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Inmet Announces First Quarter 2008 Earnings of $2.21 Per Share

Posted on: Tuesday, 29 April 2008, 09:00 CDT

TORONTO, April 29 /PRNewswire-FirstCall/ --

Highlights - Higher net income per share Net income this quarter of $2.21 per share was higher than in the first quarter of 2007, mainly because copper and gold prices were higher. We realized record copper prices this quarter, at US $4.16 per pound, compared to US $2.81 per pound last year. Zinc prices were lower at US $1.08 per pound compared to US $1.38 per pound. Copper sales this quarter included $16 million in finalization adjustments relating to 2007 sales. - Production consistent with last year Copper and gold production was constant between periods and zinc production was marginally lower this year. - Operating cash flow per share down because of changes in working capital Operating cash flow was $77 million or $1.59 per common share compared to $105 million or $2.17 per share in the first quarter of 2007. Operating cash flow before changes in working capital was $114 million or $2.36 per share. - Las Cruces on schedule Plant construction is on schedule and we expect Las Cruces to produce its first copper cathode in the fourth quarter of 2008. Capital cost estimates to complete the project remain unchanged. We have entered into contracts with smelters to sell the majority of the 130,000 tonnes of high grade ore and expect shipments to start in June. - Proceeding with development at Petaquilla We entered into an agreement with Teck Cominco Limited to proceed with development of Petaquilla. Over the next 18 months we will act as operator on behalf of Teck Cominco and will fund at least US $50 million of our and Teck Cominco's share of expenditures to advance the project. - Injunction at Cerattepe On March 28 we received notice of a court injunction preventing further development work at the Cerattepe property. The injunction decision has been appealed and we expect to receive the results of the appeal soon. If the appeal is not successful, the project will be delayed. Key financial data ------------------------------------------------------------------------- three months ended March 31 2008 2007 change ------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (thousands, except per share amounts) Sales Gross sales $276,281 $286,614 -4% Net income Net income $106,674 $101,078 +6% Net income per share $2.21 $2.09 +6% Cash flow Cash flow provided by operating activities $76,750 $104,980 -27% Cash flow provided by operating activities per share(1) $1.59 $2.17 -27% Capital spending $111,414 $51,935 +115% ------------------------------------------------------------------------- OPERATING HIGHLIGHTS Production(2) Copper (tonnes) 19,200 19,500 -2% Zinc (tonnes) 20,300 22,100 -8% Gold (ounces) 56,300 56,000 +1% Cash costs Copper (US $ per pound)(3) $0.33 $0.10 +230% Gold (US $ per ounce)(3) $392 $448 -13% ------------------------------------------------------------------------- as at March 31 as at December 31 FINANCIAL CONDITION 2008 2007 ---------------------------------- Current ratio 6.3 to 1 5.6 to 1 Gross debt to total equity 22% 18% Net working capital balance (millions) $982 $855 Cash balance (millions) $906 $841 Shareholders' equity (millions) $1,575 $1,392 ------------------------------------------------------------------------- (1) Calculated as cash flow provided by operating activities divided by average shares outstanding for the respective period. (2) Inmet's share. (3) Cash cost per pound of copper and cash cost per ounce of gold are non-GAAP measures - see Supplementary financial information on pages 31 and 33. First quarter press release Where to find it Our financial results ............................ 4 Key changes in 2008 .............................. 4 Understanding our performance .................... 5 Earnings from operations ....................... 7 Corporate costs ................................ 12 Results of our operations ........................ 14 Cayeli ......................................... 14 Pyhasalmi ...................................... 16 Troilus ........................................ 18 Ok Tedi ........................................ 20 Status of our development projects ............... 22 Las Cruces ..................................... 22 Cerattepe ...................................... 23 Petaquilla ..................................... 24 Managing our liquidity ........................... 25 Financial condition .............................. 27 Managing risk .................................... 29 Accounting changes ............................... 30 Supplementary financial information .............. 31 Quarterly review ................................. 34 Consolidated financial statements ................ 35

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 March 31, 2008.

