Inmet announces a fourth quarter loss of $0.67 per share following a $0.71 per share write down of Cerattepe and lower metal prices
Posted on: Tuesday, 10 February 2009, 07:50 CST
All amounts in Canadian dollars unless indicated otherwise
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
Forward looking information
Securities regulators encourage companies to disclose forward-looking information to help investors understand a company's future prospects. This press release contains statements about our future financial condition, results of operations and business.
These are "forward-looking" because we have used what we know and expect today to make a statement about the future. Forward-looking statements usually include words such as may, expect, anticipate, believe or other similar words. We believe the expectations reflected in these forward-looking statements are reasonable. However, actual events and results could be substantially different because of the risks and uncertainties associated with our business or events that happen after the date of this press release. You should not place undue reliance on forward-looking statements. As a general policy, we do not update forward-looking statements except as required by securities laws and regulations.
Our financial results ------------------------------------------------------------------------- three months ended December 31 (thousands, except per share amounts) 2008 2007 change ------------------------------------------------------------------------- EARNINGS FROM OPERATIONS(1) Cayeli $(8,438) $36,138 -123% Pyhasalmi 7,812 28,149 -72% Troilus 3,695 345 +971% Ok Tedi (2,385) 28,441 -108% Other (487) (491) -1% ------------------------------------------------------------------------- 197 92,582 -100% ------------------------------------------------------------------------- DEVELOPMENT AND EXPLORATION Corporate development and exploration (1,971) (3,510) -44% ------------------------------------------------------------------------- CORPORATE COSTS General and administration (3,289) (12,622) -74% Investment and other income 8,057 5,968 +35% Asset impairment (36,275) - - Interest expense (490) (407) +20% Income and capital taxes (537) (18,339) -97% Non-controlling interest 1,794 (27) -6744% ------------------------------------------------------------------------- (30,740) (25,427) 21% ------------------------------------------------------------------------- Net income (loss) $(32,514) $63,645 -151% ------------------------------------------------------------------------- Basic net income (loss) per share $(0.67) $1.32 -151% ------------------------------------------------------------------------- Diluted net income (loss) per share $(0.67) $1.32 -151% ------------------------------------------------------------------------- Weighted average shares outstanding 48,282 48,282 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- year ended December 31 (thousands, except per share amounts) 2008 2007 change ------------------------------------------------------------------------- EARNINGS FROM OPERATIONS(1) Cayeli $122,483 $223,892 -45% Pyhasalmi 92,698 138,582 -33% Troilus 26,328 9,828 +168% Ok Tedi 135,163 182,774 -26% Other (1,951) (1,953) - ------------------------------------------------------------------------- 374,721 553,123 -32% ------------------------------------------------------------------------- DEVELOPMENT AND EXPLORATION Corporate development and exploration (10,620) (9,083) +17% ------------------------------------------------------------------------- CORPORATE COSTS General and administration (13,138) (20,298) -35% Investment and other income 5,986 36,454 -84% Asset impairment (36,275) - - Interest expense (1,884) (1,693) +11% Income and capital taxes (107,368) (140,694) -24% Non-controlling interest 5,500 (200) -2850% ------------------------------------------------------------------------- (147,179) (126,431) +16% ------------------------------------------------------------------------- Net income (loss) $216,922 $417,609 -48% ------------------------------------------------------------------------- Basic net income (loss) per share $4.49 $8.65 -48% ------------------------------------------------------------------------- Diluted net income (loss) per share $4.48 $8.64 -48% ------------------------------------------------------------------------- Weighted average shares outstanding 48,282 48,279 - ------------------------------------------------------------------------- (1) Gross sales less smelter processing charges and freight, cost of sales, depreciation and provisions for mine reclamation. Key changes in 2008 ------------------------------------------------------------------------- three months year ended ended see (millions) December 31 December 31 page ------------------------------------------------------------------------- EARNINGS FROM OPERATIONS Sales Lower copper and zinc prices denominated in Canadian dollars $(92) $(194) 8 Higher gold prices denominated in Canadian dollars 12 34 8 Higher pyrite demand (higher sales net of costs) 7 28 8 Lower sales volumes (5) (23) 9 Costs Lower smelter processing charges 4 30 10 Higher operating costs, including costs that vary with income and cash flows (10) (41) 11 Higher depreciation (5) (8) 11 Other (3) (4) ------------------------------------------------------------------------- Decrease in earnings from operations, compared to 2007 (92) (178) CORPORATE COSTS Lower income tax expense 19 34 13 Gain on sale of Wolfden in 2007 - (12) 12 Asset impairment (36) (36) 13 Higher foreign exchange losses (3) (20) 12 Lower general and administration costs 9 7 Other 7 4 ------------------------------------------------------------------------- Decrease in net income, compared to 2007 $(96) $(201) ------------------------------------------------------------------------- Understanding our performance Metal prices The table below shows the average metal prices we realized in US dollars and Canadian dollars (the prices we realize include finalization adjustments - see Gross sales on page 7). ------------------------------------------------------------------------- three months ended December 31 2008 2007 change ------------------------------------------------------------------------- US dollar metal prices Copper (per pound) US $0.50 US $2.75 -82% Zinc (per pound) US $0.46 US $1.10 -58% Gold (per ounce) US $714 US $664 +8% ------------------------------------------------------------------------- Canadian dollar metal prices Copper (per pound) C $0.61 C $2.70 -77% Zinc (per pound) C $0.56 C $1.08 -48% Gold (per ounce) C $866 C $651 +33% ------------------------------------------------------------------------- ------------------------------------------------------------------------- year ended December 31 2008 2007 change ------------------------------------------------------------------------- US dollar metal prices Copper (per pound) US $2.70 US $3.22 -16% Zinc (per pound) US $0.84 US $1.39 -40% Gold (per ounce) US $732 US $594 +23% ------------------------------------------------------------------------- Canadian dollar metal prices Copper (per pound) C $2.88 C $3.45 -17% Zinc (per pound) C $0.90 C $1.49 -40% Gold (per ounce) C $ 781 C $636 +23% -------------------------------------------------------------------------Commodity prices this year were very strong until August, when demand collapsed across almost every market.
