Inmet Mining Corporation
TSX : IMN

Inmet Mining Corporation

November 01, 2012 17:24 ET

Inmet Announces Third Quarter Net Income From Continuing Operations of $1.68 Per Share Compared to $1.41 Per Share in the Third Quarter of 2011

TORONTO, CANADA--(Marketwire - Nov. 1, 2012) -

All amounts in US dollars unless indicated otherwise

Inmet (TSX:IMN) announces third quarter net income from continuing operations of $1.68 per share compared to $1.41 per share in the third quarter of 2011.

Third quarter highlights

  • Strong earnings from operations

Earnings from operations were $168 million compared to $113 million in the third quarter of 2011. This increase is due to the strong performance of our operations.

  • Las Cruces operating consistently at or above design capacity

Las Cruces produced 18,800 tonnes of copper cathode in the quarter compared to 11,400 tonnes produced during the same period of 2011. Plant production exceeded 6,000 tonnes of copper cathode (design capacity) each month this quarter, marking six consecutive months that Las Cruces produced at or above design capacity. Unit costs decreased to $1.01 per pound of copper cathode produced.

  • Construction of Cobre Panama progressing

Since construction commenced in May of this year, Minera Panama S.A. (MPSA) has entered into commitments for approximately $2.4 billion, representing 39 percent of estimated capital expenditures and expects commitments of approximately $4 billion, or 65 percent of estimated capital expenditures before the end of the year.

  • Announcement of Cobre Panama precious metals stream agreement with Franco-Nevada

In August 2012, we announced the completion of a precious metals stream agreement with Franco-Nevada Corporation (Franco-Nevada). Under the terms of the agreement, Franco-Nevada will provide a $1 billion deposit after Inmet's funding since issuing a Full Notice to Proceed reaches $1 billion (expected by Q1 2013) pro-rata on a 1:3 ratio with Inmet's subsequent funding contributions. The amount of precious metals deliverable under the stream is indexed to the copper in concentrate produced from the entire project and approximates 86 percent of the estimated payable precious metals attributable to Inmet's 80 percent ownership based on the current 31 year mine plan.

  • Offer to acquire Petaquilla Minerals Ltd.

On September 28, 2012, we filed a formal offer for all of the outstanding common shares of Petaquilla Minerals Ltd. (Petaquilla), and on October 25, 2012, we increased our offer. Under the offer, Petaquilla shareholders can elect to receive consideration in cash, shares or a combination thereof.

Revisions to production guidance

We have increased our copper production objective for Çayeli from between 27,000 to 30,000 tonnes to between 30,000 and 32,000 tonnes. Additionally, we have narrowed our copper production objective for Las Cruces from between 61,700 tonnes and 68,600 tonnes of copper cathode to between 65,000 tonnes and 68,000 tonnes. Our other production guidance for copper and zinc remains as previously disclosed.

Key financial data
three months ended
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(thousands, except per share amounts) 2012 2011 change 2012 2011 change
FINANCIAL HIGHLIGHTS
Sales
Gross sales $ 327,187 $ 253,432 +29 % $ 864,109 $ 714,517 +21 %
Net income
Net income from continuing operations $ 116,226 $ 97,987 +19 % $ 303,486 $ 209,770 +45 %
Net income from continuing operations per share $ 1.68 $ 1.41 +19 % $ 4.38 $ 3.20 +37 %
Net income from discontinued operations - - - - 80,786 -100 %
Net income from discontinued operations per share - - - - $ 1.23 -100 %
Net income attributable to Inmet shareholders $ 116,528 97,987 +19 % $ 304,067 $ 290,556 +5 %
Net income per share $ 1.68 $ 1.41 +19 % $ 4.38 $ 4.43 -1 %
Cash flow
Cash flow provided by operating activities $ 135,696 $ 116,813 +16 % $ 426,541 $ 321,208 +33 %
Cash flow provided by operating activities per share (1) $ 1.96 $ 1.68 +17 % $ 6.15 $ 4.91 +25 %
Capital spending (2) $ 168,636 $ 55,220 +205 % $ 443,294 $ 144,809 +206 %
OPERATING HIGHLIGHTS
Production
Copper (tonnes) 29,700 21,700 +37 % 84,100 58,600 +44 %
Zinc (tonnes) 15,800 23,000 -31 % 45,600 62,500 -27 %
Pyrite (tonnes) 243,300 210,100 +16 % 669,200 594,300 +13 %
Copper cash cost (US $ per pound) (3) $ 0.78 $ 0.69 +13 % $ 0.87 $ 0.88 -1 %
as at
September 30
as at
December 31
FINANCIAL CONDITION 2012 2011
Current ratio 8.3 to 1 9.3 to 1
Gross debt to total equity 38 % 1 %
Net working capital balance (millions) $ 2,148 $ 1,263
Cash balance (including bonds and other securities: millions) $ 3,306 $ 1,655
Gross debt (millions) $ 1,508 $ 17
Shareholders' equity (millions) $ 3,872 $ 3,306
(1) Cash flow provided by operating activities divided by average shares outstanding for the period.
(2) The nine months ended September 30, 2012 includes capital spending of $400 million at Cobre Panama. The nine months ended September 30, 2011 includes capital spending of $87 million at Cobre Panama.
(3) Copper cash cost per pound is a non-GAAP financial measure - see Supplementary financial information on pages 30 to 32.

Third quarter press release

Where to find it

Our financial results 5
Key changes in 2012 5
Understanding our performance 6
Earnings from operations 8
Corporate costs 13
Results of our operations 15
Çayeli 16
Las Cruces 18
Pyhäsalmi 20
Status of our development project 22
Cobre Panama 22
Managing Our Liquidity 25
Financial condition 29
Supplementary financial information 30

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, 2012. Revised objective is as of November 1, 2012.

Change in Inmet's functional and presentation currencies to the US dollar

The decision to construct Cobre Panama has significantly increased Inmet's exposure to the US dollar. Effective June 1, 2012, the US dollar was adopted as Inmet's functional currency on a prospective basis. We translated Inmet's May 31, 2012 financial statement items from Canadian dollars to US dollars using the May 31, 2012 exchange rate US $0.97 per Canadian dollar (Transition Rate). Our operating entities continue to measure the items in their financial statements using their functional currencies; Çayeli and Cobre Panama use the US dollar, and Pyhäsalmi and Las Cruces use the euro.

At the same time we changed our presentation currency from Canadian dollars to US dollars and now report our results in US dollars. We have restated all comparative financial statements from previously reported Canadian dollar amounts to US dollars using the Transition Rate.

Caution with respect to forward-looking statements and information

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

These statements 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 like may, expect, anticipate, believe or other similar words. Our objectives and outlook have been prepared based on our existing operations, expectations and circumstances. Actual events and results could be substantially different, however, because of the risks and uncertainties associated with our business or events that happen after the date of this interim report.

You should not place undue reliance on forward-looking statements. As a general policy, we do not update forward-looking statements except if there is an offering document or where securities legislation requires us to do so.

Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Also, many of the factors are beyond the control of Inmet. Accordingly, readers should not place undue reliance on forward-looking statements or information. Inmet undertakes no obligation to update forward-looking statements or information as a result of new information after the date of this interim report except as required by law. All forward-looking statements and information herein are qualified by this cautionary statement.

Our financial results

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(thousands, except per share amounts) 2012 2011 change 2012 2011 change
EARNINGS FROM OPERATIONS (1)
Çayeli $ 56,182 $ 35,965 +56 % $ 146,386 $ 119,950 +22 %
Las Cruces 89,131 31,594 +182 % 205,853 81,989 +151 %
Pyhäsalmi 26,154 44,993 -42 % 78,962 108,407 -27 %
Other (3,032 ) - -100 % (7,180 ) - -100 %
168,435 112,552 +50 % 424,021 310,346 +37 %
DEVELOPMENT AND EXPLORATION
Corporate development and exploration (7,905 ) (4,539 ) +74 % (26,996 ) (21,940 ) +23 %
CORPORATE COSTS
General and administration (12,982 ) (9,669 ) +34 % (38,626 ) (25,819 ) +50 %
Investment and other income 13,276 34,640 -62 % 52,116 33,631 +55 %
Finance costs (2,463 ) (2,301 ) +7 % (7,438 ) (6,868 ) +8 %
Income and capital taxes (42,135 ) (32,696 ) +29 % (99,591 ) (79,580 ) +25 %
(44,304 ) (10,026 ) +342 % (93,539 ) (78,636 ) +19 %
Net income from continuing operations 116,226 97,987 +19 % 303,486 209,770 +45 %
Income from discontinued operation (net of taxes) - - - - 80,786 -100 %
Non-controlling interest (302 ) - +100 % (581 ) - +100 %
Net income attributable to Inmet shareholders $ 116,528 $ 97,987 +19 % $ 304,067 $ 290,556 +5 %
Income from continuing operations per common share $ 1.68 $ 1.41 +19 % $ 4.38 $ 3.20 +37 %
Diluted income from continuing operations per common share $ 1.67 $ 1.41 +18 % $ 4.36 $ 3.20 +36 %
Basic net income per common share $ 1.68 $ 1.41 +19 % $ 4.38 $ 4.43 -1 %
Diluted net income per common share $ 1.67 $ 1.41 +18 % $ 4.36 $ 4.43 -2 %
Weighted average shares outstanding 69,366 69,331 +0 % 69,360 65,454 +6 %
(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 2012

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see
page
EARNINGS FROM OPERATIONS
Sales
Higher (lower) copper prices $ 15 $ (40 ) 8
Lower zinc prices - (6 ) 8
Lower other metal prices (7 ) (3 ) 8
Higher copper sales volumes 81 235 8
Lower zinc sales volumes (9 ) (25 ) 8
Costs
Lower processing charges and freight 1 3 10
Higher operating costs (7 ) (20 ) 11
Charge for mine rehabilitation at closed properties (3 ) (7 ) 11
Higher depreciation (11 ) (18 ) 12
Other (4 ) (5 )
Higher earnings from operations compared to 2011 56 114
CORPORATE COSTS
Higher exploration and administrative costs (7 ) (18 ) 13
Higher taxes from higher income (9 ) (20 ) 14
Foreign exchange changes (32 ) 7 13
Unrealized gain on prepayment rights derivative - senior unsecured notes 12 12 13
Other (1 ) -
Higher net income from continuing operations compared to 2011 19 95
Lower income from discontinued operation - Ok Tedi - (81 ) 14
Higher net income attributable to Inmet shareholders compared to 2011 $ 19 $
14

Understanding our performance

Metal prices

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

The prices we realize include finalization adjustments - see Gross sales on page 8.