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 ------------------------------------------------------------------------- (thousands, except per share amounts) three months ended March 31 2008 2007 change ------------------------------------------------------------------------- EARNINGS FROM OPERATIONS(1) Cayeli $53,655 $59,435 -10% Pyhasalmi 27,994 31,442 -11% Troilus 8,635 2,812 +207% Ok Tedi 53,918 40,015 +35% Other (494) (488) +1% ------------------------------------------------------------------------- 143,708 133,216 +8% ------------------------------------------------------------------------- DEVELOPMENT AND EXPLORATION Corporate development and exploration (2,618) (842) +211% ------------------------------------------------------------------------- CORPORATE COSTS General and administration (3,648) (2,840) Investment and other income 14,754 7,427 Interest expense (447) (438) Income and capital taxes (44,870) (35,650) Non-controlling interest (205) 205 ------------------------------------------------------------------------- (34,416) (31,296) +10% ------------------------------------------------------------------------- Net income $106,674 $101,078 +6% ------------------------------------------------------------------------- Basic net income per share $2.21 $2.09 +6% ------------------------------------------------------------------------- Diluted net income per share $2.21 $2.09 +6% ------------------------------------------------------------------------- Weighted average shares outstanding 48,282 48,278 - ------------------------------------------------------------------------- (1) Gross sales less smelter processing charges and freight, cost of sales, depreciation and provisions for mine rehabilitation. Key changes this year ------------------------------------------------------------------------- three months ended see (millions) March 31 page ------------------------------------------------------------------------- EARNINGS FROM OPERATIONS Sales Higher metal prices denominated in Canadian dollars $23 7 Lower sales volumes (18) 8 Costs Lower smelter processing charges and freight 14 10 Higher operating costs, including costs that vary with income and cash flows (9) 11 ----------------------------------------------------------- Increase in earnings from operations, compared to 2007 $10 CORPORATE COSTS Higher taxes from higher income (10) 13 Change in tax rates 1 13 Foreign exchange gain 7 12 Higher interest income 2 12 Other (4) ----------------------------------------------------------- Increase in net income, compared to 2007 $6 ----------------------------------------------------------- Understanding our performance Metal prices

The table below shows the average metal prices, in US dollars and Canadian dollars, we realized (the prices we realize include finalization adjustments - see Gross sales on page 7).

------------------------------------------------------------------------- three months ended March 31 2008 2007 Change ------------------------------------------------------------------------- US dollar metal prices Copper (per pound) US $4.16 US $2.81 +48% Zinc (per pound) US $1.08 US $1.38 -22% Gold (per ounce) US $776 US $559 +39% ------------------------------------------------------------------------- Canadian dollar metal prices Copper (per pound) C$4.16 C$3.29 +26% Zinc (per pound) C$1.08 C$1.61 -33% Gold (per ounce) C$776 C$654 +19% -------------------------------------------------------------------------

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

------------------------------------------------------------------------- three months ended March 31 2008 2007 change ------------------------------------------------------------------------- Exchange rates 1 US$ to C$ $1.00 $1.17 -15% 1 euro to C$ $1.51 $1.54 -2% -------------------------------------------------------------------------

Canadian dollar revenue and earnings were lower in the first quarter compared to the same period last year because of the significant increase in the value of the Canadian dollar relative to the US dollar. This lowered gross sales this quarter by $40 million and net income by $26 million, which includes a $6 million foreign exchange loss from the repatriation of Cayeli earnings in the first quarter of 2008. There was a small change in the average value of the Canadian dollar relative to the euro between periods, which increased net income slightly because euro-based costs were slightly lower when converted to Canadian dollars. There was however a larger change in the value of the euro to Canadian dollar from December 31, 2007 to March 31, 2008 and when euro denominated cash and short-term intergroup receivables were revalued, resulted in foreign exchange gains of $7 million recorded in Investment and other income in 2008.

Treatment charges and freight down for copper and up 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 smelter processing charges we realized. ------------------------------------------------------------------------- three months ended March 31 2008 2007 change ------------------------------------------------------------------------- Treatment charges Copper (per dry metric tonne of concentrate) US$52 US$73 -29% Zinc (per dry metric tonne of concentrate) US$310 US$124 +150% ------------------------------------------------------------------------- Price participation Copper (per pound) US$0.05 US$0.08 -38% Zinc (per pound)(1) US$(0.04) US$0.01 -500% ------------------------------------------------------------------------- Freight charges Copper (per dry metric tonne of concentrate) US$50 US$30 +67% Zinc (per dry metric tonne of concentrate) US$39 US$24 +63% ------------------------------------------------------------------------- (1) Zinc price participation is based on a zinc price of US $2,000 per tonne in 2008 and US $3,500 per tonne in 2007.

Copper treatment charges were lower this quarter than they were in 2007 because we have better contract terms with smelters. Zinc treatment charges were higher than 2007, but zinc price participation was down significantly.