Copper started the year at US
Zinc prices fell from a price of US
Gold was one of the few commodities to close higher this year than it had in 2007, with a 5 percent gain. In the first half of the year, gold prices were as high as US
The price of sulphur, which is closely linked to pyrite prices, was strong throughout most of 2008. In September demand for sulphur came to a halt and prices dropped from
Sales are affected by the conversion of US dollar revenue to Canadian dollars. Foreign exchange was not a factor when looking at variances in sales between years because the US to Canadian exchange rate was consistent between these periods. The fourth quarter, however, saw a sharp rise in exchange rates relative to the US dollar.
Net income was
Changes to the US to Canadian dollar exchange rate and US dollar to euro exchange rate affect our net income in four ways:
- US dollar sales translated to Canadian dollar - Cayeli and Ok Tedi record all costs in US dollars which we translate to Canadian dollars - we recognize deferred foreign exchange gains or losses when we repatriate cash from Cayeli and Ok Tedi (we record this in Investment and other income). Foreign exchange losses for the year include the recognition of a deferred foreign exchange loss of $25 million ($1 million gain in the fourth quarter) when we repatriated cash from Cayeli and Ok Tedi. - we revalue foreign currency balances such as the US dollar debt in Las Cruces (recorded in Investment and other income). Pre-tax net income this quarter and year was down $12 million and $25 million, respectively, because we recognized a foreign exchange loss on the translation of the Las Cruces US dollar credit facility. Euros -----Net income was lower between periods because costs we incurred in euros were higher when we converted them to Canadian dollars.
We recorded foreign exchange gains of
Treatment charges 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 charges we realized this quarter and year to date.
------------------------------------------------------------------------- three months ended December 31 year ended December 31 2008 2007 change 2008 2007 change ------------------------------------------------------------------------- Treatment charges Copper (per dry metric tonne of concentrate) $64 $66 -3% $50 $63 -21% Zinc (per dry metric tonne of concentrate) $379 $290 +31% $318 $274 +16% ------------------------------------------------------------------------- Price participation Copper (per pound) $0.02 $0.04 -50% $0.04 $0.08 -50% Zinc (per pound)(1) ($0.08) ($0.05) +60% ($0.02) $0.01 -300% ------------------------------------------------------------------------- Freight charges Copper (per dry metric tonne of concentrate) $37 $58 -36% $48 $50 -4% Zinc (per dry metric tonne of concentrate) $32 $38 -16% $37 $33 +12% ------------------------------------------------------------------------- (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 and for 2008 than they were in 2007 because we had better contract terms with smelters. While zinc treatment charges were higher than 2007, zinc price participation was down significantly in 2008. 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% - Las Cruces 30% 30% - ------------------------------------------------------------------------- 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 include the following: ------------------------------------------------------------------------- three months ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Gross sales $139,626 $224,773 -38% Smelter processing charges (32,870) (43,902) -25% Cost of sales: Direct production costs (86,935) (79,588) +9% Inventory changes (30) 2,239 -101% Provisions for mine rehabilitation and other non-cash charges (4,750) (1,460) +225% Depreciation (14,844) (9,480) +57% ------------------------------------------------------------------------- Earnings from operations $197 $92,582 -100% ------------------------------------------------------------------------- ------------------------------------------------------------------------- year ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Gross sales $944,865 $1,103,698 -14% Smelter processing charges (179,738) (206,478) -13% Cost of sales: Direct production costs (331,173) (295,896) +12% Inventory changes 3,345 (3,264) -202% Provisions for mine rehabilitation and other non-cash charges (17,974) (9,264) +94% Depreciation (44,604) (35,673) +25% ------------------------------------------------------------------------- Earnings from operations $374,721 $553,123 -32% ------------------------------------------------------------------------- Gross sales were lower this year mainly because the price of copper and zinc was down ------------------------------------------------------------------------- three months ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Gross sales by operation Cayeli $27,481 $81,088 -66% Pyhasalmi 37,273 58,672 -36% Troilus 36,391 27,317 +33% Ok Tedi(1) 38,481 57,696 -33% ------------------------------------------------------------------------- $139,626 $224,773 -38% ------------------------------------------------------------------------- Gross sales by metal Copper $46,367 $120,705 -62% Zinc 20,110 53,246 -62% Gold 54,720 38,313 +43% Other 18,429 12,509 +47% ------------------------------------------------------------------------- $139,626 $224,773 -38% ------------------------------------------------------------------------- ------------------------------------------------------------------------- year ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Gross sales by operation Cayeli $305,190 $418,694 -27% Pyhasalmi 221,124 260,246 -15% Troilus 141,251 108,378 +30% Ok Tedi(1) 277,300 316,380 -12% ------------------------------------------------------------------------- $944,865 $1,103,698 -14% ------------------------------------------------------------------------- Gross sales by metal Copper $511,037 $627,424 -19% Zinc 150,216 280,713 -46% Gold 189,379 150,228 +26% Other 94,233 45,333 +108% ------------------------------------------------------------------------- $944,865 $1,103,698 -14% ------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's sales. Key components of the change in sales: copper and zinc prices down, gold prices up, pyrite sales up ------------------------------------------------------------------------- three months year ended ended (millions) December 31 December 31 ------------------------------------------------------------------------- Lower copper prices, denominated in Canadian dollars $(83) $(106) Lower zinc prices, denominated in Canadian dollars (9) (95) Higher gold prices, denominated in Canadian dollars 12 34 Higher pyrite prices, denominated in Canadian dollars 9 38 Changes in other metal prices - 8 Lower sales volumes (14) (38) ------------------------------------------------------------------------- Decrease in gross sales, compared to 2007 $(85) $(159) -------------------------------------------------------------------------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 forward price of the metal 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).
