 operating earnings and operating cash flows. We have based these estimates on our 2011 objectives for production and cost per tonne of ore milled, as well as the following assumptions for the fourth quarter of the year:

Copper price US $3.40 per pound
Zinc price US $0.85 per pound
Copper treatment cost US $56 per tonne for contracts
Zinc treatment cost US $229 per tonne (basis US $2,500 per tonne) for contracts
US $ to C$ exchange rate $1.00
euro to C$ exchange rate $1.40
Working capital Assume no changes for the year

Çayeli

three months ended
September 30
nine months ended
September 30
revised
objective
2011 2010 change 2011 2010 change 2011
Tonnes of ore milled (000's) 312 275 +13 % 880 859 +2 % 1,200
Tonnes of ore milled per day 3,400 3,000 +13 % 3,200 3,100 +2 % 3,300
Grades (percent)
copper 3.1 3.4 -9 % 3.1 3.2 -3 % 3.2
zinc 6.5 6.2 +5 % 6.2 6.3 -2 % 5.9
Mill recoveries (percent)
copper 74 78 -5 % 74 77 -4 % 75
zinc 68 68 - 68 71 -4 % 68
Production (tonnes)
copper 7,100 7,300 -3 % 20,100 21,500 -7 % 28,400
zinc 13,900 11,700 +19 % 36,900 38,200 -3 % 48,000
Cost per tonne of ore milled (C$) $ 81 $ 81 - $ 81 $ 76 +7 % $ 81

Higher grades increase zinc production this quarter

Mill throughput at Çayeli was strong this quarter, and in line with its annual 1.2 million tonne objective. In August 2011, we mined over 107,000 tonnes of ore, setting an all-time record, and have now mined more than 100,000 tonnes of ore per month for four consecutive months. This increase in performance is the result of improved mine planning processes, the implementation of a mine control system, and additional rehabilitation resources.

Copper grades year to date are slightly lower than last year, but we expect higher grades in the last quarter this year and have not revised our view on average grades. Recoveries for both copper and zinc this year are lower than 2010 because of the difficulties associated with processing ore containing bornite minerals. Copper production was therefore slightly below 2010 and our expectations.

Zinc grades this quarter were higher than the third quarter of 2010 because of variation in ore types. In conjunction with higher mill throughput, this resulted in significantly higher zinc production this quarter.

Cost per tonne of ore milled year to date was higher than 2010 mainly because of higher royalty costs (pushed up by higher realized metals prices), additional ground support costs and increased costs for consumables. This change was, however, consistent with our expectations and the objective for the year.

2011 outlook and revised objectives

Production levels in 2011 should remain at approximately 1.2 million tonnes. We continue to expect copper grades to be 3.2 percent for the year but we have lowered our expected copper recoveries from 80 percent to 75 percent to recognize lower recoveries year to date. Therefore we have reduced our copper production objective by 2,500 tonnes to 28,400 tonnes.

We have increased our zinc grade objective from 5.6 percent to 5.9 percent to reflect actual performance for the first nine months of the year and we have increased our zinc production objective by 2,300 tonnes to 48,000.

Financial review

Lower copper and zinc prices reduced operating earnings this quarter

(millions of Canadian dollars unless otherwise stated) three months ended
September 30
nine months ended
September 30
revised
objective
2011 2010 2011 2010 2011
Sales analysis
Copper sales (tonnes) 8,100 8,400 20,600 21,500 28,400
Zinc sales (tonnes) 14,500 9,600 40,100 38,500 48,000
Gross copper sales $ 55 $ 69 $ 167 $ 161 $ 227
Gross zinc sales 28 21 85 80 100
Other metal sales 10 6 22 13 29
Gross sales 93 96 274 254 356
Smelter processing charges and freight (21 ) (19 ) (57 ) (58 ) (77 )
Net sales $ 72 $ 77 $ 217 $ 196 $ 279
Cost analysis
Tonnes of ore milled (thousands) 312 275 880 859 1,200
Direct production costs ($ per tonne) $ 81 $ 81 $ 81 $ 76 $ 81
Direct production costs $ 25 $ 22 $ 71 $ 65 $ 97
Change in inventory 3 1 3 - -
Depreciation and other non-cash costs 7 6 19 19 25
Operating costs $ 35 $ 29 $ 93 $ 84 $ 122
Operating earnings $ 37 $ 48 $ 124 $ 112 $ 157
Operating cash flow $ 57 $ 21 $ 148 $ 74 $ 142

The objective for 2011 uses the assumptions listed on page 14.

The table below shows what contributed to the change in operating earnings and operating cash flow between 2011 and 2010.

(millions) three months ended
September 30
nine months ended
September 30
Higher (lower) copper prices, denominated in Canadian dollars $ (11 ) $ 13
Higher (lower) zinc prices, denominated in Canadian dollars (4 ) 2
Higher other metal prices, denominated in Canadian dollars 3 9
Lower copper sales volumes (3 ) (9 )
Higher zinc sales volumes 5 -
Higher production costs, including royalty (3 ) (6 )
Lower smelter processing charges and freight 3 4
Other (1 ) (1 )
Higher (lower) operating earnings, compared to 2010 (11 ) 12
Change in tax expense because of change in taxable income (10 ) (16 )
Changes in working capital (see note 20 on page 75) 56 78
Other 1 -
Higher operating cash flow, compared to 2010 $ 36 $ 74

The change in working capital this quarter is mainly from lower accounts receivable.

Capital spending

three months ended September 30 nine months ended September 30 revised objective
(thousands) 2011 2010 change 2011 2010 change 2011
Capital spending $ 1,900 $ 3,300 -42 % $ 9,600 $ 8,200 +17 % $ 15,000

2011 outlook for capital spending

We expect to spend $15 million on capital in 2011 for underground development, ore pass rehabilitation, mobile equipment, a shotcrete delivery line extension, a new concrete batch plant and other improvements to the mill.