Statutory tax rates down slightly

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

------------------------------------------------------------------------- 2008 2007 change ------------------------------------------------------------------------- Statutory tax rates Cayeli 24% 27% -3% Pyhasalmi 26% 26% - Ok Tedi 37% 37% - -------------------------------------------------------------------------

Cayeli's tax rate is lower because the withholding tax rate was reduced from 8 percent to 5 percent.

EARNINGS FROM OPERATIONS Earnings from operations includes the following: ------------------------------------------------------------------------- three months ended March 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Gross sales $276,281 $286,614 -4% Smelter processing charges (44,157) (64,606) -32% Cost of sales: Direct production costs (77,534) (73,716) +5% Inventory changes 2,940 (3,608) -181% Provisions for mine rehabilitation and other non-cash charges (4,652) (2,053) +127% Depreciation (9,170) (9,415) -3% ------------------------------------------------------------------------- Earnings from operations $143,708 $133,216 +8% ------------------------------------------------------------------------- Gross sales revenues were 4 percent lower this quarter because of lower volumes sold ------------------------------------------------------------------------- three months ended March 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Gross sales by operation Cayeli $100,616 $117,734 -15% Pyhasalmi 54,908 65,340 -16% Troilus 34,251 30,242 +13% Ok Tedi(1) 86,506 73,298 +18% ------------------------------------------------------------------------- $276,281 $286,614 -4% ------------------------------------------------------------------------- Gross sales by metal Copper $168,168 $143,324 +17% Zinc 48,806 89,781 -46% Gold 43,287 41,057 +5% Other 16,020 12,452 +29% ------------------------------------------------------------------------- $276,281 $286,614 -4% ------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's sales. Key components of the change in sales ------------------------------------------------------------------------- three months ended (millions) March 31 ------------------------------------------------------------------------- Higher copper prices, denominated in C$ $37 Lower zinc prices, denominated in C$ (24) Higher gold prices and other metal prices, denominated in C$ 10 Lower sales volumes (33) ------------------------------------------------------------------------- Decrease in gross sales, compared to 2007 $(10) ------------------------------------------------------------------------- Higher copper and gold prices; lower zinc prices

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

Copper sales were higher this quarter because of $16 million in finalization adjustments for sales recorded in the fourth quarter of 2007. There were minimal adjustments to zinc sales.

Our finalization adjustments were calculated using US $3.02 per pound for copper and US $1.07 per pound for zinc. The average LME price for copper this quarter was US $3.54 per pound and US $1.10 per pound for zinc. The copper price increased substantially during the quarter, peaking at US $4.03 per pound.

At the end of this quarter, the following sales had not been settled: - 29 million pounds of copper provisionally priced at US $3.83 per pound - 11 million pounds of zinc provisionally priced at US $1.06 per pound.

The finalization adjustment we record for these sales will depend on the actual price when the sale actually settles, which can be from one to five months after we initially record it.

Lower sales volume ------------------------------------------------------------------------- three months ended March 31 2008 2007 change ------------------------------------------------------------------------- Sales volumes Copper (tonnes) 18,300 20,000 -9% Zinc (tonnes) 20,500 25,200 -19% Gold (ounces) 55,300 61,800 -11% -------------------------------------------------------------------------

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

Sales volumes this quarter were in line with production in the first quarter of 2007, but sales were down compared to 2007 first quarter sales because shipping that had been delayed in the fourth quarter of 2006 was recognized in the first quarter of 2007.

Production ------------------------------------------------------------------------- three months ended March 31 objective Inmet's share(1) 2008 2007 change 2008 ------------------------------------------------------------------------- Copper (tonnes) Ok Tedi 6,700 8,200 31,300 Cayeli 8,100 7,500 33,600 Pyhasalmi 3,500 3,200 13,000 Las Cruces - - 18,900 Troilus 900 600 7,000 ------------------------------------------------------------------------- 19,200 19,500 -2% 103,800 ------------------------------------------------------------------------- Zinc (tonnes) Cayeli 12,700 11,900 47,800 Pyhasalmi 7,600 10,200 30,900 ------------------------------------------------------------------------- 20,300 22,100 -8% 78,700 ------------------------------------------------------------------------- Gold (ounces) Troilus 35,000 33,200 163,200 Ok Tedi 21,300 22,800 121,300 ------------------------------------------------------------------------- 56,300 56,000 +1% 284,500 ------------------------------------------------------------------------- Pyrite (tonnes) Pyhasalmi 194,500 160,500 +21% 505,000 ------------------------------------------------------------------------- (1) Inmet's share represents 100 percent for Cayeli, Pyhasalmi and Troilus, 18 percent for Ok Tedi and 70 percent for Las Cruces. This quarter: - copper production this quarter was consistent with the first quarter of 2007. This was the net result of higher throughput and grades at Cayeli and Pyhasalmi, and lower production at Ok Tedi. - zinc production was lower mainly because grades at Pyhasalmi were lower. - gold production did not change. Although grades were higher at both Troilus and Ok Tedi, throughput was down at both mines. 2008 outlook for sales

We expect sales of all metals for the year to be consistent with our 2008 production estimates in the chart above. Our higher copper production outlook is based on our expectation that production will start at Las Cruces.