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2012 2011 change 2012 2011 change
Copper (per pound) $ 3.57 $ 3.54 +1 % $ 3.63 $ 3.97 -9 %
Zinc (per pound) $ 0.88 $ 0.92 -4 % $ 0.89 $ 0.99 -10 %

Copper

Copper prices on the London Metals Exchange (LME) averaged $3.50 per pound this quarter, in-line with prices in the second quarter of 2012 and a 14 percent decrease from the third quarter of 2011. In the third quarter of 2011, our realized copper price of US $3.54 per pound was significantly lower than the LME average price, mainly because of Çayeli. A high proportion of Çayeli's sales that quarter were not yet finalized so they were valued at the September 30, 2011 forward price of US $3.18 per pound.

Zinc

Zinc prices on the LME averaged $0.86 per pound this quarter, consistent with last quarter's average price of $0.87 per pound and a 15 percent decrease from the third quarter of 2011.

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 2011.

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2012 2011 change 2012 2011 Change
Exchange rates
1 C$ to US$ $ 1.02 $ 1.02 - $ 1.00 $ 1.02 -2 %
1 euro to US$ $ 1.25 $ 1.38 -9 % $ 1.28 $ 1.38 -7 %
1 US$ to Turkish lira TL 1.80 TL 1.65 +9 % TL 1.80 TL 1.62 +11 %

Compared to the same quarter last year, the value of the US dollar was flat relative to the Canadian dollar, and appreciated 9 percent relative to the euro.

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

  • translate the operating expenses of our euro-based operations from their functional currency to US dollars
  • revalue US dollars that we hold in cash at our operations whose functional currency is the euro
  • revalue Canadian dollars and euros that we hold in cash, bonds and other securities corporately at Inmet
  • translate Çayeli's Turkish lira denominated costs into its functional currency (US dollars).

Prior to the adoption of the US dollar as Inmet's functional currency effective June 1, 2012, our earnings were affected by changes in foreign currency exchange rates when we revalued our US dollar denominated cash, bonds and other securities and senior unsecured notes held corporately at Inmet.

Treatment charges for zinc decreased this year

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 zinc concentrates were lower this year than in 2011, reflecting agreements we have signed with customers.

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2012 2011 change 2012 2011 change
Treatment charges
Copper (per dry metric tonne of concentrate) $ 57 $ 67 -15 % $ 58 $ 58 -
Zinc (per dry metric tonne of concentrate) $ 182 $ 225 -19 % $ 180 $ 225 -20 %
Price participation
Copper (per pound) $ 0.00 $ 0.02 -100 % $ 0.00 $ 0.02 -100 %
Zinc (per pound) $ 0.00 $ (0.01 ) +100 % $ 0.00 $ (0.01 ) +100 %
Freight charges
Copper (per dry metric tonne of concentrate) $ 51 $ 46 +11 % $ 54 $ 49 +10 %
Zinc (per dry metric tonne of concentrate) $ 21 $ 26 -19 % $ 24 $ 25 -4 %

Statutory tax rates

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

2012 2011 change
Statutory tax rates
Çayeli 24 % 24 % -
Las Cruces 30 % 30 % -
Pyhäsalmi 24.5 % 26 % -1.5 %

Earnings from operations

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(thousands) 2012 2011 change 2012 2011 change
Gross sales $ 327,187 $ 253,432 +29 % $ 864,109 $ 714,517 +21 %
Smelter processing charges and freight (30,023 ) (35,865 ) -16 % (87,841 ) (99,239 ) -11 %
Cost of sales:
Direct production costs (78,192 ) (73,008 ) +7 % (235,646 ) (216,932 ) +9 %
Inventory changes (7,332 ) (4,682 ) +57 % (8,289 ) (6,135 ) +35 %
Other non-cash expenses (5,572 ) (873 ) +538 % (11,419 ) (3,431 ) +233 %
Depreciation (37,633 ) (26,452 ) +42 % (96,893 ) (78,434 ) +24 %
Earnings from operations $ 168,435 $ 112,552 +50 % $ 424,021 $ 310,346 +37 %

Gross sales were higher

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(thousands) 2012 2011 change 2012 2011 change
Gross sales by operation
Çayeli $ 110,689 $ 90,204 +23 % $ 300,222 $ 265,334 +13 %
Las Cruces 163,827 83,618 +96 % 402,072 247,837 +62 %
Pyhäsalmi 52,671 79,610 -34 % 161,815 201,346 -20 %
$ 327,187 $ 253,432 +29 % $ 864,109 $ 714,517 +21 %
Gross sales by metal
Copper $ 272,175 $ 171,016 +59 % $ 704,499 $ 496,772 +42 %
Zinc 29,967 46,099 -35 % 88,829 138,231 -36 %
Other 25,045 36,317 -31 % 70,781 79,514 -11 %
$ 327,187 $ 253,432 +29 % $ 864,109 $ 714,517 +21 %

Key components of the change in gross sales: increasing sales volumes at Las Cruces, higher realized copper prices


(millions)
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Higher (lower) copper prices $ 15 $ (40 )
Lower zinc prices - (6 )
Higher copper sales volumes at Las Cruces 79 189
Higher copper sales volumes at our other mines 8 58
Lower zinc sales volumes (16 ) (43 )
Changes in other metal sales (12 ) (8 )
Higher gross sales, compared to 2011 $ 74 $ 150

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 $1 million in negative finalization adjustments from second quarter 2012 sales.

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

  • 32 million pounds of copper provisionally priced at $3.72 per pound
  • 12 million pounds of zinc provisionally priced at $0.95 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 2012 19 12
November 2012 5 -
December 2012 6 -
January 2013 - -
February 2013 2 -
Unsettled sales at September 30, 2012 32 12

Higher copper sales volumes, lower zinc 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 and sales volumes were higher this quarter and year to date mainly because of production at Las Cruces and the mining of higher-grade areas and a continued improvement in recoveries at Çayeli. The timing of shipments resulted in copper sales volumes exceeding production volumes by a combined 4,900 tonnes for this quarter as compared to a combined excess of shipments over production of 1,400 tonnes in the third quarter of 2011.
  • Zinc production and sales volumes were lower than in 2011 due to lower zinc grades at Çayeli and Pyhäsalmi, which production was consistent with our objectives.

Sales volumes

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2012 2011 change 2012 2011 change
Copper contained in concentrate (tonnes) 13,700 12,300 +11 % 38,300 30,900 +24 %
Copper cathode (tonnes) 20,900 10,800 +94 % 51,400 29,200 +76 %
Total copper (tonnes) 34,600 23,100 +50 % 89,700 60,100 +49 %
Zinc (tonnes) 15,500 23,900 -35 % 46,100 67,000 -31 %
Pyrite (tonnes) 213,400 269,200 -21 % 552,800 633,200 -13 %

Production

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revised
objective
2012 2011 Change 2012 2011 change 2012
Copper (tonnes)
Çayeli 7,800 7,100 +10 % 24,400 20,100 +21 % 30,000 - 32,000
Las Cruces 18,800 11,400 +65 % 50,400 28,000 +80 % 65,000 - 68,000
Pyhäsalmi 3,100 3,200 -3 % 9,300 10,500 -11 % 11,300 - 12,600
29,700 21,700 +37 % 84,100 58,600 +44 % 106,300 - 112,600
Zinc (tonnes)
Çayeli 10,700 13,900 -23 % 29,600 36,900 -20 % 36,000 - 39,800
Pyhäsalmi 5,100 9,100 -44 % 16,000 25,600 -38 % 22,800 - 25,200
15,800 23,000 -31 % 45,600 62,500 -27 % 58,800 - 65,000
Pyrite (tonnes)
Pyhäsalmi 243,300 210,100 +16 % 669,200 594,300 +13 % 900,000

2012 outlook for sales

We use our production objectives to estimate our sales target. We have increased our copper production objective for Çayeli from between 27,000 to 30,000 tonnes to between 30,000 and 32,000 tonnes. Additionally, we have narrowed our copper production objective for Las Cruces from between 61,700 tonnes and 68,600 tonnes of copper cathode to between 65,000 tonnes and 68,000 tonnes. Our other production guidance for copper and zinc remains as previously disclosed.

Our revenues are also affected by the US dollar denominated metal prices we receive.