Las Cruces

three months ended
September 30
nine months ended
September 30
revised
objective
(100 percent) 2011 2010 change 2011 2010 change 2011
Tonnes of ore processed (000's) 209 143 +46 % 545 331 +65 % 800
Copper grades (percent) 6.5 7.5 -13 % 6.3 7.2 -13 % 6.3
Plant recoveries (percent) 87 77 +13 % 85 81 +5 % 86
Cathode copper production (tonnes) 11,400 8,400 +36 % 28,000 19,500 +44 % 43,500
Cost per pound of cathode produced (C$)(1) $ 1.43 $ 1.68 -15 % $ 1.76 $ 1.68 not applicable $ 1.59
(1) Subsequent to July 1, 2010

Improved plant performance

We produced 11,400 tonnes of cathode this quarter, including a record 4,500 tonnes in August. Plant modifications during the June shutdown had a positive impact on production, which was interrupted in July when a support structure of the new grinding thickener failed due to a faulty weld. Since repairs were made, the grinding thickener has operated as required.

Reactor performance and reliability continued to improve this quarter, and by the end of September, all eight reactors had operated reliably for 30 consecutive days. The major modifications to the plant, including the fines bypass system, pinned bed clarifier and the leach feed surge tank, have all been installed and are now being commissioned.

Mining activities year to date are close to planned levels, despite limited access in the first half of the year because of water levels in the pit. Surface stockpiles are approaching 700,000 tonnes, and should remain at that level through to year end, in preparation for the rainy season.

Our water treatment and drainage and reinjection well systems performed very well this quarter, and the pit is in optimal condition as we head into the rainy season. Our contact water storage ponds are at only 40 percent of their available capacity, and we have reduced our water discharge to the river to remain well below our regulated limits for the year.

Cost per pound of cathode produced this quarter was significantly lower than earlier in the year and in the same quarter of 2010, as higher production translated into a lower unit cost.

2011 outlook

Following a successful third quarter, we continue to target a ramp up to production design capacity by year end, and we continue to expect cathode production of 42,000 – 45,000 tonnes this year.

We are currently testing the plant at up to 100 percent throughput levels to assess its overall stability and identify any remaining bottlenecks. We have installed a higher strength conveyor belt to accommodate higher tonnage, and intend to increase the width of the conveyor in early 2012 to provide capacity above design. We have seen copper recoveries improve to an average of 87 percent this quarter and continue to push to reach design levels of 91 percent. We expect this improvement to evolve with better oxygen dispersion as we pilot the fifth generation oxygen distributors (currently installed in one reactor), and with further improvements in overall fluid flow and process control. We completed a three day shutdown in October to change worn mill linings, and are not planning any further production interruptions this year.

Las Cruces' cost per pound of cathode produced should continue to go down as production increases. By the first quarter of 2012, we expect to have a reliable prediction for long term costs when one time contractor costs can be separated from ongoing maintenance costs.

Financial review

Higher operating earnings and operating cash flow this year as Las Cruces ramps up

(millions of Canadian dollars unless otherwise stated) three months ended
September 30
nine months ended
September 30
revised objective
2011 2010 2011 2011
Sales analysis
Copper sales (tonnes) 10,800 8,600 29,200 43,500
Gross copper sales $ 86 $ 62 $ 256 $ 364
Smelter processing charges and freight - - (1 ) (1 )
Net sales $ 86 $ 62 $ 255 $ 363
Cost analysis
Pounds of copper produced (millions) 25 18 62 96
Direct production costs ($ per pound) $ 1.43 $ 1.68 $ 1.76 $ 1.59
Direct production costs $ 36 31 $ 109 $ 153
Change in inventory (1 ) (1 ) 4 -
Depreciation and other non-cash costs 18 11 57 88
Operating costs $ 53 41 $ 170 $ 241
Operating earnings $ 33 $ 21 $ 85 $ 122
Operating cash flow $ 50 $ 32 $ 149 $ 207

The objective for 2011 uses the assumptions listed on page 14.

The table below shows what contributed to the change in operating earnings and operating cash flow between the three months ended September 30, 2011 and 2010.

(millions) three months ended September 30
Higher copper prices, denominated in Canadian dollars $ 9
Higher copper sales volumes 16
Higher production costs, including royalty (5 )
Higher depreciation (7 )
Other (1 )
Higher operating earnings, compared to 2010 12
Changes in working capital (see note 20 on page 75) 1
Change in depreciation 7
Other (2 )
Higher operating cash flow, compared to 2010 $ 18

Capital spending

three months ended
September 30
nine months ended
September 30
revised objective
(100 percent and millions of Canadian dollars) 2011 2010 change 2011 2010 change 2011
Capital $ 10 $ 23 -57 % $ 44 $ 52 -15 % $ 61
Pre-operating costs capitalized, net of sales, working capital and other - (7 ) -100 % - (60 ) -100 % -
$ 10 $ 16 -38 % $ 44 $ (8 ) -650 % $ 61

Capital spending this year has been mainly on making improvements to the plant, the permanent water purification plant and mine development. In 2010 it was mainly for the permanent water purification plant.

2011 outlook for capital spending

We expect to spend $61 million on capital projects in 2011, including $16 million for mine development and $37 million for plant improvements.

Pyhäsalmi

three months ended September 30 nine months ended September 30 revised
objective
2011 2010 change 2011 2010 change 2011
Tonnes of ore milled (000's) 351 351 - 1,038 1,051 -1 % 1,370
Tonnes of ore milled per day 3,800 3,800 - 3,800 3,800 -1 % 3,750
Grades (percent)
copper 1.0 1.2 -17 % 1.1 1.1 - 1.0
zinc 2.9 2.9 - 2.7 2.3 +17 % 2.6
sulphur 41 40 +3 % 41 43 -5 % 43
Mill recoveries (percent)
copper 95 95 - 96 96 - 95
zinc 90 90 - 91 90 +1 % 90
Production (tonnes)
copper 3,200 3,900 -18 % 10,500 10,800 -3 % 13,300
zinc 9,100 9,100 - 25,600 21,900 +17 % 31,900
pyrite 210,100 62,000 +239 % 594,300 397,000 +50 % 800,000
Cost per tonne of ore milled (C$) $41 $35 +17 % $42 $38 +11 % $42

Record pyrite production and sales

Pyhäsalmi processed at an annualized rate that was in line with its annual objective.