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

Smelter processing charges and freight were substantially less this quarter ------------------------------------------------------------------------- three months ended March 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Smelter processing charges and freight by operation Cayeli $22,013 $31,168 -29% Pyhasalmi 10,820 18,614 -42% Troilus 2,187 2,693 -19% Ok Tedi(1) 9,137 12,131 -25% ------------------------------------------------------------------------- $44,157 $64,606 -32% ------------------------------------------------------------------------- Smelter processing charges and freight by metal Copper $20,894 $27,479 -24% Zinc 19,772 33,715 -41% Other 3,491 3,412 +2% ------------------------------------------------------------------------- $44,157 $64,606 -32% ------------------------------------------------------------------------- Smelter processing charges by type and freight Copper treatment and refining charges $5,975 $11,024 -46% Zinc treatment charges 11,792 7,084 +66% Copper price participation 1,963 3,860 -49% Zinc price participation (1,894) 11,016 -117% Content losses 16,257 21,963 -26% Other 2,272 1,527 +49% Freight 7,792 8,132 -4% ------------------------------------------------------------------------- $44,157 $64,606 -32% ------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's smelter processing charges and freight.

Copper treatment and refining charges were lower this quarter compared to 2007 because of more favourable contract terms with smelters. Zinc treatment charges were higher, but lower prices significantly reduced zinc price participation charges.

2008 outlook for smelter processing charges and freight

We have finalized the contract terms for long-term copper sales at our operating mines, and treatment charges are averaging about US $50 per dry metric tonne with little to no price participation.

We have not finalized terms for zinc yet, but we are seeing higher zinc treatment charges in 2008, at about US $325 per dry metric tonne. We expect price escalation/de-escalation (price participation) of zinc concentrate to be approximately US $0.10 per dry metric tonne for zinc prices greater than US $

2,000 per tonne ($1.36 per pound), and (US $0.10) per dry metric tonne for zinc prices less than US $2,000 per tonne.

Production is planned to begin at Las Cruces in 2008. For five months starting in June 2008, the mine intends to sell crushed ore and pay smelter processing charges. These charges are expected to be higher than what our other operations pay because of the impurity levels in this ore.

We expect copper cathode production to start in the fourth quarter. Copper cathode will be sold directly to buyers, bypassing the smelters and eliminating smelter and refining treatment charges.

Direct production costs and cost of sales were consistent with last year ------------------------------------------------------------------------- three months ended March 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Direct production costs by operation Cayeli $23,340 $20,901 +12% Pyhasalmi 14,604 13,617 +7% Troilus 19,947 19,337 +3% Ok Tedi(1) 19,643 19,861 -1% ------------------------------------------------------------------------- Total direct production costs 77,534 73,716 +5% Inventory changes (2,940) 3,608 -181% Reclamation, accretion and other non-cash expenses 4,652 2,053 +127% ------------------------------------------------------------------------- Total cost of sales $79,246 $79,377 - ------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's direct production costs. Depreciation was slightly lower than last year ------------------------------------------------------------------------- three months ended March 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Depreciation by operation Cayeli $2,373 $2,697 -12% Pyhasalmi 2,150 2,361 -9% Troilus 2,418 2,709 -11% Ok Tedi 2,229 1,648 +35% ------------------------------------------------------------------------- $9,170 $9,415 -3% -------------------------------------------------------------------------

Ok Tedi has higher depreciation because it has been spending on new mine equipment and other sustaining capital over the last few years.

2008 outlook for depreciation

We estimate depreciation will be about $50 million for 2008. This is higher than 2007 because production at Las Cruces should begin, and Ok Tedi will begin depreciating the capital for its mine waste management project.

CORPORATE COSTS

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

Investment income was higher because of foreign exchange gains ------------------------------------------------------------------------- three months ended March 31 (thousands) 2008 2007 ------------------------------------------------------------------------- Interest income $8,723 $6,879 Dividend income and royalty - 1,000 Foreign exchange gain (loss) 6,858 (8) Other (827) (444) ------------------------------------------------------------------------- $14,754 $7,427 -------------------------------------------------------------------------

We recorded a net foreign exchange gain of $6.9 million this quarter. We recognized a gain of $13 million because we revalued some of our foreign currency denominated accounts and cash balances, and recognized a deferred foreign exchange loss of $6 million when dividends were received from Cayeli.