Zinc smelter processing charges down, copper charges up

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(thousands) 2012 2011 change 2012 2011 change
Smelter processing charges and freight by operation
Çayeli $ 18,948 $ 19,959 -5 % $ 54,492 $ 55,051 -1 %
Las Cruces 668 376 +78 % 1,513 837 +81 %
Pyhäsalmi 10,407 15,530 -33 % 31,836 43,351 -27 %
$ 30,023 $ 35,865 -16 % $ 87,841 $ 99,239 -11 %
Smelter processing charges and freight by metal
Copper $ 14,632 $ 12,376 +18 % $ 41,014 31,383 +31 %
Zinc 10,986 18,003 -39 % 32,817 52,250 -37 %
Other 4,405 5,486 -20 % 14,010 15,606 -10 %
$ 30,023 $ 35,865 -16 % $ 87,841 $ 99,239 -11 %
Smelter processing charges by type and freight
Copper treatment and refining charges $ 5,249 $ 4,726 +11 % $ 14,924 $ 10,728 +39 %
Zinc treatment charges 5,512 10,106 -45 % 16,301 28,170 -42 %
Copper price participation - 433 -100 % - 1,125 -100 %
Zinc price participation 25 (683 ) -104 % 46 (1,224 ) -104 %
Content losses 9,940 11,439 -13 % 28,427 33,499 -15 %
Freight 8,982 9,507 -6 % 27,270 26,031 +5 %
Other 315 337 -7 % 873 910 -4 %
$ 30,023 $ 35,865 -16 % $ 87,841 $ 99,239 -11 %

Our copper treatment and refining charges were higher than they were in 2011 because we sold more copper. This was more than offset by lower zinc treatment charges than last year due to lower zinc sales volumes at Çayeli and Pyhäsalmi, and because our terms with smelters were lower.

2012 outlook for smelter processing charges and freight

We expect our costs for copper treatment and refining to be consistent in 2012 to those we achieved in 2011 based on agreements we have signed with our customers. We expect the global copper concentrate market will return to a balanced position for the remainder of the year from a deficit position in the first nine months of 2012. We do not expect to pay copper price participation.

We expect total zinc smelter processing charges, including price participation, to be lower than in 2011 and a continued deficit to exist in the zinc concentrate market in 2012.

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

We expect our ocean freight costs in the fourth quarter to be similar to rates realized year to date in 2012.

Higher direct production costs and cost of sales

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(thousands) 2012 2011 change 2012 2011 change
Direct production costs by operation
Çayeli $ 22,303 $ 24,450 -9 % $ 68,572 $ 69,246 -1 %
Las Cruces 41,792 34,728 +20 % 123,636 105,143 +18 %
Pyhäsalmi 14,097 13,830 +2 % 43,438 42,543 +2 %
Total direct production costs 78,192 73,008 +7 % 235,646 216,932 +9 %
Inventory changes 7,332 4,682 +57 % 8,289 6,135 +35 %
Charges for mine rehabilitation and other non-cash charges 5,572 873 +538 % 11,419 3,431 +233 %
Total cost of sales (excluding depreciation) $ 91,096 $ 78,563 +16 % $ 255,354 $ 226,498 +13 %

Direct production costs

Direct production costs were higher this year because higher production at Las Cruces increased variable electricity, consumables and royalty costs, somewhat offset by the impact of the weaker euro relative to the US dollar.

Charges for mine rehabilitation and other non-cash charges

These charges include accruals for asset retirement obligations, provisions for severance and retirement and other non-cash expenses. We recorded an increase of $3 million this quarter in post-closure liabilities at our closed properties, and $7 million year to date. This increase was a result of a decrease in the discount rates and US dollar to Canadian dollar exchange rate we applied in determining the liabilities.

2012 outlook for cost of sales (excluding depreciation)

We expect consolidated direct production costs to be higher in 2012 because we expect higher production at Las Cruces to increase total variable costs, primarily electricity and royalties.

Our budget for 2012 continues to assume our costs at Çayeli and Pyhäsalmi will be similar to those of 2011.

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.

The total amount we report in US dollars will also be affected by the value of the euro relative to the US dollar.

Additionally, changes in market risk-free interest rates could significantly increase or decrease our costs related to mine rehabilitation at our closed properties. At September 30, 2012, the interest rates we used to value our asset retirement obligations at our closed properties ranged from 1.3 percent to 2.3 percent.

Higher depreciation

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(thousands) 2012 2011 change 2012 2011 change
Depreciation by operation
Çayeli $ 7,362 $ 6,018 +22 % $ 19,990 $ 15,946 +25 %
Las Cruces 27,681 18,198 +52 % 69,706 55,802 +25 %
Pyhäsalmi 2,590 2,236 +16 % 7,197 6,686 +8 %
$ 37,633 $ 26,452 +42 % $ 96,893 $ 78,434 +24 %

Depreciation was higher this quarter and for the year to date mainly because of higher copper sales volumes at Las Cruces and Çayeli.

2012 outlook for depreciation

We expect depreciation to be higher in 2012 than 2011 because of higher sales volumes at Las Cruces.

Corporate costs

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

General and administration

General and administration costs were $13 million higher year to date, compared to 2011. As a result of the decision to construct Cobre Panama, we recognized a non-cash stock based compensation expense of $7 million in the second quarter on Long-term Incentive Plan (LTIP) units issued in previous years that relate to the project. This expense represented the cumulative impact from the units' grant dates to June 30, 2012, on a 100 percent award basis, as no value was attributed to these units prior to the construction decision for Cobre Panama. See note 22c to the 2011 annual financial statements for more details on these units.

2012 outlook for general and administration

We expect general and administration costs to be higher in 2012 due to increased human resource costs supporting construction activities for Cobre Panama. We expect to recognize $8 million for the LTIP units this year.

Investment and other income

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(thousands) 2012 2011 2012 2011
Interest income $ 3,143 $ 4,676 $ 11,326 $ 11,431
Foreign exchange gains (losses) (2,366 ) 29,513 25,878 18,773
Unrealized gain on prepayment options derivative - senior unsecured notes 11,631 - 11,631 -
Dividend and royalty income 769 451 2,229 1,484
Other 99 - 1,052 1,943
$ 13,276 $ 34,640 $ 52,116 $ 33,631

Foreign exchange gains and losses

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

Our foreign exchange gains and losses were from:

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(thousands) 2012 2011 2012 2011
Translation of US dollar cash held by Corporate prior to June 2012 inclusive of proceeds of notes offering $ - $ (79 ) $ 27,338 $ (8,006 )
Translation of US dollar senior unsecured notes prior to June 2012 - - (16,884 ) -
Translation of US dollar bonds and other securities prior to June 2012 - 22,313 4,330 19,553
Translation of US dollar cash held in euro-based entities (11,626 ) - (1,227 ) -
Translation of Cdn dollar cash held by Corporate subsequent to May 2012 1,611 - 2,588 -
Translation of Cdn dollar bonds and other securities subsequent to May 2012 6,937 - 9,979 -
Translation of other monetary assets and liabilities 712 7,279 (246 ) 7,226
$ (2,366 ) $ 29,513 $ 25,878 $ 18,773

We recognized net foreign exchange gains of $15 million this year from the revaluation of US dollar denominated cash, bonds and other securities and the senior unsecured notes held in Inmet prior to the change in its functional currency from the Canadian dollar to the US dollar effective June 1, 2012. As of this date, Inmet's US dollar-denominated monetary assets and liabilities were no longer revalued. Instead we began recognizing foreign exchange impacts on the revaluation of Inmet's Canadian dollar denominated monetary assets and liabilities with a gain of $9 million in third quarter, and $13 million year to date, on Canadian dollar denominated cash, bonds and other securities due to a weakening in the US dollar relative to the Canadian dollar.

Additionally, in 2012 we began holding our euro-based operations' excess cash in US dollars. We recognized $12 million in foreign exchange losses this quarter, and $1 million year to date, on the revaluation of US-denominated cash balances to euros.

Unrealized gain on embedded derivative in senior unsecured notes

Our senior unsecured notes include prepayment rights, as described in note 7 to the interim consolidated financial statements, that are considered to be an embedded derivative. At September 30, 2012, these prepayment rights are recognized on the balance sheet at a fair value of $55 million, based on current market interest rates for similar instruments and our credit spread. The change in the market value of this derivative asset since issuance of the senior unsecured notes in May 2012 of $12 million, primarily occurring as a result of borrowing market yield changes since the end of the second quarter, has been recognized as an unrealized gain in investment and other income.

2012 outlook for investment and other income

Investment and other income is affected by the extent of our cash, bonds and other securities, and by interest rates and exchange rates. We are capitalizing interest income earned on funds from the proceeds of our senior unsecured notes until they are used to construct Cobre Panama (as we are capitalizing interest costs on the senior unsecured notes). At September 30, 2012, we held Cdn $252 million in cash, bonds and other securities subject to translation in our US dollar-denominated accounts and US $535 million in cash subject to translation in our euro accounts. Additionally, changes in market borrowing rates could change the fair value of the derivative embedded in our senior unsecured notes, resulting in the recognition of potentially significant unrealized gains and losses.

Income tax expense

three months ended
September 30
nine months ended
September 30
(thousands) 2012 2011 change 2012 2011 change
Çayeli $ 11,572 $ 18,661 $ 28,940 $ 41,503
Las Cruces 25,673 5,073 54,124 14,691
Pyhäsalmi 5,023 10,158 15,938 24,098
Corporate and other (133 ) (1,196 ) 589 (712 )
$ 42,135 $ 32,696 $ 99,591 $ 79,580
Consolidated effective tax rate 27 % 25 % +2 % 25 % 28 % -3 %

The consolidated effective tax rate is higher this quarter compared to the same quarter of last year mainly because of the improvement in earnings at Las Cruces, combined with its lower intergroup interest expense as it repaid a portion of its intergroup debt this year. This interest expense eliminates in the consolidated financial statements. Year to date, Cayeli's taxes were lower as it recognized a foreign exchange loss from its US dollar denominated cash this year, compared to a foreign exchange gain in 2011 (Cayeli's income taxes are denominated in Turkish lira).