The operation maintained its strong production record and achieved copper recoveries of 95 percent and zinc recoveries of 90 percent. Zinc grades were significantly higher year to date compared to last year, pushing zinc production significantly higher. Copper production this quarter was below the same quarter in 2010 and consistent with our plan because of variations in copper grades. Pyrite production was significantly higher this year to meet higher customer demand. In August, Pyhäsalmi shipped a record 150,000 tonnes of pyrite concentrate to customers.

Operating costs have been higher this year mostly because of increased group support and consumables costs, and due to the incremental costs associated with producing more pyrite.

2011 outlook

Pyhäsalmi remains on target to mine 1.4 million tonnes of 1 percent copper and 2.6 percent zinc in 2011, and to produce 13,300 tonnes of copper and 31,900 tonnes of zinc.

Pyhäsalmi expects to produce and sell 800,000 tonnes of pyrite in 2011 and has long term agreements covering sales of up to 760,000 tonnes per year.

Financial review

Higher earnings because of significantly higher pyrite sales volumes

(millions of Canadian dollars unless otherwise stated) three months ended
September 30
nine months ended
September 30
revised
objective
2011 2010 2011 2010 2011
Sales analysis
Copper sales (tonnes) 4,200 3,500 10,300 10,400 13,300
Zinc sales (tonnes) 9,400 8,800 26,900 21,200 31,900
Pyrite sales (tonnes) 269,200 136,000 633,200 395,100 800,000
Gross copper sales $ 35 $ 27 $ 90 $ 79 $ 113
Gross zinc sales 19 19 58 46 67
Other metal sales 28 12 60 36 73
Gross sales 82 58 208 161 253
Smelter processing charges and freight (16 ) (15 ) (45 ) (40 ) (56 )
Net sales $ 66 $ 43 $ 163 $ 121 $ 197
Cost analysis
Tonnes of ore milled (thousands) 351 351 1,038 1,051 1,370
Direct production costs ($ per tonne) $ 41 $ 35 $ 42 $ 38 $ 42
Direct production costs $ 14 $ 12 $ 44 $ 40 $ 58
Change in inventory 3 1 - (1 ) -
Depreciation and other non-cash costs 3 3 7 7 10
Operating costs $ 20 $ 16 $ 51 $ 46 $ 68
Operating earnings $ 46 $ 27 $ 112 $ 75 $ 129
Operating cash flow $ 24 $ 26 $ 93 $ 53 $ 106

The objective for 2011 uses the assumptions listed on page 14.

The table below shows what contributed to the change in operating earnings and operating cash flow between 2011 and 2010.


(millions)
three months ended September 30 nine months ended September 30
Higher copper prices, denominated in Canadian dollars $ 3 $ 12
Lower zinc prices, denominated in Canadian dollars (1 ) (1 )
Higher other metal prices 7 10
Higher zinc sales volumes 1 7
Higher pyrite sales volumes 9 15
Higher production costs (2 ) (4 )
Other 2 (2 )
Higher operating earnings, compared to 2010 19 37
Change in tax expense because of change in earnings (4 ) (8 )
Changes in working capital (see note 20 on page 75) (18 ) 10
Other 1 1
Higher (lower) operating cash flow, compared to 2010 $ (2 ) $ 40

Capital spending

three months ended
September 30
nine months ended
September 30
objective
(thousands) 2011 2010 change 2011 2010 change 2011
Capital spending $ 2,500 $ 700 +257 % $ 5,300 $ 3,300 +61 % $ 8,000

2011 outlook for capital spending

Capital spending in 2011 is mainly to replace underground mobile equipment.

Status of our development project

Cobre Panama

Engineering, infrastructure and power

Basic engineering progressed as scheduled this quarter. We continue to expect to announce revised capital and operating cost estimates for the project at the conclusion of basic engineering (early 2012), allowing major civil work to begin at that time.

We continued with preparatory road construction this quarter on a pioneer road to the tailings dam site, and other road by-passes and upgrades, as well as preparation for bridge construction.

Update on Environmental and Social Impact Assessment (ESIA) approval

We continue to await ESIA approval for the project. The government's review and assessment process has been methodical and thorough. Our final step in the process this quarter was to submit our responses to the second round of questions posed by Autoridad Nacional del Ambiente (ANAM), the Panamanian environmental authority, and other consulting ministries and the public file indicates that the Panamanian government has completed its technical review.

When we receive and formally announce ESIA approval, Korea Panama Mining Corporation will have seven days to make its election on whether to exercise its option to acquire a 20 percent interest in Minera Panama.

Partnership process

We continue to engage with potential new partners in Cobre Panama. Interested parties are engaged in various stages of due diligence under confidentiality agreements.

Drilling

We continued with resource drilling this quarter on the recently discovered Balboa deposit, to delineate the extents of the zone as well as infill drilling on 100 metre centres. This quarter, we completed 11,150 metres of drilling in 21 holes, bringing the total to date for this deposit to 28,400 metres in 48 holes. We plan to continue the program to the end of this year with a view to establishing National Instrument 43-101 compliant mineral resources for the Balboa deposit in early 2012. Metallurgical test work is also continuing on the mineralization, which should allow us to convert Balboa resources into reserves and include them in a revised mine plan for the property later in 2012.

2011 outlook for development

We plan to:

  • continue our dialogue with stakeholders at the community, regional and national levels, to increase their understanding of the project and its benefits to Panama, and our understanding of their potential concerns
  • work with all the government agencies to obtain permits that will be required after the ESIA is approved
  • continue with a 720 hectare reforestation plan outside of the concession area, as a first step in our biodiversity commitments
  • work with environmental non-governmental organizations and the environmental authorities to plan the conservation initiative for two national parks in the general project region, but outside the project footprint area
  • continue to expand site access and infrastructure
  • complete additional drilling for geotechnical and hydrological purposes and to improve our understanding of mineralization not currently included in the project base case
  • complete basic engineering and prepare to begin site capture when we receive the main permits
  • Work with SK Engineering and Construction, Co. Ltd. on the development of the 300 megawatt thermal power plant to supply power for the project
  • develop a range of financing options including a project level limited recourse facility, capital market alternatives and potential new partners
  • spend the balance of our capital expenditures budget of $177 million to carry out the work described. This budget represents a reduction of $47 million from our initial capital spending objective of $224 million, and reflects the delay of $24 million of advance payments for mill equipment and certain advance projects to early 2012.