Interest income was higher this quarter compared to the same quarter last year because we had higher cash balances in 2008.

2008 outlook for investment and other income

Investment and other income is affected by cash balances, interest rates and exchange rates.

We plan on repatriating approximately $200 million in cash from Cayeli and expect to record a foreign exchange loss of about $20 million in the second quarter of 2008. We repatriated Pyhasalmi's 2007 distributable earnings in April and will record a foreign exchange gain of $6 million. These distributable earnings were accumulated at exchange rates that were different from the rate that applied when the dividend was ultimately paid. This foreign exchange difference is deferred until the funds are repatriated and then they are recorded in investment and other income.

Because Ok Tedi distributes its earnings more frequently, the effect of repatriation is normally not significant.

Starting on June 30, 2008, the Las Cruces credit facility will convert to a US dollar loan and will be denominated in US dollars, rather than euros. From that date forward, we will revalue the loan to euros (the functional currency of Las Cruces). Foreign exchange gains or losses on revaluations will be reflected in investment and other income.

At March 31, 2008, we held only (euro)3 million in cash in Canada that could be affected by foreign exchange gains or losses.

Income tax expense was higher in the quarter because of higher earnings ------------------------------------------------------------------------- three months ended March 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Cayeli $19,124 $13,671 +40% Pyhasalmi 6,023 6,907 -13% Ok Tedi 19,347 14,617 +32% Las Cruces 250 - +100% Corporate 126 455 -72% ------------------------------------------------------------------------- $44,870 $35,650 +26% -------------------------------------------------------------------------

Our tax expense changes as our earnings change. Cayeli's effective tax rate was 33 percent this quarter. This is higher than its statutory rate of 24 percent because taxable foreign exchange gains in its Turkish lira tax accounts generated an additional tax expense of $7 million.

2008 outlook for income tax expense

We are not expecting any further changes in statutory tax rates at our operations in 2008.

Results of our operations CAYELI ------------------------------------------------------------------------- revised three months ended March 31 objective 2008 2007 change 2008 ------------------------------------------------------------------------- Tonnes of ore milled (000's) 278 259 +7% 1,100 Tonnes of ore milled per day 3,100 2,900 +7% 3,000 ------------------------------------------------------------------------- Grades (percent) copper 3.6 3.5 +3% 3.8 zinc 6.5 6.2 +5% 6.0 ------------------------------------------------------------------------- Mill recoveries (percent) copper 81 83 -2% 81 zinc 70 75 -7% 72 ------------------------------------------------------------------------- Production (tonnes) copper 8,100 7,500 +8% 33,600 zinc 12,700 11,900 +6% 47,800 ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $84 $80 +5% $80 ------------------------------------------------------------------------- Cayeli delivers on its production target

Cayeli produced ore this quarter at an annualized rate of more than 1.1 million tonnes, which is consistent with our annual objective and seven percent higher than the first quarter of last year. Copper and zinc production were also higher than last year.

2008 outlook for production and costs

Cayeli expects to complete improvements to its ore pass system in 2008, allowing it to reliably mine and process 1.1 million tonnes of ore annually. Development in 2008 is focusing on access and level development of the lower mine ore blocks. Mine development rates are higher than 2007 and development of the lower mine is proceeding as planned. We expect to operate at an annual production rate of 1.2 million tonnes by 2009.

We have revised our cost per tonne estimate to be in line with first quarter costs. Costs could change, depending on the value of the Turkish lira relative to the US dollar. If the Turkish lira decreases in value, Turkish lira based costs such as labour will go down, reducing our costs.

Royalties also have a significant impact on costs and are variable depending on earnings. Cost per tonne of ore milled in the first quarter includes $15 per tonne in royalties, compared to our objective of $10 per tonne, which is based on metal price assumptions for the remainder of the year.