2012 outlook for income tax expense

Other than the decrease in the statutory tax rate at Pyhäsalmi from 26 percent to 24.5 percent, we expect the statutory tax rates at our operations to remain the same in 2012 as they were in 2011.

Discontinued operation - 2011

We sold our 18 percent equity interest in Ok Tedi in January 2011, and have reported our results relating to Ok Tedi in that year as discontinued operations. After-tax income of $81 million in 2011 includes net earnings of $17 million in January 2011, before the sale, and a gain on sale of $64 million net of withholding taxes. We paid Papua New Guinea withholding taxes of $27 million on the sale.

Results of our operations

2012 estimates

Our financial review by operation includes estimates for our 2012 operating earnings and operating cash flows. We have based these estimates on our 2012 objectives for production (using the midpoints in our production volume ranges) and cost per tonne of ore milled (cost per pound of copper produced at Las Cruces), as well as the following assumptions for the remaining three months of the year:

Copper price US $3.60 per pound
Zinc price US $0.90 per pound
euro to US$ exchange rate $1.25
Working capital Assume sales volumes equal production volumes for the fourth quarter

Çayeli

three months ended
September 30
nine months ended
September 30
2012 2011 change 2012 2011 change
Tonnes of ore milled (000's) 305 312 -2 % 899 880 +2 %
Tonnes of ore milled per day 3,300 3,400 -2 % 3,300 3,200 +2 %
Grades (percent)
Copper 3.3 3.1 +6 % 3.4 3.1 +10 %
Zinc 5.2 6.5 -20 % 5.1 6.2 -18 %
Mill recoveries (percent)
Copper 78 74 +5 % 79 74 +7 %
Zinc 67 68 -1 % 65 68 -4 %
Production (tonnes)
Copper 7,800 7,100 +10 % 24,400 20,100 +21 %
Zinc 10,700 13,900 -23 % 29,600 36,900 -20 %
Cost per tonne of ore milled $ 73 $ 78 -6 % $ 76 $ 79 -4 %

Higher grades and recoveries increased copper production

Copper grades this quarter and year to date were higher than 2011, while zinc grades were lower, because we produced from different areas of the mine. This higher copper grade ore and lower zinc grade ore compared to last year contributed to higher copper recoveries and lower zinc recoveries, respectively.

The result was higher copper production and lower zinc production compared to 2011. Due to the timing of shipments, Çayeli's copper sales volumes exceeded production volumes by approximately 2,600 tonnes this quarter and 1,000 tonnes in the third quarter of 2011. These two factors led to a 28 percent increase in copper sales for the quarter relative to the comparable quarter in 2011.

Cost per tonne of ore milled was lower this quarter and year to date than in 2011 due to lower royalty costs. Çayeli's royalty is based on its Turkish lira net income, which was impacted by significant foreign exchange gains in 2011.

The three-year labour agreement at Cayeli expired in May of this year. The collective labour agreement legislative proposal was accepted by parliament on October 18, 2012. The next step in the process is the formal approval of the proposal by the President of the Republic of Turkey followed by publication in the official gazette. It is expected that collective bargaining will begin in early November. Once initiated, we will make a strong effort to manage labour cost escalations to maintain our competitiveness.

2012 outlook for production

In 2012, mill throughput should remain at approximately 1.2 million tonnes. We expect slightly lower copper and zinc grades for the remainder of 2012 as we produce from lower grade areas of the mine. We continue to expect zinc grades to be lower than 2011. We increased our copper production objective from between 27,000 tonnes and 30,000 tonnes to between 30,000 tonnes and 32,000 tonnes. In 2012, lower zinc grades, as expected, account for the anticipated decline in zinc production compared to those in recent years.

Financial review

Higher copper sales volumes due to higher copper production volumes and timing of shipments

(millions unless otherwise stated) three months ended
September 30
nine months ended
September 30
revised
objective
2012 2011 2012 2011 2012
Sales analysis
Copper sales (tonnes) 10,400 8,100 28,100 20,600 34,800
Zinc sales (tonnes) 9,900 14,600 29,900 40,100 38,200
Gross copper sales $ 83 $ 54 $ 222 $ 162 $ 271
Gross zinc sales 19 27 58 82 74
Other metal sales 9 9 20 21 22
Gross sales $ 111 $ 90 $ 300 $ 265 $ 367
Smelter processing charges and freight (19 ) (20 ) (54 ) (55 ) (70 )
Net sales $ 92 $ 70 $ 246 $ 210 $ 297
Cost analysis
Tonnes of ore milled (thousands) 305 312 899 880 1,200
Direct production costs ($ per tonne) $ 73 $ 78 $ 76 $ 79 $ 79
Direct production costs $ 22 $ 24 $ 69 $ 69 $ 95
Change in inventory 4 3 6 3 6
Depreciation and other non-cash costs 10 7 24 18 34
Operating costs $ 36 $ 34 $ 99 $ 90 $ 135
Operating earnings $ 56 $ 36 $ 147 $ 120 $ 162
Operating cash flow $ 44 $ 55 $ 106 $ 144 $ 158

The objective for 2012 uses the assumptions listed on page 15.

The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.

(millions) three months ended
September 30
nine months ended
September 30
Higher copper prices $ 14 $ 1
Higher (lower) zinc prices 1 (3 )
Higher copper sales volumes 11 46
Lower zinc sales volumes (4 ) (11 )
Higher depreciation (1 ) (4 )
Other (1 ) (2 )
Higher operating earnings, compared to 2011 20 27
Change in cash taxes 9 11
Changes in working capital (see note 15 on page 52) (42 ) (80 )
Change in depreciation 1 4
Other 1 -
Lower operating cash flow, compared to 2011 $ (11 ) $ (38 )

Lower capital spending due to timing

three months ended
September 30
nine months ended
September 30
objective
(thousands) 2012 2011 change 2012 2011 change 2012
Capital spending $ 3,900 $ 1,900 +105 % $ 9,200 $ 9,300 -1 % $ 20,000

2012 outlook for capital spending

We expect to spend $20 million on capital in 2012, including $8 million to upgrade our ore pass system to address deterioration that has accumulated over time from normal abrasion, and to extend the shotcrete slickline and replace certain mobile equipment.

Las Cruces

three months ended
September 30
nine months ended
September 30
2012 2011 change 2012 2011 change
Tonnes of ore processed (000's) 290 209 +39 % 806 545 +48 %
Copper grades (percent) 7.2 6.5 +11 % 7.2 6.3 +14 %
Plant recoveries (percent) 88 87 +1 % 87 85 +2 %
Cathode copper production (tonnes) 18,800 11,400 +65 % 50,400 28,000 +80 %
Cost per pound of cathode produced $ 1.01 $ 1.38 -27 % $ 1.11 $ 1.70 -35 %

Plant production continued to exceed design capacity

Las Cruces production this quarter was significantly higher than the third quarter of 2011, increasing from 11,400 tonnes of copper cathode to 18,800 tonnes. Plant production exceeded the design capacity of 6,000 tonnes of copper cathode each month this quarter, marking six consecutive months that Las Cruces produced at or above design capacity. Overall recoveries increased to 88 percent this quarter compared to 87 percent in the same quarter of 2011, with leach recoveries at design levels. The difference from overall plant design level recoveries is mostly in copper already leached but retained in the filtration residue. Our focus remains on improving recoveries in washing and filtration. Plant feed grades were significantly higher for the quarter and year to date compared to 2011 and we expect grades to gradually decline to approximately 6.5 percent during the fourth quarter of 2012.

Las Cruces' copper sales volumes exceeded production volumes by approximately 2,100 tonnes this quarter as a result of the timing of shipments.

Cost per pound of copper produced was significantly lower than in 2011 due to higher production volumes.

2012 outlook for production

For 2012, we have narrowed our copper production objective for Las Cruces from between 61,700 tonnes and 68,600 tonnes of copper cathode to between 65,000 tonnes and 68,000 tonnes. No major construction projects or major shutdowns are planned for the remainder of the year. In total, we expect a minimum of 90 percent operating time throughout 2012.

Financial review

Higher sales volumes due to higher production

(millions unless otherwise stated) three months ended
September 30
nine months ended
September 30
revised
objective
2012 2011 2012 2011 2012
Sales analysis
Copper sales (tonnes) 20,900 10,800 51,400 29,200 67,500
Gross copper sales $ 164 $ 83 $ 402 $ 248 $ 529
Freight (1 ) - (1 ) (1 ) (2 )
Net sales $ 163 $ 83 $ 401 $ 247 $ 527
Cost analysis
Pounds of copper produced (millions) 41 25 111 62 147
Direct production costs ($ per pound) $ 1.01 $ 1.38 $ 1.11 $ 1.70 $ 1.10
Direct production costs $ 42 $ 35 $ 124 $ 105 $ 161
Change in inventory 4 (1 ) 2 4 2
Depreciation and other non-cash costs 28 17 69 56 92
Operating costs $ 74 $ 51 $ 195 $ 165 $ 255
Operating earnings $ 89 $ 32 $ 206 $ 82 $ 272
Operating cash flow $ 105 $ 49 $ 270 $ 144 $ 378

The objective for 2012 uses the assumptions listed on page 15.

The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.