After basic engineering is completed and we have received the appropriate approvals, site capture, preparation and construction should take approximately 48 months.

Managing our liquidity

We develop our financing strategy by considering our long-term capital requirements and deciding on the optimal mix of cash, future operating cash flow, credit facilities and project financing.

Our capital structure includes a liquidity cushion that gives us the flexibility to deal with operational disruptions or general market downturns.

three months ended
September 30
nine months ended
September 30
(millions) 2011 2010 2011 2010
CASH FROM OPERATING ACTIVITIES
Çayeli $ 57 $ 21 $ 148 $ 74
Las Cruces 50 32 149 26
Pyhäsalmi 24 26 93 53
Other (Troilus) - 7 - 44
Corporate development and exploration not incurred by operations (4 ) (2 ) (17 ) (5 )
General and administration (10 ) (4 ) (27 ) (16 )
Foreign exchange gains on US dollar cash 1 - (8 ) -
Other 3 - (6 ) (12 )
121 80 332 164
CASH FROM INVESTING AND FINANCING
Purchase of property, plant and equipment (57 ) (44 ) (150 ) (69 )
Purchase and maturing of long-term investments, net 7 (77 ) (247 ) (296 )
Foreign exchange on cash held in foreign operations 14 4 18 (16 )
Issuance of common shares - - 502 -
Other 4 8 2 12
(32 ) (109 ) 125 (369 )
CASH FROM DISCONTINUED OPERATION (OK TEDI) - 17 307 95
Increase (decrease) in cash 89 (12 ) 764 (110 )
Cash and short-term investments
Beginning of period 1,001 436 326 534
End of period $ 1,090 $ 424 $ 1,090 $ 424

Our available liquidity also includes $648 million of held to maturity investments ($373 million at December 31, 2010), providing a total of $1,738 million in capital available to finance our growth strategy as at September 30, 2011.

OPERATING ACTIVITIES

Key components of the change in operating cash flows


(millions)
three months ended
September 30
nine months ended
September 30
Higher earnings from operations (see page 4) $ 14 $ 83
Add back higher depreciation included in earnings from operations 8 44
Higher tax expense (9 ) (19 )
Changes in working capital (see note 20 on page 75) 34 84
Realized foreign exchange gain (loss) on cash 1 (8 )
Higher corporate development and exploration (2 ) (12 )
Higher general and administrative costs (6 ) (11 )
Stand-by costs in 2010 - 7
Other 1 -
Higher operating cash flow, compared to 2010 $ 41 $ 168

Operating cash flows this year were higher than 2010 because:

  • our operating earnings before depreciation were higher
  • working capital was lower this quarter and year to date mainly reflecting lower accounts receivable at Çayeli and Pyhäsalmi related to the timing of collections from customers and lower metal prices.

2011 outlook for cash from operating activities

The table below shows expected operating cash flow from our key operations, based on our outlook for metal prices and production (see page 14), and on the assumptions in Results of our operations (starting on page 14).

2011 estimated operating cash flow by operation


(millions)
Çayeli $ 142
Las Cruces 207
Pyhäsalmi 106
$ 455

INVESTING AND FINANCING

Capital spending

three months ended
September 30
nine months ended
September 30
revised
objective
(millions) 2011 2010 2011 2010 2011
Çayeli $ 2 $ 3 $ 10 $ 8 $ 15
Las Cruces 10 16 44 (8 ) 61
Pyhäsalmi 2 1 6 3 8
Cobre Panama 43 24 90 66 177
$ 57 $ 44 $ 150 $ 69 $ 261

Please see Results of our operations and Status of our development project on page 21 for a discussion of actual results and our 2011 objective. Capital spending this year was mainly for Cobre Panama and for plant improvements at Las Cruces.

Purchase of long-term investments

We used the US dollar proceeds from the sale of Ok Tedi to buy US $274 million in US Treasury bonds with AA credit ratings. The bonds mature between March 2012 and January 2016 and have a weighted average annual yield to maturity of 1.2 percent. In 2010, we bought $296 million in medium-term Canadian government and corporate bonds with credit ratings of A to AAA.

Issuing common shares

On May 17, 2011, a subsidiary of Temasek Holdings (Private) Ltd. exchanged its subscriptions receipts for 7.78 million Inmet common shares and we received $500 million in cash, plus accrued interest on funds in escrow during the subscription period.

Cash from discontinued operation

In January 2011, we sold our 18 percent equity interest in Ok Tedi for net proceeds of $307 million (after Papua New Guinea withholding taxes).

2011 outlook for investing and financing

Capital spending

We expect capital spending to be $261 million in 2011. The more significant items include:

  • $177 million for work on the development at Cobre Panama, including basic engineering, advance payments for mill equipment and other costs to advance development. This budget represents a reduction of $47 million from our initial capital spending objective of $224 million, and reflects the delay of $24 million of advance payments for mill equipment and certain advance projects to early 2012.
  • $61 million at Las Cruces, including $16 million for mine development and $37 million for plant improvements.

Financial condition

Our strategy is to ensure we have sufficient liquidity (including cash and committed credit facilities) to finance our operating requirements as well as our growth projects. At September 30, 2011, we had $1,738 million in total funds, including $1,090 million in cash and short-term investments and $648 million invested in long-term bonds.

Cash

At September 30, 2011, cash and short-term investments of $1,090 million included cash and money market instruments that mature in 90 days or less.

Our policy is to invest excess cash in highly liquid investments of the highest credit quality, and to limit our exposure to individual counterparties to minimize the risk associated with these investments. We base our decisions about the length of maturities on our cash flow requirements, rates of return and other factors.

At September 30, 2011, we held cash and short-term investments in the following:

  • A to AAA rated treasury funds and money market funds managed by leading international fund managers, who are investing in money market and short-term debt securities and fixed income securities issued by leading international financial institutions and their sponsored securitization vehicles.
  • Cash, term and overnight deposits with leading Canadian and international financial institutions that are benefiting directly and indirectly from support programs by various governments and central banks.