Financial review Lower earnings this quarter because shipments in 2007 were considerably higher than production ------------------------------------------------------------------------- (millions of Canadian dollars unless three months ended March 31 otherwise stated) 2008 2007 ------------------------------------------------------------------------- Sales analysis Copper sales (tonnes) 6,700 8,200 Zinc sales (tonnes) 13,900 15,700 ---------------------------- Gross copper sales $64 $59 Gross zinc sales 34 56 Other metal sales 3 3 ---------------------------- Gross sales 101 118 Smelter processing charges and freight (22) (31) ------------------------------------------------------------------------- Net sales $79 $87 ------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 278 259 Direct production costs ($ per tonne) $84 $80 ------------------------------------------------------------------------- Direct production costs 23 21 Change in inventory (2) 3 Depreciation and other non-cash costs 4 3 ------------------------------------------------------------------------- Operating costs $25 $27 ------------------------------------------------------------------------- Operating earnings $54 $60 ------------------------------------------------------------------------- Operating cash flow $15 $60 -------------------------------------------------------------------------

The table below shows what contributed to the change in operating earnings and operating cash flow between 2008 and 2007.

------------------------------------------------------------------------- three months ended (millions) March 31 ------------------------------------------------------------------------- Change in metal prices, denominated in Canadian dollars $- Lower sales volumes (10) Lower smelter processing charges 6 Higher royalties (from higher Turkish lira based income) (2) ------------------------------------------------------------------------- Decrease in operating earnings, compared to 2007 $(6) Lower tax rate 1 Higher tax expense (8) Changes in working capital (34) Other 2 ------------------------------------------------------------------------- Decrease in operating cash flow, compared to 2007 $(45) -------------------------------------------------------------------------

The change in working capital this quarter is from higher accounts receivable because of timing of payments and a higher copper sales price used to value quarter-end receivables.

Capital spending on budget ------------------------------------------------------------------------- three months ended March 31 objective 2008 2007 change 2008 ------------------------------------------------------------------------- Capital spending $5,700 $5,100 +12% $23,000 ------------------------------------------------------------------------- Capital spending in the quarter was mainly for replacing mine equipment. 2008 outlook for capital spending

Cayeli expects to spend $23 million in 2008 on repairing a ventilation raise, buying mine equipment and replacing other equipment.

PYHASALMI ------------------------------------------------------------------------- three months ended March 31 objective 2008 2007 change 2008 ------------------------------------------------------------------------- Tonnes of ore milled (000's) 348 326 +7% 1,370 Tonnes of ore milled per day 3,800 3,600 +7% 3,750 ------------------------------------------------------------------------- Grades (percent) copper 1.1 1.0 +10% 1.0 zinc 2.4 3.4 -29% 2.5 sulphur 42 39 +8% 41 ------------------------------------------------------------------------- Mill recoveries (percent) copper 96 95 +1% 94 zinc 92 92 - 90 ------------------------------------------------------------------------- Production (tonnes) copper 3,500 3,200 +9% 13,000 zinc 7,600 10,200 -25% 30,900 pyrite 194,500 160,500 +21% 505,000 ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $42 $41 +2% $36 ------------------------------------------------------------------------- Strong mill performance this quarter

Mill throughput performance was better than expected this quarter and higher than the first quarter of 2007. Mill efficiency was lower in the first quarter of 2007 because of hard ore and the failure of a conveyer belt. Zinc production was lower in the first quarter of 2008 compared to 2007 because mining was from stopes containing lower grade ore.

2008 outlook for production and costs

We expect production for the year to be consistent with our earlier estimates and in line with production in the first quarter.

The improvements to maintain throughput and increase efficiency in the mill are well underway. Pyhasalmi has purchased copper flotation cells and a primary mill motor for the mill. A new mill motor will allow speed to be adjusted more easily, which should increase throughput capacity in the grinding circuit and reduce energy costs. These capital improvements should be completed during the second quarter.

We expect costs to come down over the rest of the year, but this will also depend on the euro to Canadian dollar exchange rate.

Financial review Lower sales volumes reduce operating earnings ------------------------------------------------------------------------- (millions of Canadian dollars unless three months ended March 31 otherwise stated) 2008 2007 ------------------------------------------------------------------------- Sales analysis Copper sales (tonnes) 3,500 3,400 Zinc sales (tonnes) 6,600 9,500 Pyrite sales (tonnes) 124,000 134,000 ---------------------------- Gross copper sales $28 $24 Gross zinc sales 15 33 Other metal sales 12 8 ---------------------------- Gross sales 55 65 Smelter processing charges and freight (11) (19) ------------------------------------------------------------------------- Net sales $44 $46 ------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 348 326 Direct production costs ($ per tonne) $42 $41 ------------------------------------------------------------------------- Direct production costs $15 $13 Change in inventory (2) (1) Depreciation and other non-cash costs 3 3 ------------------------------------------------------------------------- Operating costs $16 $15 ------------------------------------------------------------------------- Operating earnings $28 $31 ------------------------------------------------------------------------- Operating cash flow $31 $40 -------------------------------------------------------------------------

The table below shows what contributed to the change in operating earnings and operating cash flow between 2008 and 2007.