(millions) three months ended
September 30
nine months ended
September 30
Higher (lower) copper prices $ 1 $ (35 )
Higher copper sales volume 74 191
Higher production costs denominated in local currencies (12 ) (30 )
Foreign exchange - decreased costs 5 11
Higher depreciation (9 ) (14 )
Other (2 ) 1
Higher operating earnings, compared to 2011 57 124
Changes in working capital (see note 15 on page 52) (14 ) (13 )
Change in depreciation 9 14
Other 4 1
Higher operating cash flow, compared to 2011 $ 56 $ 126

Capital spending

three months ended
September 30
nine months ended
September 30
objective
(thousands) 2012 2011 change 2012 2011 change 2012
Capital spending $ 12,000 $ 9,300 +29 % $ 25,200 $ 42,300 -40 % $ 48,000

Capital expenditures for the quarter were mainly for mine development and the tailings storage facility expansion.

2012 outlook for capital spending

We expect to spend $48 million on capital projects in 2012. The largest expenditures will come in the areas of mine development of $20 million, as well as tailings storage facility expansion and land purchase.

Pyhäsalmi

three months ended
September 30
nine months ended
September 30
2012 2011 change 2012 2011 change
Tonnes of ore milled (000's) 347 351 -1 % 1,033 1,038 -
Tonnes of ore milled per day 3,800 3,800 -1 % 3,800 3,800 -
Grades (percent)
Copper 1.0 1.0 - 1.0 1.1 -9 %
Zinc 1.6 2.9 -45 % 1.7 2.7 -37 %
Mill recoveries (percent)
Copper 95 95 - 95 96 -1 %
Zinc 90 90 - 92 91 +1 %
Production (tonnes)
Copper 3,100 3,200 -3 % 9,300 10,500 -11 %
Zinc 5,100 9,100 -44 % 16,000 25,600 -38 %
Pyrite 243,300 210,100 +16 % 669,200 594,300 +13 %
Cost per tonne of ore milled $ 41 $ 39 +5 % $ 42 $ 41 +2 %

Lower grades this year in-line with annual objectives

Pyhäsalmi maintained its strong performance this quarter, processing at a rate in-line with its annual objective and achieving copper recoveries of 95 percent and zinc recoveries of 90 percent. Copper grades this quarter were consistent with the comparative quarter of 2011, and year to date were slightly lower than last year. Zinc grades were lower this quarter and year to date than the comparative periods of 2011, and consistent with our plan. Copper and zinc production so far this year were therefore lower than in 2011.

Operating costs so far this year were slightly higher than they were in 2011 due to higher labour and consumables and contractor costs.

2012 outlook for production

Pyhäsalmi expects to mine 1.4 million tonnes of approximately 1 percent copper and 2 percent zinc in 2012, and produce between 11,300 tonnes and 12,600 tonnes of copper and 22,800 tonnes and 25,200 tonnes of zinc. Copper and zinc production should be lower than it was in 2011 as fewer higher grade stopes are available in the short-term mining sequence.

Pyhäsalmi expects to produce 900,000 tonnes of pyrite in 2012 and expects to sell 915,000 tonnes of pyrite due to stronger demand from Asian customers this year.

Financial review

Lower earnings because of lower sales volumes and realized metal prices

(millions of US dollars unless otherwise stated) three months ended
September 30
nine months ended
September 30
revised
objective
2012 2011 2012 2011 2012
Sales analysis
Copper sales (tonnes) 3,300 4,200 10,200 10,300 12,700
Zinc sales (tonnes) 5,600 9,400 16,100 26,900 24,100
Pyrite sales (tonnes) 213,400 269,200 552,800 633,200 915,000
Gross copper sales $ 25 $ 34 $ 80 $ 87 $ 102
Gross zinc sales 11 19 31 56 47
Other metal sales 17 27 51 58 73
Gross sales $ 53 80 $ 162 201 $ 222
Smelter processing charges and freight (11 ) (16 ) (32 ) (43 ) (46 )
Net sales $ 42 $ 64 $ 130 $ 158 $ 176
Cost analysis
Tonnes of ore milled (thousands) 347 351 1,033 1,038 1,370
Direct production costs ($ per tonne) $ 41 $ 39 $ 42 $ 41 $ 42
Direct production costs $ 14 $ 14 $ 43 $ 43 $ 58
Change in inventory (1 ) 3 - - -
Depreciation and other non-cash costs 3 2 8 7 10
Operating costs $ 16 $ 19 $ 51 $ 50 $ 68
Operating earnings $ 26 $ 45 $ 79 $ 108 $ 108
Operating cash flow $ 17 $ 23 $ 69 $ 90 $ 92

The objective for 2012 uses the assumptions listed on page 15.

The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.


(US$ millions)
three months ended
September 30
nine months ended
September 30
Lower copper prices $ (1 ) $ (6 )
Lower zinc prices (1 ) (3 )
Lower other metal sales prices (6 ) (2 )
Lower zinc sales volumes (5 ) (14 )
Lower other sales volumes (7 ) (7 )
Other 1 3
Lower operating earnings, compared to 2011 (19 ) (29 )
Change in cash taxes 5 8
Changes in working capital (see note 15 on page 52) 9 2
Other (1 ) (2 )
Lower operating cash flow, compared to 2011 $ (6 ) $ (21 )

Capital spending

three months ended
September 30
nine months ended
September 30
objective
(US$ thousands) 2012 2011 change 2012 2011 change 2012
Capital spending $ 1,400 $ 2,400 -42 % $ 6,000 $ 5,100 +18 % $ 10,000

2012 outlook for capital spending

Capital spending of $10 million in 2012 will primarily be to replace underground mobile equipment, improve the tailings management facility, and upgrade the satellite ore grinding circuit and zinc cleaner cells.

Status of our development project

Cobre Panama

Construction progress

For a visual update on our construction progress, we invite you to visit our photo gallery on Inmet's web site at www.inmetmining.com.

During the quarter, we made the following advancements in the project's development:

Infrastructure

  • Our Engineering, Procurement and Construction Management (EP+CM) contractor, Joint Venture Panama (JVP), progressed with detailed engineering during the third quarter, including work on contract procurement, earthworks and ground preparation for camps and road construction.
  • Significant progress was achieved at the port site in Punta Rincon, including the first beach landing in early July and the installation of jack-up barges, allowing safe mooring of barges at the port site. The camp platform at the port site is also ready to receive the first pre-fabricated camp units.

Power plant

  • Our Engineering, Procurement and Construction (EPC) contractor, SK Engineering and Construction, progressed with detailed engineering and procurement activities, and with planning for the start of geotechnical work in the fourth quarter and the erection of temporary facilities in early 2013.

Process plant

  • We received and completed our evaluation of process plant bids and we expect to award the contract for the plant in the fourth quarter of 2012.

Other

  • By the end of the third quarter, MPSA had obtained all required permits and land usage rights for its construction activities both at the mine and the port site.
  • We continued the process of resettling the people who will be physically and economically displaced by the project.
  • We have made significant progress in our flora and fauna rescue program to support the ramp-up to full-scale construction, to ensure the protection of the biodiversity of the area.
  • MPSA has finalized an agreement with ANAM to support the management of two national parks and a similar agreement for the Donoso area is in progress. These agreements are an important aspect to our commitment to have a net positive benefit to the biodiversity of the project area.

MPSA and its contractors are currently employing 2,500 workers, of which more than 90 percent are local residents of the Provinces of Cocle and Colon, Panama. The combined construction workforce is expected to increase to more than 9,000 people by the end of 2014. The Ministries of Labor and Security in Panama and MPSA signed agreements this quarter to establish a special immigration and work permit office for the Cobre Panama project in Penonome. This office will support our human resource growth at Cobre Panama by helping to ensure work permits and visas for expatriate employees and contractors are processed efficiently.

We have adopted a one-team approach for safety and health execution on the project to ensure that a leading safety culture is fostered. Creating alignment between the owners' team and all contractors working on the project is of prime importance as we progress with construction. This approach has led to the current lost-time injury frequency of less than 0.1 injuries per 200,000 work hours worked since Full Notice to Proceed was issued in May 2012.

Capital spending

The following table provides a breakdown of capital expenditures on a 100 percent basis.

three months ended
September 30
nine months ended
September 30
objective
(US$ millions) 2012 2011 2012 2011 2012
Capital spending since issuance of full notice to proceed (FNTP) $ 147 $ - $ 351 $ - $ 780
Interest paid on senior unsecured notes - - - - 70
Changes in working capital 3 - (82 ) - (37 )
Capital spending prior to FNTP - 41 $ 131 87 131
Capital spending in the consolidated statements of cash flows $ 150 $ 41 $ 400 $ 87 $ 944

We expect completion to take approximately 44 months from the point we issued Full Notice to Proceed. The schedule below provides the expected timing of capital spending by year.

(US$ millions) Total
expenditures
(100% basis)
Inmet's share
after Stream

Franco-Nevada's
Stream funding

KPMC's
20%
share
Cumulative spending at September 30, 2012 $ 351 $ 120 $ - $ 231(1)
Future capital spending:
Fourth quarter of 2012 429 343 - 86
2013 2,241 1,454 339 448
2014 2,271 1,363 454 454
2015 889 504 207 178
Total direct costs $ 6,181 $ 3,784 $ 1,000 $ 1,397
(1) Includes KPMC's $161 million payment to acquire a 20% interest in MPSA, which increased KPMC's share of total project funding to $1.4 billion and reduced Inmet's share by an equal and offsetting amount.

Capital commitments

In October, contracts were awarded for mass earthworks and quarry development at both the mine and port sites, the tailings management facility, the coastal road joining the mine to the port, permanent and temporary camp construction and the port causeway and commodity berth. Since construction commenced in May of this year, MPSA has entered into commitments for approximately $2.4 billion, representing 39 percent of estimated capital expenditures, mainly for infrastructure and the power plant construction contract. MPSA expects to award contracts between now and the end of the year relating to the mobile mine equipment fleet, the mineral processing plant, fuel supply, coal unloading facility, construction camp catering and the mine pre-stripping. The total combined value of contracts that have already been awarded and those that are expected to be awarded by year end should be approximately $4 billion, or 65 percent of estimated capital expenditures.