We recorded
Zinc production for the year was down from 2007 because zinc grades were lower. Gold production was higher because gold grades were higher.
2009 outlook for sales
Our outlook for sales ties directly to our production outlook. We expect copper and zinc sales volumes in 2009 to be higher because of our higher production expectations, including new production at Las Cruces.
We have set a higher copper production target for 2009 because production should start at Las Cruces and we expect higher throughput at Cayeli and Ok Tedi. We expect to mine lower zinc grades at Pyhasalmi in 2009. Estimated production for our 70 percent share of Las Cruces includes 26,000 tonnes of copper cathode and 12,200 tonnes of ore that, depending on market conditions, we will ship directly to smelters.
Our gold target for 2009 is consistent with our 2008 results. We expect more production from Ok Tedi because of higher throughput, but lower production from Troilus when it starts to produce gold from its lower grade stockpiles.
Our Canadian dollar sales revenues are affected by the US dollar denominated metal price we receive, and the exchange rate between the US dollar and Canadian dollar. According to analysts' consensus forecasts, copper and zinc are the two metals investors believe are best positioned for a rebound in demand. With the current volatility in the markets it is even more difficult to forecast metal prices. We do not know the effect various government planned stimulus packages and interest rate cuts will have on the worldwide economy. As part of our strategy, we will focus on maximizing the efficiency of our operations to ensure that we remain highly competitive in this economic environment.
Lower smelter processing charges for the quarter and year ------------------------------------------------------------------------- three months ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Smelter processing charges and freight by operation Cayeli $13,279 $19,756 -33% Pyhasalmi 9,615 15,384 -38% Troilus 3,904 1,798 +117% Ok Tedi(1) 6,072 6,964 -13% ------------------------------------------------------------------------- $32,870 $43,902 -25% ------------------------------------------------------------------------- Smelter processing charges and freight by metal Copper $17,655 $19,910 -11% Zinc 12,069 20,682 -42% Other 3,146 3,310 -5% ------------------------------------------------------------------------- $32,870 $43,902 -25% ------------------------------------------------------------------------- Smelter processing charges by type and freight Copper treatment and refining charges $8,524 $8,092 +5% Zinc treatment charges 10,228 13,444 -24% Copper price participation 1,229 1,918 -36% Zinc price participation (2,355) (2,535) -7% Content losses 6,778 14,788 -54% Other 950 139 +583% Freight 7,516 8,056 -7% ------------------------------------------------------------------------- $32,870 $43,902 -25% ------------------------------------------------------------------------- ------------------------------------------------------------------------- year ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Smelter processing charges and freight by operation Cayeli $78,400 $94,700 -17% Pyhasalmi 56,954 62,081 -8% Troilus 11,053 7,989 +38% Ok Tedi(1) 33,331 41,708 -20% ------------------------------------------------------------------------- $179,738 $206,478 -13% ------------------------------------------------------------------------- Smelter processing charges and freight by metal Copper $79,792 $97,071 -18% Zinc 74,071 97,141 -24% Other 25,875 12,266 +111% ------------------------------------------------------------------------- $179,738 $206,478 -13% ------------------------------------------------------------------------- Smelter processing charges by type and freight Copper treatment and refining charges $24,625 $32,414 -24% Zinc treatment charges 47,030 46,058 +2% Copper price participation 7,025 13,763 -49% Zinc price participation (3,170) 2,529 -225% Content losses 50,530 74,112 -32% Other 6,600 5,394 +22% Freight 47,098 32,208 +46% ------------------------------------------------------------------------- $179,738 $206,478 -13% ------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's smelter processing charges and freight.Copper treatment and refining charges were lower in 2008 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. For the quarter, zinc treatment charges also reflect lower volumes sold. Freight charges were higher for the year because Pyhasalmi increased their shipments of pyrite and freight rates increased as a result of rising demand and fuel prices.
2009 outlook for smelter processing charges and freight
We expect copper treatment and refining costs to increase in 2009 following recently announced benchmark settlements between major mining companies and smelters.