See note 7 on page 69 in the consolidated financial statements for more details about where our cash is invested.

Medium-term bonds

We have created a bond portfolio to provide better yields with no change to our investment risk. As at September 30, 2011, the portfolio was $648 million (Held to maturity investments - note 9):

  • 58 percent US Treasury bonds
  • 5 percent Government of Canada bonds
  • 33 percent Canadian Provincial Government bonds
  • 4 percent corporate bonds.

The bonds mature between December 2011 and August 2016. Although our intention is to hold these investments to maturity, there is a liquid market for them and they are available to us at any time.

Restricted cash

Our restricted cash balance of $76 million as at September 30, 2011 included:

  • $17 million in cash collateralized letters of credit for Inmet
  • $57 million at Las Cruces related to a reclamation bond, issuing letters of credit to suppliers and the local water authority and for its labour bond to the government
  • $2 million for future reclamation at Pyhäsalmi.

COMMON SHARES

Common shares outstanding as of September 30, 2011 69,332,492
Deferred share units outstanding as of September 30, 2011 (redeemable on a one-for-one basis for common shares) 117,388

Dividend declaration

Inmet's board of directors has declared an eligible dividend of $0.10 per common share payable on December 15, 2011 to common shareholders of record as of November 30, 2011.

Accounting changes

Adoption of International Financial Reporting Standards

The Accounting Standards Board incorporated International Financial Reporting Standards (IFRS) into the Canadian Institute of Chartered Accountants Accounting Handbook effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The first quarter of 2011 was the first presentation of our results under IFRS, with an effective transition date of January 1, 2010.

While the adoption of IFRS did not change our business activities, it has significantly changed our reported financial position. Our key controls over financial reporting did not change as a result of our transition to IFRS. For all changes to policies and procedures that have been identified, the effectiveness of internal controls over financial reporting and disclosure controls and procedures has been assessed and any changes have been implemented. In addition, controls over the IFRS changeover process have been implemented as necessary.

See note 3 to our interim consolidated financial statements for a complete list of our significant accounting policies followed on adoption of IFRS. See note 6 to the financial statements for a detailed description of our conversion to IFRS, including a line-by-line reconciliation of our financial statements previously prepared under Canadian GAAP to those under IFRS for the three and nine months ended September 30, 2010 and for the year ended December 31, 2010.

The table below reconciles total equity under Canadian GAAP to total equity under IFRS, and illustrates the after-tax effect of each of the most significant adjustments had on equity.

Notes January 1,
2010
September 30,
2010
December 31,
2010
Canadian GAAP equity $ 2,238,145 $ 2,392,961 $ 2,758,484
IFRS adjustments:
Reclassification of non-controlling interest to equity 78,005 73,597 -
Revenue recognition i 14,210 18,753 30,023
Reversal of impairment of assets – Çayeli ii 42,395 36,589 34,005
Provision for asset retirement obligations iii (38,349 ) (36,276 ) (41,310 )
Acquisition of the non-controlling interest in Las Cruces iv - - (254,056 )
Property, plant and equipment associated with asset retirement obligations v 8,304 12,989 12,175
Other 18,702 18,873 15,218
IFRS equity $ 2,361,412 $ 2,517,486 $ 2,554,539

i) Revenue

Under Canadian GAAP, we recognized revenue when title was legally transferred to the purchaser. For certain shipments at Çayeli, Pyhäsalmi and Ok Tedi, we transfer title when we receive the first provisional payment, which is later than the transfer point for risks and rewards of ownership.

Under IFRS, we recognize revenue when all significant risks and rewards of ownership of our products are transferred to the purchaser.

ii) Impairment of assets

Under Canadian GAAP, we used a two-step approach to impairment testing:

  • first comparing asset carrying values with undiscounted future cash flows to determine whether impairment exists
  • then measuring any impairment by comparing asset carrying values with fair values (generally assessed using a discounted cash flow valuation process).

Under IFRS we use a one-step approach to test for and measure impairment, and compare asset carrying values directly with the higher of fair value less costs to sell and value in use (which uses discounted future cash flows). IFRS also requires a full or partial reversal of previous impairment losses when circumstances have changed and the impairments have been reduced. Impairment losses were not reversed under Canadian GAAP.

We increased January 1, 2010 property plant and equipment at Çayeli by approximately $50 million to reverse an impairment charge we recognized for this operation in 1996. The increase is the IFRS carrying amount we would have calculated, net of depreciation, if we had not recognized the original impairment. This will also result in a higher ongoing depreciation expense for Çayeli, including an increase of $8 million for the year ended December 31, 2010.

iii) Asset retirement obligations

Under Canadian GAAP, we used a credit adjusted risk free interest rate and were not required to update the rate when market rates changed.

Under IFRS, we measure asset retirement obligations using a risk free interest rate and revalue when market risk free interest rates change.

iv) Business combinations

Under Canadian GAAP, companies that acquired an additional interest in an entity they already controlled accounted for it as a step acquisition. Under IFRS, acquiring a non-controlling interest is not considered a business combination, and is instead accounted for as an equity transaction.

Under IFRS, we have accounted for our acquisition of the remaining 30 percent interest in Las Cruces in December 2010 as an equity transaction, because we already controlled it. We recognized the difference between the non-controlling interest (as determined under IFRS) and the fair value of the consideration paid, in retained earnings.

v) First time adoption of IFRS: property, plant and equipment associated with asset retirement obligations

First time adoption of International Financial Reporting Standards (IFRS 1) provides specific exemptions that we used when we adopted IFRS.

IFRS and Canadian GAAP both require us to recognize a corresponding change in asset retirement obligations in the carrying value of the related property, plant and equipment (where we identify an asset) and depreciate this amount prospectively. The amount under IFRS was different from the amount determined under Canadian GAAP because of the different way IFRS determines asset retirement obligations.

We used an optional transitional calculation to determine the property, plant and equipment associated with our provision for asset retirement obligations. Under the transitional calculation, we measured the provision at the transition date and discounted it to the date the liability first arose. The result became the initial asset value. Depreciation was applied to this value. We applied this exemption to certain mines instead of determining property, plant and equipment associated with asset retirement obligations retrospectively.