Sale of precious metal stream to Franco-Nevada

In August 2012, we announced the completion of a precious metals stream agreement with Franco-Nevada. Under the terms of the agreement, a wholly-owned subsidiary of Franco-Nevada will provide a $1 billion deposit which will be used to fund a portion of Cobre Panama project capital costs. The deposit will become available after Inmet's funding since issuing a Full Notice to Proceed reaches $1 billion (expected by Q1 2013) and will be provided pro-rata on a 1:3 ratio with Inmet's subsequent funding contributions.

The amount of precious metals deliverable under the stream is indexed to the copper in concentrate produced from the entire project and approximates 86 percent of the estimated payable precious metals attributable to Inmet's 80 percent ownership based on the current 31 year mine plan. Beyond the currently contemplated mine life, the precious metals deliverable under the stream will be based on a fixed percentage of the precious metals in concentrate.

Franco-Nevada will pay to MPSA an amount for each ounce of precious metals delivered equal to $400 per ounce for gold and $6 per ounce for silver (subject to an annual adjustment for inflation) for the first 1,341,000 ounces of gold and 21,510,000 ounces of silver (approximately the first 20 years of expected deliveries) and thereafter the greater of $400 per ounce for gold and $6 per ounce for silver (subject to an adjustment for inflation) or one half of the then prevailing market price. In all cases the amount paid is not to exceed the prevailing market price per ounce of gold and silver.

Funding plan

The table below outlines the total project funding plan as at September 30, 2012.

(US$ millions) Total expenditures
(100% basis)
Total construction budget for Cobre Panama $ 6,181
Less: Cumulative project funding at September 30, 2012
Inmet's share (240 )
Attributable to non-controlling interest (KPMC) (221 )
Cumulative funding to date (461 )
Less: Future funding
Attributable to precious metal stream partner (Franco-Nevada) (1,000 )
Attributable to non-controlling interest (KPMC) (1,176 )
Inmet's share of future funding 3,544
Less: Cash on hand at September 30, 2012 (includes bonds and other securities and excludes MPSA cash) (3,173 )
Expenditures to be funded by other debt financing or operating cash flow $ 371

2012 outlook for development

We plan to:

Infrastructure

  • Continue with mobilization of major contractors for site capture and bulk earthworks.
  • Establish additional quarries for crushed rock to supply all aggregate required for the construction and operation of Cobre Panama.
  • Complete additional work on resource definition, metallurgical recoveries, pit design and other engineering to allow us to include the Balboa and Brazo mineralization in our mine plan for Cobre Panama.
  • Continue to grow the temporary camps, with 2,000 accommodation units expected to be available by the end of 2012.
  • Award contracts for the mobile mine equipment fleet, fuel supply, coal unloading facility, construction camp catering and mine pre-stripping by the end of the year.

Power Plant

  • Progress with detailed engineering and procurement for the power plant.

Process Plant

  • Award the contract for the process plant and begin detailed engineering and procurement.

Other

  • Continue to build our privilege to operate through intensive 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.
  • Continue to work with ANAM towards finalizing an agreement to support the management of the Donoso area.
  • Develop and implement, with the assistance of our EP+CM contractors, our one-team, project specific health & safety and environmental and social mitigation plans that are consistent with the ESIA and Inmet's Corporate Responsibility Standards and Procedures.
  • Continue to grow the strength of our management team and human resources dedicated to the project. The combined construction workforce, including full-time employees and contractors, is expected to increase to more than 9,000 people by the end of 2014.

Managing Our Liquidity

We develop our financing strategy by looking at 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
(US$ millions) 2012 2011 2012 2011
CASH FROM OPERATING ACTIVITIES
Çayeli $ 44 $ 55 $ 106 $ 144
Las Cruces 105 49 270 144
Pyhäsalmi 16 23 69 90
Corporate development and exploration not incurred by operations (6 ) (3 ) (17 ) (16 )
General and administration (13 ) (10 ) (32 ) (26 )
Realized foreign exchange gains (losses) on cash (10 ) - 29 (8 )
Other - 3 2 (7 )
136 117 427 321
CASH FROM INVESTING AND FINANCING
Purchase of property, plant and equipment (169 ) (55 ) (443 ) (145 )
Purchase and maturity of bonds and other securities, net (1,568 ) 7 (1,496 ) (239 )
Issuance of common shares - - - 486
Sale of 20 percent interest in Cobre Panama - - 161 -
Long-term debt borrowing - - 1,429 -
Funding by non-controlling shareholder 40 - 60 -
Other 10 17 (4 ) 19
(1,687 ) (31 ) (293 ) 121
CASH FROM DISCONTINUED OPERATION (OK TEDI) - - - 297
Increase (decrease) in cash (1,551 ) 86 134 739
Cash and short-term investments
Beginning of period 2,733 969 1,048 316
End of period $ 1,182 $ 1,055 $ 1,182 $ 1,055

Our available liquidity also includes $2,124 million of bonds and other securities ($607 million at December 31, 2011), providing a total of $3.3 billion in capital available to finance our growth strategy as at September 30, 2012.

OPERATING ACTIVITIES

Key components of the change in operating cash flows


(US$ millions)
three months ended
September 30
nine months ended
September 30
Higher earnings from operations (see page 5) $ 56 $ 114
Add back higher depreciation and other non-cash charges included in earnings from operations 14
25
Lower cash taxes 12 18
Changes in working capital (see note 15 on page 52) (51 ) (89 )
Realized foreign exchange changes - cash (10 ) 37
Higher exploration and administration costs (6 ) (7 )
Other 4 7
Change in operating cash flow, compared to 2011 $ 19 $ 105

Operating cash flows this quarter and year to date were higher than in 2011 primarily due to higher earnings from operations before non-cash charges. This impact was somewhat offset by an increase this year in net working capital, mainly reflecting higher accounts receivable at Çayeli and Las Cruces due to the timing of shipments and collections from customers.

2012 outlook for cash from operating activities

The table below shows expected operating cash flow from our operations, based on our outlook for metal prices and production (see page 15), and the assumptions in Results of our operations (starting on page 15).

2012 estimated operating cash flow by operation


(US$ millions)
Çayeli $ 158
Las Cruces 378
Pyhäsalmi 92
$ 628

INVESTING AND FINANCING

Capital spending

three months ended
September 30
nine months ended
September 30
revised
objective
(US$ millions) 2012 2011 2012 2011 2012
Çayeli $ 4 $ 2 $ 9 $ 9 $ 20
Las Cruces 12 9 25 42 48
Pyhäsalmi 1 2 6 5 10
Cobre Panama 150 41 400 87 944
$ 167 $ 54 $ 440 $ 143 $ 1,022

Please see Results of our operations and Status of our development project for a discussion of actual results and our 2012 objectives. Capital spending this quarter was mainly for Cobre Panama.

Purchase and maturing of investments

In August 2012, we invested US cash of $1.7 billion in US dollar-denominated bonds and other securities. During the quarter, $133 million of securities matured.

Issuance of $1.5 billion in senior unsecured notes

On May 18, 2012, we issued $1.5 billion in senior unsecured notes, bearing a coupon rate of interest of 8.75 percent and maturing on June 1, 2020. The notes were priced at 98.584 percent of their face value, yielding proceeds of $1.43 billion net of the discount and transaction fees. Interest is payable on the notes semi-annually on December 1 and June 1 of each year. As the proceeds will be used to fund the development of Cobre Panama, interest costs will be capitalized to project assets during the construction period.

These notes are unconditionally guaranteed on a senior unsecured basis by certain Inmet subsidiaries. The notes contain certain customary covenants and restrictions for a financing instrument of this type.

Sale of 20 percent interest in Cobre Panama

On April 25, 2012, Korea Panama Mining Corporation (KPMC) completed its acquisition of a 20 percent interest in Minera Panama, owner and developer of Cobre Panama. KPMC acquired its interest for $161 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to closing. Together with the 20 percent of funding of the development costs of Cobre Panama it will provide, this amounts to funding of $1.4 billion.

Issuance of common shares - 2011

In May 2011, a subsidiary of Temasek Holdings (Private) Ltd. exchanged its subscription receipts for 7.78 million Inmet common shares and we received cash of $486 million.

Cash from discontinued operation - 2011

In January 2011, we sold our 18 percent equity interest in Ok Tedi for net proceeds of $297 million (after Papua New Guinea withholding taxes).

2012 outlook for investing and financing

Capital spending

At our operating mines, we expect capital spending to be $78 million in 2012, most significantly $48 million at Las Cruces, including $22 million for mine development, as well as several smaller expenditures including a tailings storage facility expansion, land purchase and certain plant improvements. We expect to spend $944 million on the construction and development of Cobre Panama this year.

Financing Cobre Panama construction costs

With Franco-Nevada's commitment to fund $1 billion of Inmet's share of the development costs of Cobre Panama under the precious metal stream, Inmet has almost all of its $4.8 billion required capital with the balance expected either from other sources of debt or from future operating cash flow.

Offer to acquire Petaquilla

On September 28, 2012, we filed a formal offer for all of the outstanding common shares of Petaquilla Minerals Ltd. (Petaquilla), and on October 25, 2012, we increased our offer. Under the offer, Petaquilla shareholders can elect to receive consideration in cash, shares or a combination thereof. For each Petaquilla Minerals common share they own, shareholders can elect to receive:

  • 0.0118 of a common share of Inmet and $0.001 in cash; or
  • a cash amount that is greater than $0.001 but not more than $0.60, and, if such elected cash amount is less than $0.60, that number of common shares of Inmet equal to the excess of $0.60 over the elected cash amount, divided by $50.82.