We sell approximately 90 percent of our copper concentrate under long-term contracts. We are estimating long-term treatment costs of US
In the fourth quarter of 2008, smelters joined mines in cutting production, to respond to the decline in demand for refined zinc, and to falling prices. We expect mine production in 2009 to be below smelting requirements, and believe that a balanced or deficit concentrate market could evolve. We therefore expect zinc processing charges to be lower in 2009, potentially by as much as 35 percent.
We expect to see zinc treatment charges in 2009 of about US
We expect production to begin at Las Cruces in 2009, and, depending on market conditions, it may sell crushed ore to smelters and incur smelter processing charges. The costs associated with smelting this material are expected to be higher than at our other operations because of the higher level of impurities in this ore.
We now expect copper cathode production to start in
We expect our ocean freight costs to be about 20 percent lower than they were in 2008 because of a general slowdown in global economic activity.
Direct production costs and cost of sales were higher than last year ------------------------------------------------------------------------- three months ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Direct production costs by operation Cayeli $21,161 $23,913 -12% Pyhasalmi 15,597 13,589 +15% Troilus 22,628 21,173 +7% Ok Tedi(1) 27,549 20,913 +32% ------------------------------------------------------------------------- Total direct production costs 86,935 79,588 +9% Inventory changes 30 (2,239) -101% Reclamation, accretion and other non-cash expenses 4,750 1,460 +225% ------------------------------------------------------------------------- Total cost of sales $91,715 $78,809 +16% ------------------------------------------------------------------------- ------------------------------------------------------------------------- year ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Direct production costs by operation Cayeli $89,761 $86,978 +3% Pyhasalmi 59,642 50,043 +19% Troilus 88,707 77,643 +14% Ok Tedi(1) 93,063 81,232 +15% ------------------------------------------------------------------------- Total direct production costs 331,173 295,896 +12% Inventory changes (3,345) 3,264 -202% Reclamation, accretion and other non-cash expenses 17,974 9,264 +94% ------------------------------------------------------------------------- Total cost of sales $345,802 $308,424 +12% ------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's direct production costs. Key reasons for the increase in direct production costs ------------------------------------------------------------------------- three months year ended ended (millions) December 31 December 31 ------------------------------------------------------------------------- Volume $(1) $(6) Labour costs 1 11 Consumables 1 16 Energy 5 13 Costs that vary with income and cash flow (3) (1) Other 4 2 ------------------------------------------------------------------------- Increase in direct production costs, compared to 2007 $7 $35 ------------------------------------------------------------------------- Depreciation was higher than last year ------------------------------------------------------------------------- three months ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Depreciation by operation Cayeli $3,150 $2,635 +20% Pyhasalmi 2,502 1,881 +33% Troilus 2,954 2,620 +13% Ok Tedi 6,238 2,344 +166% ------------------------------------------------------------------------- $14,844 $9,480 +57% ------------------------------------------------------------------------- ------------------------------------------------------------------------- year ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Depreciation by operation Cayeli $11,448 $8,857 +29% Pyhasalmi 9,227 8,439 +9% Troilus 9,239 10,120 -9% Ok Tedi 14,690 8,257 +78% ------------------------------------------------------------------------- $44,604 $35,673 +25% -------------------------------------------------------------------------Depreciation in 2008 included a full year of phase 2 shaft development at Cayeli, while 2007 included only four months. Ok Tedi's depreciation increased because depreciation started in
2009 outlook for depreciation
We expect depreciation to be about
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 and other income was lower in the year because of foreign exchange losses ------------------------------------------------------------------------- three months ended December 31 year ended December 31 (thousands) 2008 2007 2008 2007 ------------------------------------------------------------------------- Interest income $6,188 $9,703 $28,182 $32,647 Dividend income and royalty 1,825 1,677 4,979 5,748 Foreign exchange loss (5,607) (2,969) (33,875) (14,519) Sale of Wolfden - - - 11,730 Other 5,651 (2,443) 6,700 848 ------------------------------------------------------------------------- $8,057 $5,968 $5,986 $36,454 ------------------------------------------------------------------------- Foreign exchange loss We have a foreign exchange gain or loss when: - we revalue certain foreign denominated assets and liabilities - we distribute funds from our self-sustaining operations and recognize the foreign exchange we previously deferred on our original investment and on funds as they accumulated. Foreign exchange gains (losses) in 2008 and 2007 are a result of the following: ------------------------------------------------------------------------- three months ended December 31 year ended December 31 (millions) 2008 2007 2008 2007 ------------------------------------------------------------------------- Revaluation of US dollar denominated debt at Las Cruces $(12) $- $(25) $- Distribution of funds from subsidiaries 1 (2) (19) (5) Revaluation of euro denominated cash held in Canada 4 (1) 5 (6) Revaluation of short-term foreign inter- group loans and other monetary items 1 - 5 (3) ------------------------------------------------------------------------- $(6) $(3) $(34) $(14) -------------------------------------------------------------------------Sale of Wolfden
In
2009 outlook for investment and other income
Investment and other income is affected by cash balances, interest rates and exchange rates. We plan to continue to repatriate excess cash balances from our foreign operations. This could result in foreign exchange losses or gains depending on the strength or weakness of the Canadian dollar relative to when we initially invested in the operations or the rate at which funds were accumulated. The amount of the gain or loss, if any, will depend on the amount distributed and foreign exchange rates at the time of distribution.