Supplementary financial information

Pages 30 and 31 include supplementary financial information about cash costs. These measures do not fall into the category of International Financial Reporting Standards.

We use unit cash cost information as a key performance indicator, both on a segmented and consolidated basis. We have included cash costs as supplementary information because we believe our key stakeholders use these measures as a financial indicator of our profitability and cash flows before the effects of capital investment and financing costs, such as interest.

Since cash costs are not recognized financial measures under International Financial Reporting Standards, they should not be considered in isolation of earnings or cash flows. There is also no standard way to calculate cash costs, so they are not a reliable way to compare us to other companies.

About Inmet

Inmet is a Canadian-based global mining company that produces copper, zinc and pyrite. We have three wholly-owned mining operations: Çayeli (Turkey), Las Cruces (Spain) and Pyhäsalmi (Finland). We also have a 100 percent interest in Cobre Panama, a development property in Panama.

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

Third quarter conference call

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You can also dial in by calling

  • Local or international: +1.416.695.6616
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Starting at approximately 10:30 a.m. (ET) Friday, October 28, 2011, a conference call replay will be available

  • Local or international: +1.905.694.9451 passcode 7433427
  • Toll-free within North America: +1.800.408.3053 passcode 7433427
INMET MINING CORPORATION
Supplementary financial information
Cash costs
2011 For the nine months ended September 30
per pound of copper
ÇAYELI LAS CRUCESPYHÄSALMI TOTAL
(US dollars)
Direct production costs$1.44 $1.72$1.95 $1.67
Royalties and variable compensation 0.21 0.08 - 0.11
Smelter processing charges and freight 1.62 0.01 1.24 0.78
Metal credits (2.68) - (4.25) (1.68)
Cash cost$0.59 $1.81$(1.06)$0.88
2010 For the nine months ended September 30
per pound of copper
ÇAYELI LAS CRUCES (1)PYHÄSALMI TOTAL
(US dollars)
Direct production costs$1.22 $1.54$1.62 $1.38
Royalties and variable compensation 0.11 0.06 - 0.07
Smelter processing charges and freight 1.36 - 1.06 1.07
Metal credits (2.05) - (2.73) (1.93)
Cash cost$0.64 $1.60$(0.05)$0.59
Reconciliation of cash costs to statements of earnings
2011 For the nine months ended September 30
per pound of copper
(millions of Canadian dollars, except where otherwise noted)ÇAYELI LAS CRUCESPYHÄSALMI TOTAL
GAAP referencepage 16 page 18page 20
Direct production costs$71 $109$44 $224
Smelter processing charges and freight 57 - 45 102
By product sales (107) - (118) (225)
Adjust smelter processing and freight, and sales to production basis 5 - 5 10
Operating costs net of metal credits$26 $109$(24)$111
US $ to C$ exchange rate$0.98 $0.98$0.98 $0.98
Inmet's share of production (000's) 44,300 61,800 23,100 129,200
Cash cost$0.59 $1.81$(1.06)$0.88
2010 For the nine months ended September 30
per pound of copper
(millions of Canadian dollars, except where otherwise noted)ÇAYELI LAS CRUCES (1)PYHÄSALMI TOTAL
GAAP referencepage 16 page 18page 20
Direct production costs$65 $31$40 $136
Smelter processing charges and freight 58 - 40 98
By product sales (93) - (82) (175)
Adjust smelter processing and freight, and sales to production basis 1 - 1 2
Operating costs net of metal credits$31 $31$(1)$61
US $ to C$ exchange rate$1.04 $1.04$1.04 $1.04
Inmet's share of production (000's) 47,500 18,400 23,900 89,800
Cash cost$0.64 $1.60$(0.05)$0.59
(1)Las Cruces' results are included from July 1, 2010
Cash costs
2011 For the three months ended September 30
per pound of copper
ÇAYELI LAS CRUCESPYHÄSALMI TOTAL
(US dollars)
Direct production costs$1.35 $1.39$2.06 $1.48
Royalties and variable compensation 0.29 0.07 - 0.13
Smelter processing charges and freight 1.65 0.02 1.36 0.75
Metal credits (2.72) - (5.25) (1.67)
Cash cost$0.57 $1.48$(1.83)$0.69
2010 For the three months ended September 30
per pound of copper
ÇAYELI LAS CRUCES (1)PYHÄSALMI TOTAL
(US dollars)
Direct production costs$1.20 $1.54$1.45 $1.37
Royalties and variable compensation 0.12 0.06 - 0.07
Smelter processing charges and freight 1.34 - 1.14 0.84
Metal credits (2.04) - (2.78) (1.51)
Cash cost$0.62 $1.60$(0.19)$0.77
Reconciliation of cash costs to statements of earnings