Financial condition

Our strategy is to make sure we have sufficient liquidity (including cash and committed credit facilities) to finance our operating requirements as well as our growth projects. At September 30, 2012, we had $3,306 million in total funds, including $1,182 million of cash and short-term investments and $2,124 million invested in bonds and other securities.

Cash

At September 30, 2012 our cash and short-term investments of $1,182 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 high 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, 2012, 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.

See note 4 on page 46 in the consolidated financial statements for more details about where our cash is invested.

Bonds and other securities

We hold a portfolio of bonds and other securities to provide better yields while minimizing our investment risk. As at September 30, 2012, our portfolio was $2,124 million. The portfolio includes:

  • 36 percent US Treasury bonds
  • 30 percent Canadian and provincial government bonds
  • 30 percent corporate bonds
  • 4 percent Supranational bonds.

The securities mature between October 2012 and June 2018.

Restricted cash

Our restricted cash balance of $77 million as at September 30, 2012 included:

  • $20 million in cash collateralized letters of credit for Inmet
  • $55 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, 2012 69,365,748
Deferred share units outstanding as of September 30, 2012 (redeemable on a one-for-one basis for common shares) 104,566

Dividend declaration

Inmet's board of directors has declared an eligible dividend of $0.10 per common share payable on December 15, 2012 to common shareholders of record as of November 30, 2012.

Additional risk factor

We have significantly increased our cash balance following the issuance of our senior unsecured notes for the construction of Cobre Panama. Based on our analysis, we do not believe that we are a "passive foreign investment company" (PFIC) for the current tax year. For U.S. federal income tax purposes a non-U.S. corporation may be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75 percent of its gross income is passive income, or (2) on average at least 50 percent of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income. If we were classified as a PFIC, U.S. taxpayers that hold our common shares could be subject to adverse U.S. federal income tax consequences, including increased tax liabilities and possible additional reporting requirements. As the determination of PFIC status is made annually at the close of each tax year and is dependent in part on factors beyond our control (such as changes in the relative values of our assets), there can be no assurance that Inmet will not become a PFIC in the current or any future tax year. U.S. taxpayers that hold our common shares are urged to consult their tax advisors concerning the potential U.S. federal income tax consequences of holding common shares if Inmet were considered a PFIC in any year.

Supplementary financial information

Pages 31 and 32 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 and zinc. We have three wholly-owned mining operations: Çayeli (Turkey), Las Cruces (Spain) and Pyhäsalmi (Finland), and have an 80 percent interest in the Cobre Panama development project, currently in construction.

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

Third quarter conference call

Will be held on

You can also dial in by calling

  • Local or international: +1.416.340.8530
  • Toll-free within North America: +1.877.240.9772

Starting at approximately 10:30 a.m. (ET) Friday, November 2, 2012, a conference call replay will be available

  • Local or international: +1.905.694.9451 passcode 7349975
  • Toll-free within North America: +1.800.408.3053 passcode 7349975
INMET MINING CORPORATION
Supplementary financial information
Cash costs
2012 For the nine months ended September 30
per pound of copper
ÇAYELI LAS CRUCES PYHÄSALMI TOTAL
(US dollars)
Direct production costs $ 1.18 $ 1.08 $ 2.14 $ 1.23
Royalties and variable compensation 0.12 0.06 - 0.07
Smelter processing charges and freight 0.93 0.01 0.87 0.37
Metal credits (1.41 ) - (3.49 ) (0.80 )
Cash cost $ 0.82 $ 1.15 $ (0.48 ) $ 0.87
2011 For the nine months ended September 30
per pound of copper
ÇAYELI LAS CRUCES PYHÄSALMI 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
Reconciliation of cash costs to statements of earnings
2012 For the nine months ended September 30
per pound of copper
(millions of US dollars, except where otherwise noted) ÇAYELI LAS CRUCES PYHÄSALMI TOTAL
GAAP reference page 17 page 19 page 21
Direct production costs $ 69 $ 124 $ 43 $ 236
Smelter processing charges and freight 54 1 32 87
By product sales (78 ) - (82 ) (160 )
Adjust smelter processing and freight, and sales to production basis (1 ) - (3 ) (4 )
Operating costs net of metal credits $ 44 $ 125 $ (10 ) $ 159
Inmet's share of production (000's) 53,700 111,000 20,600 185,300
Cash cost (US dollars) $ 0.82 $ 1.15 $ (0.48 ) $ 0.87
2011 For the nine months ended September 30
per pound of copper
(millions of US dollars, except where otherwise noted) ÇAYELI LAS CRUCES PYHÄSALMI TOTAL
GAAP reference page 17 page 19 page 21
Direct production costs $ 69 $ 105 $ 43 $ 217
Smelter processing charges and freight 55 1 43 99
By product sales (103 ) - (114 ) (217 )
Adjust smelter processing and freight, and sales to production basis 5 - 4 9
Operating costs net of metal credits $ 26 $ 106 $ (24 ) $ 108
Inmet's share of production (000's) 44,300 61,800 23,100 129,200
Cash cost (US dollars) $ 0.59 $ 1.81 $ (1.06 ) $ 0.88
INMET MINING CORPORATION
Supplementary financial information
Cash costs
2012 For the three months ended September 30
per pound of copper
ÇAYELI LAS CRUCES PYHÄSALMI TOTAL
(US dollars)
Direct production costs $ 1.18 $ 0.95 $ 2.06 $ 1.13
Royalties and variable compensation 0.12 0.06 - 0.07
Smelter processing charges and freight 0.97 0.02 $ 0.81 0.35
Metal credits (1.60 ) - $ (3.36 ) (0.77 )
Cash cost $ 0.67 $ 1.03 $ (0.49 ) $ 0.78
2011 For the three months ended September 30
per pound of copper
ÇAYELI LAS CRUCES PYHÄSALMI 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
Reconciliation of cash costs to statements of earnings
2012 For the three months ended September 30
per pound of copper
(millions of US dollars, except where otherwise noted) ÇAYELI LAS CRUCES PYHÄSALMI TOTAL
GAAP reference page 17 page 19 page 21
Direct production costs $ 22 $ 42 $ 14 $ 78
Smelter processing charges and freight 19 1 11 31
By product sales (28 ) - (28 ) (56 )
Adjust smelter processing and freight, and sales to production basis (2 ) - - (2 )
Operating costs net of metal credits $ 11 $ 43 $ (3 ) $ 51
Inmet's share of production (000's) 17,100 41,300 6,900 65,300
Cash cost (US dollars) $ 0.67 $ 1.03 $ (0.49 ) $ 0.78
2011 For the three months ended September 30
per pound of copper
(millions of US dollars, except where otherwise noted) ÇAYELI LAS CRUCES PYHÄSALMI TOTAL
GAAP reference page 17 page 19 page 21
Direct production costs $ 24 $ 35 $ 14 $ 73
Smelter processing charges and freight 20 - 16 36
By product sales (36 ) - (46 ) (82 )
Adjust smelter processing and freight, and sales to production basis 1 - 3 4
Operating costs net of metal credits $ 9 $ 35 $ (13 ) $ 31
Inmet's share of production (000's) 15,700 25,200 7,000 47,900
Cash cost (US dollars) $ 0.57 $ 1.48 $ (1.83 ) $ 0.69
INMET MINING CORPORATION
Quarterly review
(unaudited)
Latest Four Quarters

(thousands of US dollars, except per share amounts)
2012
Third
quarter
2012
Second
quarter
2012(1)
First
quarter
2011(1)
Fourth
quarter
STATEMENTS OF EARNINGS
Gross sales $ 327,187 $ 251,395 $ 285,527 $ 233,392
Smelter processing charges and freight (30,023 ) (28,480 ) (29,338 ) (27,330 )
Cost of sales (excluding depreciation) (91,096 ) (84,634 ) (79,624 ) (90,176 )
Depreciation (37,633 ) (29,193 ) (30,067 ) (26,834 )
168,435 109,088 146,498 89,052
Corporate development and exploration (7,905 ) (10,290 ) (8,801 ) (6,333 )
General and administration (12,982 ) (15,899 ) (9,745 ) (7,488 )
Investment and other income 13,276 45,103 (6,263 ) (3,883 )
Finance costs (2,463 ) (2,379 ) (2,596 ) (2,314 )
Income tax expense (42,135 ) (31,444 ) (26,012 ) (22,490 )
Net income $ 116,226 $ 94,179 $ 93,081 $ 46,544
Net income attributable to:
Inmet equity holders $ 116,528 $ 94,458 $ 93,081 $ 46,544
Non-controlling interest (302 ) (279 ) - -
$ 116,226 $ 94,179 $ 93,081 $ 46,544
Net Income per share
Basic $ 1.68 $ 1.36 $ 1.35 $ 0.67
Diluted $ 1.67 $ 1.35 $ 1.34 $ 0.67
(1) Information restated from previously reported Canadian dollar amounts to US dollar amounts at May 31, 2012 exchange rate of US $0.97 per Canadian dollar.
Previous Four Quarters