We plan to repatriate approximately US
At
Asset impairment charges to reflect our write down in Cerattepe
On
The remaining
Our tax expense changes as our earnings change. Cayeli's effective tax rate was 5 percent this quarter and 38 percent for the year. This is different from the statutory rate of 24 percent mainly because the asset impairment charge for Cerattepe is not tax-deductible, and there were foreign exchange gains in the Turkish lira tax accounts. At Las Cruces, we recorded a tax recovery related to foreign exchange losses from the translation of its US dollar denominated debt. We also reduced its future income tax liability by
2009 outlook for income tax expense
We are not expecting any further changes in statutory tax rates at our operations in 2009. We expect to expense approximately
Results of our operations
2009 estimates
We have included estimates for our 2009 operating earnings and operating cash flows in our financial review by operation. In deriving our estimates we used our 2009 objectives for production and cost per tonne of ore milled, as well as the following assumptions:
------------------------------------------------------------------------- Copper price US $1.50 per pound Zinc price US $0.50 per pound Gold price US $850 per ounce Copper treatment cost US $75 per tonne Zinc treatment cost US $200 per tonne (basis US $1,200 per tonne) US $ to C$ exchange rate $1.25 euro to C$ exchange rate $1.50 Working capital Assume no changes ------------------------------------------------------------------------- CAYELI ------------------------------------------------------------------------- three months ended December 31 ------------------------------------------------------------------------- 2008 2007 change ------------------------------------------------------------------------- Tonnes of ore milled (000's) 292 277 +5% Tonnes of ore milled per day 3,200 3,000 +5% ------------------------------------------------------------------------- Grades (percent) copper 3.7 4.2 -12% zinc 6.2 6.8 -9% ------------------------------------------------------------------------- Mill recoveries (percent) copper 77 79 -3% zinc 70 72 -3% ------------------------------------------------------------------------- Production (tonnes) copper 8,400 9,100 -8% zinc 12,800 13,600 -6% ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $72 $86 -16% ------------------------------------------------------------------------- ------------------------------------------------------------------------- year ended December 31 objective ------------------------------------------------------------------------- 2008 2007 change 2009 ------------------------------------------------------------------------- Tonnes of ore milled (000's) 1,109 1,046 +6% 1,200 Tonnes of ore milled per day 3,040 2,900 +6% 3,300 ------------------------------------------------------------------------- Grades (percent) copper 3.7 3.8 -3% 3.8 zinc 6.1 6.2 -2% 6.5 ------------------------------------------------------------------------- Mill recoveries (percent) copper 80 81 -1% 80 zinc 71 71 - 72 ------------------------------------------------------------------------- Production (tonnes) copper 32,700 32,500 +1% 36,800 zinc 47,600 46,200 +3% 56,400 ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $81 $83 -2% $81 -------------------------------------------------------------------------Production goals surpassed targets
Cayeli successfully increased the annual output of the mine to 1.1 million tonnes in 2008, including 292,000 tonnes during the fourth quarter of the year. Production grades and metallurgical performance for the year were as expected and in line with 2007 production results. We completed all critical stope development for the year, giving us access to the lower mining areas.
In the quarter and in comparison to the 2007 fourth quarter, higher throughput only partially offset the impacts of lower copper and zinc grades and lower metallurgical recoveries. As a result copper and zinc production were below prior year fourth quarter levels.
The ore pass system and the new cemented rockfill system improved operational performance in 2008, allowing production and development to proceed uninterrupted. The two parallel raise systems will permit us to develop a program of inspection and repair to ensure their continued reliability.
Operating costs for the year 2008 were higher than 2007 because inflation in
2009 outlook for production and costs
Development of the lower mine, improvements in the ore handling system and the cemented wastefill system - all critical components to higher production levels - are now in place, and Cayeli remains focused on producing at a level of 1.2 million tonnes per year through 2012. For 2009, we expect copper grades to remain at 3.8 percent and zinc grades to rise to 6.5 percent.
The current three-year labour agreement will expire in
Royalties also have a significant effect on costs and are variable depending on earnings. Cost per tonne of ore milled includes a negative
Continues to improve efficiencies by increasing mill production
Pyhasalmi had record throughput in 2008, processing more than 1.4 million tonnes of ore through the mill. The mill had a record 96 percent availability.
Copper production in 2008 was slightly higher than plan.
Zinc production was lower than we planned and lower than 2007 because changes in stope sequencing resulted in lower grades.
Pyrite production increased to 565,000 tonnes for the year to take advantage of high demand. Demand decreased in the fourth quarter and accordingly we reduced our production of pyrite.
The higher cost of steel and mill processing reagents, combined with the exchange rate between the euro and Canadian dollar, increased costs this year.
2009 outlook for production and costs
Pyhasalmi expects to mine 1.4 million tonnes of 1 percent copper and 1.9 percent zinc in 2009, and produce 13,000 tonnes of copper and 22,600 tonnes of zinc. Zinc grades should be lower than in recent years because mining stopes are further from the zinc-rich ore body contact.