2011 For the three months ended September 30
per pound of copper
(millions of Canadian dollars, except where otherwise noted)ÇAYELI LAS CRUCESPYHÄSALMI TOTAL
GAAP referencepage 16 page 18page 20
Direct production costs$25 $36$14 $75
Smelter processing charges and freight 21 - 16 37
By product sales (38) - (47) (85)
Adjust smelter processing and freight, and sales to production basis 1 - 4 5
Operating costs net of metal credits$9 $36$(13)$32
US $ to C$ exchange rate$0.98 $0.98$0.98 $0.98
Inmet's share of production (000's) 15,700 25,200 7,000 47,900
Cash cost$0.57 $1.48$(1.83)$0.69
2010 For the three months ended September 30
per pound of copper
(millions of Canadian dollars, except where otherwise note)ÇAYELI LAS CRUCES (1)PYHÄSALMI TOTAL
GAAP referencepage 16 page 18page 20
Direct production costs$22 $31$12 $65
Smelter processing charges and freight 19 - 16 35
By product sales (27) - (31) (58)
Adjust smelter processing and freight, and sales to production basis (4) - 2 (2)
Operating costs net of metal credits$10 $31$(1)$41
US $ to C$ exchange rate$1.04 $1.04$1.04 $1.04
Inmet's share of production (000's) 16,200 18,400 8,700 43,300
Cash cost$0.62 $1.60$(0.19)$0.77
(1)Las Cruces' results are included from July 1, 2010
INMET MINING CORPORATION
Quarterly review
(unaudited)
Latest Four Quarters
(thousands of Canadian dollars, except per share amounts)2011
Third
quarter
2011
Second
quarter
2011
First
quarter
2010(1)
Fourth
quarter
STATEMENTS OF EARNINGS
Gross sales$261,757 $221,952 $254,277 $230,269
Smelter processing charges and freight (37,043) (33,870) (31,585) (35,733)
Cost of sales (excluding depreciation) (81,144) (73,644) (79,150) (82,967)
Depreciation (27,321) (26,649) (27,040) (18,882)
116,249 87,789 116,502 92,687
Corporate development and exploration (4,688) (4,562) (13,411) (5,434)
General and administration (9,987) (8,258) (8,422) (4,758)
Investment and other income 35,778 4,731 (5,773) 50,622
Finance costs (2,377) (2,386) (2,331) (4,294)
Income tax expense (33,770) (21,264) (27,160) (31,960)
Income from continuing operations 101,205 56,050 59,405 96,863
Income from discontinued operation (net of taxes) - - 83,439 47,993
Net income$101,205 $56,050 $142,844 $144,856
Net income attributable to:
Inmet equity holders$101,205 $56,050 $142,844 $146,932
Non-controlling interest - - - (2,076)
$101,205 $56,050 $142,844 $144,856
Income from continuing operations per share
Basic$1.46 $0.86 $0.97 $1.73
Diluted$1.46 $0.86 $0.96 $1.73
Income from discontinuing operations per share
Basic$- $- $1.36 $0.84
Diluted$- $- $1.35 $0.84
Net Income per share
Basic$1.46 $0.86 $2.33 $2.57
Diluted$1.46 $0.86 $2.31 $2.57
(1)Information from 2010 restated in accordance with IFRS, including presentation of our share of Ok Tedi as discontinued operations.
Previous Four Quarters
(thousands of Canadian dollars, except per share amounts)2010(1)
Third
quarter
2010(1)
Second
quarter
2010(1)
First
quarter
2009(2)
fourth
quarter
STATEMENTS OF EARNINGS
Gross sales$225,960 $161,165 $161,162 $290,570
Smelter processing charges and freight (34,358) (35,272) (33,101) (53,696)
Cost of sales (excluding depreciation) (70,503) (48,123) (52,266) (74,995)
Depreciation (19,062) (10,328) (7,716) (17,911)
102,037 67,442 68,079 143,968
Corporate development and exploration (2,758) (2,524) (2,779) (2,915)
General and administration (3,985) (6,200) (5,421) (9,836)
Investment and other income 3,197 3,321 1,204 280
Asset impairment - - - (3,496)
Stand-by costs - - (6,753) -
Finance costs (5,239) (1,770) (1,873) (496)
Income tax expense (25,266) (8,775) (3,086) (38,599)
Income from continuing operations 67,986 51,494 49,371 88,906
Income from discontinued operation (net of taxes) 33,569 12,475 30,718 -
Net income$101,555 $63,969 $80,089 $88,906
Net income attributable to:
Inmet equity holders$91,678 $68,495 $84,771 $89,763
Non-controlling interest 9,877 (4,526) (4,682) (857)
$101,555 $63,969 $80,089 $88,906
Income from continuing operations per share
Basic$1.04 $1.00 $0.96 $1.60
Diluted$1.04 $1.00 $0.96 $1.60
Income from discontinuing operations per share
Basic$0.60 $0.22 $0.55 $-
Diluted$0.60 $0.22 $0.55 $-
Net Income per share
Basic$1.64 $1.22 $1.51 $1.60
Diluted$1.64 $1.22 $1.51 $1.60
(1)Information from 2010 restated in accordance with IFRS, including presentation of our share of Ok Tedi as discontinued operations.
(2)Information from 2009 is presented in accordance with Canadian GAAP and was not required to be restated to IFRS.