(thousands of US dollars, except per share amounts)
2011(1)
Third
quarter
2011(1)
Second
quarter
2011(1)
First
quarter
2010(1)
Fourth
quarter
STATEMENTS OF EARNINGS
Gross sales $ 253,432 $ 214,894 $ 246,191 $ 222,945
Smelter processing charges and freight (35,865 ) (32,793 ) (30,581 ) (34,597 )
Cost of sales (excluding depreciation) (78,563 ) (71,302 ) (76,633 ) (80,328 )
Depreciation (26,452 ) (25,802 ) (26,180 ) (18,281 )
112,552 84,997 112,797 89,739
Corporate development and exploration (4,539 ) (4,417 ) (12,984 ) (5,261 )
General and administration (9,669 ) (7,995 ) (8,155 ) (4,607 )
Investment and other income 34,640 4,581 (5,590 ) 49,012
Finance costs (2,301 ) (2,310 ) (2,257 ) (4,157 )
Income tax expense (32,696 ) (20,588 ) (26,296 ) (30,944 )
Income from continuing operations 97,987 54,268 57,515 93,782
Income from discontinued operation (net of taxes) - - 80,786 46,467
Net income $ 97,987 $ 54,268 $ 138,301 $ 140,249
Net income attributable to:
Inmet equity holders $ 97,987 $ 54,268 $ 138,301 $ 142,259
Non-controlling interest - - - (2,010 )
$ 97,987 $ 54,268 $ 138,301 $ 140,249
Income from continuing operations per share
Basic $ 1.41 $ 0.83 $ 0.94 $ 1.67
Diluted $ 1.41 $ 0.83 $ 0.93 $ 1.67
Income from discontinuing operations per share
Basic $ - $ - $ 1.32 $ 0.81
Diluted $ - $ - $ 1.31 $ 0.81
Net Income per share
Basic $ 1.41 $ 0.83 $ 2.26 $ 2.49
Diluted $ 1.41 $ 0.83 $ 2.24 $ 2.49
(1) Information restated from previously reported Canadian dollar amounts to US dollar amounts at May 31, 2012 exchange rate of US $0.97 per Canadian dollar.
Consolidated financial statements
INMET MINING CORPORATION
Consolidated statements of financial position
(Unaudited)
(thousands of US dollars) Note
reference
September 30,
2012
December 31,
2011
(1)
December 31,
2010(1)
Assets
Current assets:
Cash and short term investments 4 $ 1,181,665 $ 1,048,457 $ 316,045
Restricted cash 5 1,050 784 597
Accounts receivable 148,996 101,867 115,628
Inventories 83,749 87,654 69,860
Current portion of bonds and other securities 6 1,028,322 175,921 52,201
Assets held for sale - - 308,935
2,443,782 1,414,683 863,266
Restricted cash 5 75,686 69,538 67,831
Property, plant and equipment 2,298,330 1,772,766 1,680,858
Bonds and other securities 6 1,096,327 430,787 311,091
Deferred income tax assets - 317 8,444
Other assets 1,613 1,380 2,261
Total assets $ 5,915,738 $ 3,689,471 $ 2,933,751
Liabilities
Current liabilities:
Accounts payable and accrued liabilities $ 280,439 $ 138,596 $ 132,009
Provisions 14,874 13,087 17,106
Liabilities associated with assets held for sale - - 108,338
295,313 151,683 257,453
Long-term debt 7 1,452,106 16,581 16,091
Provisions 195,831 170,025 157,235
Other liabilities 17,252 17,156 17,541
Deferred income tax liabilities 83,504 28,351 12,127
Total liabilities 2,044,006 383,796 460,447
Commitments and contingencies 16
Equity
Share capital 1,541,773 1,541,324 1,054,927
Contributed surplus 64,774 64,629 64,028
Share based compensation 8 19,366 8,256 6,334
Retained earnings 2,155,910 1,851,010 1,527,342
Accumulated other comprehensive loss 9 (123,163 ) (159,544 ) (179,327 )
Total equity attributable to Inmet equity holders 3,658,660 3,305,675 2,473,304
Non-controlling interest 10 213,072 - -
Total equity 3,871,732 3,305,675 2,473,304
Total liabilities and equity $ 5,915,738 $ 3,689,471 $ 2,933,751
(1) refer to note 3 for effect of change in presentation currency to the US dollar.

(See accompanying notes)

INMET MINING CORPORATION
Segmented statements of financial position
(Unaudited)
2012 As at September 30 CORPORATE
& OTHER
ÇAYELI LAS
CRUCES
PYHÄSALMI COBRE
PANAMA
DISCONTINUED
OPERATIONS -
OK TEDI
TOTAL
(thousands of US dollars) (Turkey) (Spain) (Finland) (Panama) (Papua
New Guinea)
Assets
Cash and short-term investments $ 802,173 $ 91,637 $ 127,312 $ 30,653 $ 129,890 $ - $ 1,181,665
Other current assets 1,038,508 73,674 97,461 50,034 2,440 - 1,262,117
Restricted cash 19,937 - 54,175 1,574 - - 75,686
Property, plant and equipment 3,310 130,466 832,284 65,319 1,266,951 - 2,298,330
Bonds and other securities 995,590 100,737 - - - - 1,096,327
Other non-current assets 1,428 185 - - - - 1,613
$ 2,860,946 $ 396,699 $ 1,111,232 $ 147,580 $ 1,399,281 $ - $ 5,915,738
Liabilities
Current liabilities $ 69,187 $ 39,727 $ 54,516 $ 17,433 $ 114,450 $ - $ 295,313
Long-term debt 1,452,106 - - - - - 1,452,106
Provisions 73,536 19,426 64,020 30,633 8,216 - 195,831
Other liabilities 688 - 16,564 - - - 17,252
Deferred income tax liabilities 4 959 71,458 11,083 - - 83,504
$ 1,595,521 $ 60,112 $ 206,558 $ 59,149 $ 122,666 $ - $ 2,044,006
2011 As at December 31 CORPORATE
& OTHER
ÇAYELI LAS
CRUCES
PYHÄSALMI COBRE
PANAMA
DISCONTINUED
OPERATIONS -
OK TEDI
TOTAL
(thousands of US dollars) (Turkey) (Spain) (Finland) (Panama) (Papua
New Guinea)
Assets
Cash and short-term investments $ 711,427 $ 133,215 $ 131,799 $ 46,109 $ 25,907 $ - $ 1,048,457
Other current assets 183,715 44,728 83,926 51,893 1,964 - 366,226
Restricted cash 16,306 - 51,667 1,565 - - 69,538
Property, plant and equipment 1,196 137,736 869,308 66,103 698,423 - 1,772,766
Bonds and other securities 351,082 79,705 - - - - 430,787
Other non-current assets 1,262 435 - - - - 1,697
$ 1,264,988 $ 395,819 $ 1,136,700 $ 165,670 $ 726,294 $ - $ 3,689,471
Liabilities
Current liabilities $ 21,305 $ 41,460 $ 53,152 $ 16,418 $ 19,348 $ - $ 151,683
Long-term debt 16,581 - - - - - 16,581
Provisions 68,823 17,450 53,857 29,895 - - 170,025
Other liabilities 655 - 16,501 - - - 17,156
Deferred income tax liabilities - - 17,095 11,256 - - 28,351
$ 107,364 $ 58,910 $ 140,605 $ 57,569 $ 19,348 $ - $ 383,796
2010 As at December 31 CORPORATE
& OTHER
ÇAYELI LAS
CRUCES
PYHÄSALMI COBRE
PANAMA
DISCONTINUED
OPERATIONS -
OK TEDI
TOTAL
(thousands of US dollars) (Turkey) (Spain) (Finland) (Panama) (Papua
New Guinea)
Assets
Cash and short-term investments $ 51,493 $ 104,324 $ 57,961 $ 93,970 $ 8,297 $ - $ 316,045
Other current assets 58,851 57,084 57,708 64,088 664 308,826 547,221
Restricted cash 16,368 - 49,883 1,580 - - 67,831
Property, plant and equipment 754 147,799 911,496 64,854 555,955 - 1,680,858
Bonds and other securities 248,288 62,803 - - - - 311,091
Other non-current assets 922 5,571 4,212 - - - 10,705
$ 376,676 $ 377,581 $ 1,081,260 $ 224,492 $ 564,916 $ 308,826 $ 2,933,751
Liabilities
Current liabilities $ 29,322 $ 38,393 $ 45,718 $ 27,994 $ 7,688 $ 108,338 $ 257,453
Long-term debt 16,091 - - - - - 16,091
Provisions 55,707 20,920 54,644 25,964 - - 157,235
Other liabilities 655 - 16,886 - - - 17,541
Deferred income tax liabilities 171 - - 11,956 - - 12,127
$ 101,946 $ 59,313 $ 117,248 $ 65,914 $ 7,688 $ 108,338 $ 460,447
INMET MINING CORPORATION
Consolidated statements of changes in equity
(unaudited)
Attributable to Inmet equity holders
(thousands of US dollars) Note Reference Share
Capital
Retained
earnings
Contributed
surplus
Share based
compensation
Accumulated
other
comprehensive
income (loss)
(note 7)
Total Non-
controlling
interest
Total
equity
Balance as at December 31, 2010(1) $ 1,054,927 $ 1,527,342 $ 64,028 $ 6,334 $ (179,327 ) $ 2,473,304 - $ 2,473,304
Comprehensive income - 290,556 - - 124,096 414,652 - 414,652
Equity settled share-based compensation plans - - 455 512 - 967 - 967
Dividends - (6,713 ) - - - (6,713 ) - (6,713 )
Issuance of share capital 486,199 - - - - 486,199 - 486,199
Balance as at September 30, 2011(1) $ 1,541,126 $ 1,811,185 $ 64,483 $ 6,846 $ (55,231 ) $ 3,368,409 $ - $ 3,368,409
Comprehensive income (loss) - 46,544 - - (104,313 ) (57,769 ) - (57,769 )
Equity settled share-based compensation plans 198 -