Pyrite sales are beneficial to the financial performance of Pyhasalmi and we will continue our efforts to enter the long-term pyrite markets in
Financial review
Higher pyrite sales help offset lower copper and zinc sales
---------------------------------------------------------------- -------- (millions of Canadian dollars three months ended year ended unless otherwise December 31 December 31 Objective stated) 2008 2007 2008 2007 2009 ---------------------------------------------------------------- -------- Sales analysis Copper sales (tonnes) 3,800 3,300 13,700 14,000 13,000 Zinc sales (tonnes) 6,500 12,800 27,400 38,900 22,600 Pyrite sales (tonnes) 66,000 133,000 558,000 509,000 510,000 ------------------------------------ -------- Gross copper sales $14 $21 $94 $105 $54 Gross zinc sales 9 30 51 125 31 Other metal sales 14 8 76 30 46 ------------------------------------ -------- Gross sales 37 59 221 260 131 Smelter processing charges and freight (9) (16) (57) (62) (38) ---------------------------------------------------------------- -------- Net sales $28 $43 $164 $198 $93 ---------------------------------------------------------------- -------- Cost analysis Tonnes of ore milled (thousands) 356 358 1,406 1,377 1,370 Direct production costs ($ per tonne) $44 $38 $42 $36 $41 ---------------------------------------------------------------- -------- Direct production costs $16 $13 $60 $50 $56 Change in inventory - - - (1) - Depreciation and other non-cash costs 4 2 11 11 11 ---------------------------------------------------------------- -------- Operating costs $20 $15 $71 $60 $67 ---------------------------------------------------------------- -------- Operating earnings $8 $28 $93 $138 $26 ---------------------------------------------------------------- -------- Operating cash flow $21 $5 $100 $109 $33 ---------------------------------------------------------------- -------- The objective for 2009 uses the assumptions laid out on page 13. The table below shows what contributed to the change in operating earnings and operating cash flow between 2008 and 2007. ------------------------------------------------------------------------- three months year ended ended (millions) December 31 December 31 ------------------------------------------------------------------------- Lower metal prices, denominated in Canadian dollars $(16) $(41) Higher pyrite sales, net of costs to sell 7 28 Lower sales volumes (8) (29) Lower smelter processing charges and freight 1 6 Higher operating costs (2) (5) Impact of the Canadian dollar on translated operating costs (2) (4) ------------------------------------------------------------------------- Lower operating earnings, compared to 2007 (20) (45) Lower tax expense because of lower earnings 5 11 Changes in working capital (mainly from lower accounts receivable) 30 23 Other 1 2 --------------------------- Higher (lower) operating cash flow, compared to 2007 $16 $(9) ------------------------------------------------------------------------- Capital spending in 2008 was to improve mill efficiencies ------------------------------------------------------------------------- three months ended December 31 (thousands) 2008 2007 change ------------------------------------------------------------------------- Capital spending $3,900 $1,400 +179% ------------------------------------------------------------------------- ------------------------------------------------------------- ----------- year ended December 31 objective (thousands) 2008 2007 change 2009 ------------------------------------------------------------- ----------- Capital spending 9,800 $3,500 +180% $11,000 ------------------------------------------------------------- ----------- We purchased a rock bolter, cable bolter and a production front end loader in 2008. We also replaced the corroded copper rougher and scavenger cells with new units. 2009 outlook for capital spending We expect to spend $11 million in 2009, mainly for mine equipment, improvements in the mill and renovation of process water pumps. TROILUS ------------------------------------------------------------------------- three months ended December 31 2008 2007 change ------------------------------------------------------------------------- Tonnes of ore milled (000's) 1,500 1,440 +4% Tonnes of ore milled per day 16,600 15,700 +4% ------------------------------------------------------------------------- Strip ratio 1.3 1.5 -13% ------------------------------------------------------------------------- Grades gold (grams /tonne) 0.99 0.89 +11% copper (percent) 0.14 0.06 +133% ------------------------------------------------------------------------- Mill recoveries (percent) gold 83 82 +1% copper 94 89 +6% ------------------------------------------------------------------------- Production gold (ounces) 40,500 33,700 +20% copper (tonnes) 2,000 600 +233% ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $15 $15 - ------------------------------------------------------------------------- ------------------------------------------------------------- ----------- year ended December 31 objective 2008 2007 change 2009 ------------------------------------------------------------- ----------- Tonnes of ore milled (000's) 5,800 6,000 -3% 6,200 Tonnes of ore milled per day 15,900 16,500 -3% 16,900 ------------------------------------------------------------- ----------- Strip ratio 1.4 1.1 +27% 0.3 ------------------------------------------------------------- ----------- Grades gold (grams /tonne) 0.96 0.87 10% 0.82 copper (percent) 0.10 0.05 +100% 0.11 ------------------------------------------------------------- ----------- Mill recoveries (percent) gold 84 82 +2% 81 copper 93 88 +6% 92 ------------------------------------------------------------- ----------- Production gold (ounces) 151,300 138,400 +9% 132,200 copper (tonnes) 5,700 2,800 +104% 6,000 ------------------------------------------------------------- ----------- Cost per tonne of ore milled (C$) $15 $13 +15% $10 ------------------------------------------------------------- -----------Higher gold production
Troilus milled 5.8 million tonnes in 2008, which was well below our target of 6.6 million tonnes. This was the result of hard ore in the southwest extension area of the pit, which limited grinding mill throughput for most of the year, and lower production from the softer areas in the main ore body in the second half of the year. A total of 151,300 ounces of gold were produced during the year. Copper production reached 5,700 tonnes.
We completed mining in the J4 pit early in the year, and in the southwest ore body extension of the 87 pit in the third quarter. By the fourth quarter, production was confined to the main ore body in the 87 pit which helped increase throughput in the fourth quarter. The 87 pit should be complete by
Gold production in the fourth quarter and for the year was higher than for the same periods in 2007, mainly because grades from the 87 pit were higher. Gold recoveries also continue to be higher than expected. Copper grades peaked in the fourth quarter, more than tripling copper production in the quarter compared to last year's fourth quarter, and increasing it over 100 percent year over year.