Consolidated financial statements

INMET MINING CORPORATION
Consolidated statements of financial position
(unaudited)
(thousands of Canadian dollars) Note reference September 30, 2011 December 31, 2010(1) January 1, 2010(1)
Assets
Current assets:
Cash and short term investments 7 $ 1,090,002 $ 326,425 $ 533,913
Restricted cash 8 777 617 15,130
Accounts receivable 99,837 119,426 155,761
Inventories 83,183 72,154 98,324
Current portion of held to maturity investments 9 152,553 53,915 9,993
Assets held for sale 10 92 319,082 -
1,426,444 891,619 813,121
Restricted cash 8 75,235 70,059 101,589
Property, plant and equipment 1,894,106 1,736,065 1,945,669
Investments in equity securities 3,832 2,694 42,411
Held to maturity investments 9 495,455 318,615 89,891
Deferred income tax assets 1,935 8,721 2,360
Other assets 2,394 2,335 1,903
Total assets $ 3,899,401 $ 3,030,108 $ 2,996,944
Liabilities
Current liabilities:
Accounts payable and accrued liabilities 11 $ 168,637 $ 136,345 $ 170,524
Provisions 12 19,010 17,668 17,417
Derivatives - - 1,543
Liabilities associated with assets held for sale 10 - 111,896 -
187,647 265,909 189,484
Long-term debt 18,042 16,619 200,026
Provisions 12 172,987 162,399 196,430
Other liabilities 18,669 18,117 20,695
Derivatives - - 3,165
Deferred income tax liabilities 23,013 12,525 25,732
Total liabilities 420,358 475,569 635,532
Commitments and contingencies 21
Equity
Share capital 13 1,591,744 1,089,576 669,952
Contributed surplus 66,601 66,131 64,809
Share based compensation 14 7,071 6,542 5,170
Retained earnings 1,870,673 1,577,507 1,527,109
Accumulated other comprehensive income (loss) 15 (57,046 ) (185,217 ) 19,093
Total equity attributable to Inmet equity holders 3,479,043 2,554,539 2,286,133
Non-controlling interest - - 75,279
Total equity 3,479,043 2,554,539 2,361,412
Total liabilities and equity $ 3,899,401 $ 3,030,108 $ 2,996,944
(1) Refer to note 6 for effects of adoption of IFRS
(See accompanying notes)
INMET MINING CORPORATION
Segmented statements of financial position
(unaudited)
2011 As at September 30 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMA DISCONTINUED OPERATIONS - OK TEDI TOTAL
(thousands of Canadian dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea)
Assets
Cash and short-term investments $ 684,798 $ 139,643 $ 125,316 $ 111,373 $ 28,872 $ - $ 1,090,002
Other current assets 160,002 36,456 77,138 59,835 3,011 - 336,442
Restricted cash 16,795 - 56,720 1,720 - - 75,235
Property, plant and equipment 996 154,021 978,352 68,832 691,905 - 1,894,106
Investments in equity securities 3,832 - - - - - 3,832
Held to maturity investments 410,897 84,558 - - - - 495,455
Other non-current assets 1,177 3,152 - - - - 4,329
$ 1,278,497 $ 417,830 $ 1,237,526 $ 241,760 $ 723,788 $ - $ 3,899,401
Liabilities
Current liabilities $ 25,540 $ 62,413 $ 62,851 $ 21,950 $ 14,893 $ - $ 187,647
Long-term debt 18,042 - - - - - 18,042
Provisions 52,088 23,114 68,828 28,957 - - 172,987
Other liabilities 676 - 17,993 - - - 18,669
Deferred income tax liabilities 38 - 10,353 12,622 - - 23,013
$ 96,384 $ 85,527 $ 160,025 $ 63,529 $ 14,893 $ - $ 420,358
2010 As at December 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMA DISCONTINUED OPERATIONS - OK TEDI TOTAL
(thousands of Canadian dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea)
Assets
Cash and short-term investments $ 53,184 $ 107,750 $ 59,866 $ 97,056 $ 8,569 $ - $ 326,425
Other current assets 60,785 58,959 59,602 66,193 686 318,969 565,194
Restricted cash 16,906 - 51,521 1,632 - - 70,059
Property, plant and equipment 779 152,653 941,434 66,984 574,215 - 1,736,065
Investments in equity securities 2,694 - - - - - 2,694
Held to maturity investments 253,749 64,866 - - - - 318,615
Other non-current assets 952 5,754 4,350 - - - 11,056
$ 389,049 $ 389,982 $ 1,116,773 $ 231,865 $ 583,470 $ 318,969 $ 3,030,108
Liabilities
Current liabilities $ 30,286 $ 39,654 $ 47,220 $ 28,913 $ 7,940 $ 111,896 $ 265,909
Long-term debt 16,619 - - - - - 16,619
Provisions 57,536 21,607 56,439 26,817 - - 162,399
Other liabilities 676 - 17,441 - - - 18,117
Deferred income tax liabilities 176 - - 12,349 - - 12,525
$ 105,293 $ 61,261 $ 121,100 $ 68,079 $ 7,940 $ 111,896 $ 475,569
2010 As at January 1 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMA DISCONTINUED OPERATIONS - OK TEDI TOTAL
(thousands of Canadian dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea)
Assets
Cash and short-term investments $ 251,570 $ 158,631 $ 10,039 $ 66,314 $ 10,728 $ 36,631 $ 533,913
Other current assets 37,591 40,341 73,501 49,882 468 77,425 279,208
Restricted cash 16,492 - 56,878 1,854 - 26,365 101,589
Property, plant and equipment 13,508 168,389 1,034,947 72,183 537,251 119,391 1,945,669
Investments in equity securities 42,411 - - - - - 42,411
Held to maturity investments 89,891 - - - - - 89,891
Other non-current assets 729 2,196 412 - - 926 4,263
$ 452,192 $ 369,557 $ 1,175,777 $ 190,233 $ 548,447 $ 260,738 $ 2,996,944
Liabilities
Current liabilities $ 42,278 $ 35,144 $ 29,173 $ 27,665 $ 10,855 $ 44,369 $ 189,484
Long-term debt 18,094 - 181,932 - - - 200,026
Provisions 56,281 21,214 55,929 21,522 - 41,484 196,430
Other liabilities 676 - 20,019 - - - 20,695
Derivatives - - - - - 3,165 3,165
Deferred income tax liabilities 3,128 - - 11,448 - 11,156 25,732
$ 120,457 $ 56,358 $ 287,053 $ 60,635 $ 10,855 $ 100,174 $ 635,532
INMET MINING CORPORATION
Consolidated statements of changes in equity
(unaudited)
Attributable to Inmet equity holders Non-controlling interest Total equity
(thousands of Canadian dollars) Share Capital Retained earnings Contributed surplus Share based compensation Accumulated other comprehensive income (loss) (note 13) Total
Balance as at January 1, 2010(1) $ 669,952 $ 1,527,109 $ 64,809 $ 5,170 $ 19,093 $ 2,286,133 $ 75,279 $ 2,361,412
Comprehensive income - 244,944 - - (81,566 ) 163,378 (3,720 ) 159,658
Equity settled share-based compensation plans - - 990 1,125 - 2,115 - 2,115
Dividends on common shares - (5,610 ) - - - (5,610 ) - (5,610 )
Other - - - - - - (89 ) (89 )
Balance as at September 30, 2010(1) $ 669,952 $ 1,766,443 $ 65,799 $ 6,295 $ (62,473 ) $ 2,446,016 $ 71,470 $ 2,517,486
Comprehensive income - 146,932 - - (115,839 ) 31,093 (4,592 ) 26,501
Equity settled share-based compensation plans - - 332 247 - 579 - 579
Dividends on common shares - (5,600 ) - - - (5,600 ) - (5,600 )
Acquisition of non-controlling interest in Las Cruces 419,624 (330,268 ) - - (6,905 ) 82,451 (66,847 ) 15,604
Other - - - - - - (31 ) (31 )
Balance as at December 31, 2010(1) $ 1,089,576 $ 1,577,507 $ 66,131 $ 6,542 $ (185,217 ) $ 2,554,539 $ - $ 2,554,539
Comprehensive income - $ 300,099 - - 128,171 428,270 - 428,270
Equity settled share-based compensation plans - - 470 529 - 999 - 999
Dividends on common shares - (6,933 ) - - - (6,933 ) - (6,933 )
Issuance of common shares