------------------------------------------------------------------------- three months ended (millions) March 31 ------------------------------------------------------------------------- Lower metal prices, denominated in Canadian dollars $(1) Lower sales volumes (5) Lower smelter processing charges and freight 4 Higher operating costs (1) ------------------------------------------------------------------------- Decrease in operating earnings, compared to 2007 $(3) Lower tax expense because of lower earnings 1 Changes in working capital (7) ------------------- Decrease in operating cash flow, compared to 2007 $(9) -------------------------------------------------------------------------

The change in working capital this quarter is mainly because of the timing in paying tax installments.

Capital spending in 2008 will mainly be used to improve mill efficiencies ------------------------------------------------------------------------- three months ended March 31 objective (thousands) 2008 2007 change 2008 ------------------------------------------------------------------------- Capital spending $1,800 $300 +500% $12,000 -------------------------------------------------------------------------

Spending this quarter was mainly for the copper flotation cells and other asset replacements and upgrades.

2008 outlook for capital spending

We expect to spend $12 million in 2008, mainly for mine and mill equipment.

TROILUS ------------------------------------------------------------------------- three months ended March 31 objective 2008 2007 change 2008 ------------------------------------------------------------------------- Tonnes of ore milled (000's) 1,400 1,635 -14% 6,600 Tonnes of ore milled per day 15,400 18,200 -14% 18,100 ------------------------------------------------------------------------- Strip ratio 1.2 0.9 +33% 1.1 ------------------------------------------------------------------------- Grades gold (grams/ tonne) 0.93 0.79 +18% 0.93 copper (percent) 0.07 0.05 +40% 0.11 ------------------------------------------------------------------------- Mill recoveries (percent) gold 84 80 +5% 83 copper 91 84 +8% 92 ------------------------------------------------------------------------- Production gold (ounces) 35,000 33,200 +5% 163,200 copper (tonnes) 900 600 +50% 7,000 ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $14 $12 +17% $12 ------------------------------------------------------------------------- Mining of the J4 pit is complete

The J4 pit was completed this quarter. A final cut in the bottom recovered an additional 130,000 tonnes of ore grading over 1 gram per tonne of gold (about 3,500 recoverable ounces) that had not been previously included in the mine plan.

Throughput this quarter was lower than the first quarter of last year and below our expectations because of ore hardness and equipment failures. Even though fewer tonnes were milled in the quarter, gold production was five percent higher than last year because grades from the 87 pit were higher and because of extra tonnage from the J-4 pit. Gold recoveries this quarter were also higher than expected.

In January 2008, Troilus completed its program to upgrade the primary ball mill pumps to 1,500 horse power and secondary ball mill pumps to 1,000 horsepower. These investments should improve our throughput of softer ores in 2008.

2008 outlook for production and costs

We will continue with our plans to mine out the upper benches of the 87 pit and once these are complete we will have access to the higher grade, softer ore of the main 87 pit that has been undisturbed since early 2005. The pit will remain on track for completion in early 2009 and then stockpile recovery will begin. Troilus expects to meet targeted gold and copper production for the year.

Financial review Higher gold prices helped earnings ------------------------------------------------------------------------- (millions of Canadian dollars unless three months ended March 31 otherwise stated) 2008 2007 ------------------------------------------------------------------------- Sales analysis Gold sales (ounces) 35,100 39,700 Copper sales (tonnes) 800 700 ---------------------------- Gross gold sales $26 $25 Gross copper sales 7 4 Other metal sales 1 1 ---------------------------- Gross sales 34 30 Smelter processing charges and freight (2) (2) ------------------------------------------------------------------------- Net sales $32 $28 ------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 1,400 1,635 Direct production costs ($ per tonne) $14 $12 ------------------------------------------------------------------------- Direct production costs $20 $20 Change in inventory (1) 2 Depreciation and other non-cash costs 4 3 ------------------------------------------------------------------------- Operating costs $23 $25 ------------------------------------------------------------------------- Operating earnings $9 $3 ------------------------------------------------------------------------- Operating cash flow $6 $- -------------------------------------------------------------------------

The table below shows what contributed to the change in operating earnings and operating cash flow between 2008 and 2007.