Higher fuel and steel grinding media costs resulted in a higher cost per tonne compared to last year.
2009 outlook for production and costs
Troilus should complete mining in the 87 pit in the second quarter of 2009, and then begin stockpile recovery. We expect mill throughput of 6.2 million tonnes for the year at average grades of 0.8 grams per tonne gold and 0.11 percent copper, which should produce 132,200 ounces of gold and 6,000 tonnes of copper.
The workforce will be reduced during the year as pit mining is completed and less equipment is required. We will assign some of the Troilus workforce and available equipment to reclamation activities.
We also expect production costs to come down because of the completion of mining in the pit in May and then reverting to lower cost production from milling the stockpiles.
Financial review Higher gold prices and higher sales volumes improved earnings ---------------------------------------------------------------- -------- (millions of Canadian dollars three months ended year ended unless otherwise December 31 December 31 objective stated) 2008 2007 2008 2007 2009 ---------------------------------------------------------------- -------- Sales analysis Gold sales (ounces) 40,000 36,100 149,700 142,200 132,200 Copper sales (tonnes) 2,000 800 5,500 2,900 6,000 ------------------------------------- -------- Gross gold sales $32 $22 $109 $85 $140 Gross copper sales 4 4 30 21 25 Other metal sales - 1 2 2 3 ------------------------------------- -------- Gross sales 36 27 141 108 168 Smelter processing charges and freight (4) (2) (11) (8) (13) ---------------------------------------------------------------- -------- Net sales $32 $25 $130 $100 $155 ---------------------------------------------------------------- -------- Cost analysis Tonnes of ore milled (thousands) 1,530 1,440 5,800 6,000 6,200 Direct production costs ($ per tonne) $15 $15 $15 $13 $10 ---------------------------------------------------------------- -------- Direct production costs $23 $21 $89 $78 $62 Change in inventory 1 1 - 1 1 Depreciation and other non-cash costs 5 3 15 11 12 ---------------------------------------------------------------- -------- Operating costs $29 $25 $104 $90 $75 ---------------------------------------------------------------- -------- Operating earnings $4 $- $26 $10 $80 ---------------------------------------------------------------- -------- Operating cash flow $20 $5 $41 $15 $90 ---------------------------------------------------------------- -------- The objective for 2009 uses the assumptions laid out on page 13. The table below shows what contributed to the change in operating earnings and operating cash flow between 2008 and 2007. ------------------------------------------------------------------------- three months year ended ended (millions) December 31 December 31 ------------------------------------------------------------------------- Higher gold price denominated in Canadian dollars $7 $19 Lower copper price denominated in Canadian dollars (8) (11) Higher sales volumes 9 20 Lower smelter processing charges 1 3 Higher operating costs (3) (11) Lay off costs accrued (2) (4) ------------------------------------------------------------------------- Increase in operating earnings, compared to 2007 $4 $16 Changes in working capital 1 4 Add back - amortization of gold hedges cash settled in August 7 - Other 3 6 ------------------------------------------------------------------------- Increase in operating cash flow, compared to 2007 $15 $26 ------------------------------------------------------------------------- OK TEDI ------------------------------------------------------------------------- three months ended December 31 (100 percent) 2008 2007 change ------------------------------------------------------------------------- Tonnes of ore milled (000's) 5,600 6,300 -11% Tonnes of ore milled per day 61,000 68,000 -11% ------------------------------------------------------------------------- Strip ratio 2.1 1.5 +40% ------------------------------------------------------------------------- Grades copper (percent) 0.8 0.9 -11% gold (grams /tonne) 1.0 1.0 - ------------------------------------------------------------------------- Mill recoveries (percent) copper 89 87 +2% gold 72 63 +14% ------------------------------------------------------------------------- Production copper (tonnes) 40,600 48,400 -16% gold (ounces) 134,100 130,400 +3% ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $27 $19 +42% ------------------------------------------------------------------------- ------------------------------------------------------------- ----------- year ended December 31 objective (100 percent) 2008 2007 change 2009 ------------------------------------------------------------- ----------- Tonnes of ore milled (000's) 21,700 25,800 -16% 25,300 Tonnes of ore milled per day 59,000 71,000 -16% 69,000 ------------------------------------------------------------- ----------- Strip ratio 1.8 1.3 +38% 1.2 ------------------------------------------------------------- ----------- Grades copper (percent) 0.9 0.8 +13% 0.8 gold (grams /tonne) 1.0 0.9 +11% 1.1 ------------------------------------------------------------- ----------- Mill recoveries (percent) copper 87 86 +1% 84 gold 73 71 +3% 68 ------------------------------------------------------------- ----------- Production copper (tonnes) 159,700 169,200 -6% 176,000 gold (ounces) 515,400 471,800 +9% 608,000 ------------------------------------------------------------- ----------- Cost per tonne of ore milled (C$) $24 $18 +33% $26 ------------------------------------------------------------- -----------Lower throughput at Ok Tedi
Mill throughput in 2008 was 3.6 million tonnes below plan and 4.1 million tonnes below 2007, averaging about 59,000 tonnes per day. The main cause of the shortfall was a shortage of ore feed to the mill. Availability and operational problems with the new in-pit crusher and a three day illegal strike earlier in the year accounted for most of the lost tonnes.