------------------------------------------------------------------------- three months ended (millions) March 31 ------------------------------------------------------------------------- Higher metal prices denominated in Canadian dollars $7 Higher operating costs (1) ------------------------------------------------------------------------- Increase in operating earnings, compared to 2007 $6 Changes in working capital (2) Other 2 ------------------------------------------------------------------------- Increase in operating cash flow, compared to 2007 $6 ------------------------------------------------------------------------- OK TEDI ------------------------------------------------------------------------- three months ended March 31 objective (100 percent) 2008 2007 change 2008 ------------------------------------------------------------------------- Tonnes of ore milled (000's) 5,000 6,600 -24% 25,300 Tonnes of ore milled per day 54,900 72,500 -24% 69,000 ------------------------------------------------------------------------- Strip ratio 1.9 1.3 +46% 1.3 ------------------------------------------------------------------------- Grades copper (percent) 0.9 0.8 +13% 0.8 gold (grams/ tonne) 1.0 0.8 +25% 1.2 ------------------------------------------------------------------------- Mill recoveries (percent) copper 85 85 - 85 gold 73 71 +3% 67 ------------------------------------------------------------------------- Production copper (tonnes) 37,300 45,300 -18% 174,000 gold (ounces) 118,500 126,700 -6% 674,000 ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $24 $17 +41% $18 ------------------------------------------------------------------------- Lower throughput this quarter

Ok Tedi's operations were affected this quarter by a four-day strike in March, and by problems with a conveyor belt. The strike lowered production by about 2,500 tonnes of copper contained in concentrates (Inmet's share - 450 tonnes) and 6,400 ounces of contained gold (Inmet's share - 1,200 ounces).

Throughput was lower in February and March because lower crusher availability and a broken conveyor belt reduced the amount of feed that could be delivered to the mill. A higher portion of harder skarn ore also lowered throughput.

2008 outlook for production and costs

We have not adjusted for the shortfall in production during the first quarter. Ok Tedi's 2008 objective has remained unchanged.

Financial review Ok Tedi benefited from higher copper and gold prices ------------------------------------------------------------------------- (millions of Canadian dollars unless three months ended March 31 otherwise stated) 2008 2007 ------------------------------------------------------------------------- Sales analysis at 18% Copper sales (tonnes) 7,400 7,700 Gold sales (ounces) 20,200 22,200 ---------------------------- Gross copper sales $68 $56 Gross gold sales 17 16 Other metal sales 1 1 ---------------------------- Gross sales 86 73 Smelter processing charges and freight (9) (12) ------------------------------------------------------------------------- Net sales $77 $61 ------------------------------------------------------------------------- Cost analysis at 18% Tonnes of ore milled (thousands) 900 1,200 Direct production costs ($ per tonne) $24 $17 ------------------------------------------------------------------------- Direct production costs $20 $20 Change in inventory 1 (1) Depreciation and other non-cash costs 2 2 ------------------------------------------------------------------------- Operating costs $23 $21 ------------------------------------------------------------------------- Operating earnings $54 $40 ------------------------------------------------------------------------- Operating cash flow $39 $8 -------------------------------------------------------------------------

The table below shows what contributed to the change in operating earnings and operating cash flow between 2008 and 2007.

------------------------------------------------------------------------- three months ended (millions) March 31 ------------------------------------------------------------------------- Higher metal prices, denominated in Canadian dollars $17 Lower sales volumes (3) Lower smelter processing charges 5 Higher variable compensation (2) Higher operating costs (3) ------------------------------------------------------------------------- Increase in operating earnings, compared to 2007 $14 Decreased tax expense because of lower taxable earnings 1 Changes in net working capital 16 ------------------------------------------------------------------------- Increase in operating cash flow, compared to 2007 $31 -------------------------------------------------------------------------

The change in working capital this quarter reflects lower accounts receivable due to timing of payments.

The mine waste management program is expected to be completed mid-year

Ok Tedi's capital spending this quarter was mainly for the mine waste management program.

------------------------------------------------------------------------- (18 percent) three months ended March 31 objective 2008 2007 change 2008 ------------------------------------------------------------------------- Capital spending $8,000 $6,200 +29% $23,000 ------------------------------------------------------------------------- 2008 outlook for capital spending

Ok Tedi plans to spend $130 million (Inmet's 18 percent share is $23 million) in 2008. Of the $130 million, about $43 million will be for the mine waste management program, $27 million for the pit drainage tunnel, and the rest for mine equipment and other sustaining capital.

Status of our development projects Las Cruces Quarterly development update Plant construction In the first quarter Las Cruces had completed the following: - 70 percent of construction - 81 percent of total physical progress.

Work is progressing on schedule. We have

Source: PRNewswire-FirstCall

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