Installing the new in-pit crusher has been a challenging project. To counteract the reduced tonnage, Ok Tedi modified the mine plan to increase the copper head grade. The higher grade and metal recovery regained about half of the potential copper losses. By the end of the year, most of the issues that affected the in-pit crusher's performance in 2008 had been resolved.
The mine waste tailing project is designed to remove sulphur from the mill tailings. Commissioning began in September and is five months later than plan because of late delivery of components and a delay in visa approvals for key construction staff. Ok Tedi has managed sulphur control to date by limiting the mining of the Taranaki ore. This reduced gold production this year to 515,400 ounces, 24 percent below Ok Tedi's target.
The cost per tonne of ore milled is higher in 2008 because mill throughput is lower and labour and fuel costs have increased.
2009 outlook for production and costs
Ok Tedi expects to process 25.3 million tonnes of ore grading 0.8 percent copper and containing 1.1 grams per tonne of gold. This should produce 176,000 tonnes of copper and 608,000 ounces of gold. Ok Tedi expects a 18 percent increase in its gold production compared to 2008 because of the higher content of skarn ores in the mill feed.
The delay in commissioning the mine waste and tailings management plant will be mitigated by limiting mill feed to an average of 6 percent sulphur grade for the first six months of 2009, after which it should rise to an average of 8 percent. The sulphur constraint will limit the consumption of higher grade gold ore from the Taranaki pit during the first half of the year.
Financial review Higher operating cash flow ---------------------------------------------------------------- -------- (millions of Canadian dollars three months ended year ended unless otherwise December 31 December 31 objective stated) 2008 2007 2008 2007 2009 ---------------------------------------------------------------- -------- Sales analysis at 18% Copper sales (tonnes) 7,500 7,600 29,900 32,500 31,600 Gold sales (ounces) 23,500 21,800 92,100 92,000 109,400 ------------------------------------- -------- Gross copper sales $15 $40 $193 $248 $131 Gross gold sales 22 16 81 65 116 Other metal sales 1 1 3 3 4 ------------------------------------- -------- Gross sales 38 57 277 316 251 Smelter processing charges and freight (6) (7) (33) (41) (38) ---------------------------------------------------------------- -------- Net sales $32 $50 $244 $275 $213 ---------------------------------------------------------------- -------- Cost analysis at 18% Tonnes of ore milled (thousands) 1,000 1,125 3,900 4,640 4,550 Direct production costs ($ per tonne) $27 $19 $24 $18 $26 ---------------------------------------------------------------- -------- Direct production costs $27 $21 $93 $81 $118 Change in inventory 1 (1) (3) 2 - Depreciation and other non-cash costs 6 2 19 9 28 ---------------------------------------------------------------- -------- Operating costs $34 $22 $109 $92 $146 ---------------------------------------------------------------- -------- Operating earnings ($2) $28 $135 $183 $67 ---------------------------------------------------------------- -------- Operating cash flow $11 $23 $117 $98 $63 ---------------------------------------------------------------- -------- The objective for 2009 uses the assumptions laid out on page 13. The table below shows what contributed to the change in operating earnings and operating cash flow between 2008 and 2007. ------------------------------------------------------------------------- three months year ended ended (millions) December 31 December 31 ------------------------------------------------------------------------- Lower copper prices, denominated in Canadian dollars $(25) $(35) Higher gold prices, denominated in Canadian dollars 5 15 Lower sales volumes - (8) Lower smelter processing charges - 4 Higher operating costs (6) (18) Higher depreciation (4) (6) ------------------------------------------------------------------------- Decrease in operating earnings, compared to 2007 (30) (48) Lower tax expense because of lower earnings 11 8 Changes in net working capital 6 41 Other 1 8 ------------------------------------------------------------------------- Increase (decrease) in operating cash flow, compared to 2007 $(12) $19 ------------------------------------------------------------------------- The mine waste management program was commissioned in September In 2008, Ok Tedi spent US $200 million (our 18 percent share was $36 million), of which US $114 million was for the mine waste management program and US $43 million was for the pit drainage project. Ok Tedi's capital spending this quarter was mainly for these same two projects. ------------------------------------------------------------------------- three months ended December 31 (18 percent) 2008 2007 change ------------------------------------------------------------------------- Capital spending $11,700 $10,100 +16% ------------------------------------------------------------------------- ------------------------------------------------------------- ----------- year ended December 31 objective (18 percent) 2008 2007 change 2009 ------------------------------------------------------------- ----------- Capital spending $38,400 $31,500 +22% $26,000 ------------------------------------------------------------- -----------2009 outlook for capital spending
Ok Tedi plans to spend US
Status of our development projects
LAS CRUCES
Quarterly development update
Dewatering and re-injection system (DRS)
In
Las Cruces implemented short-term water purification and proposed relocation of certain DRS wells and long-term water purification in response to the water authority's concerns.
In a letter dated
The recommendation stipulates that Las Cruces must reduce the level of the contact water in the holding ponds, to make sure there is enough buffer capacity to support a sudden influx of contact water from the pit. All water from the holding ponds are treated by reverse osmosis or lime neutralization before they are discharged.
Las Cruces has started emptying the holding ponds and expects to complete this by the end of February. Mining at the bottom of the pit should begin again during the first week of March, and we expect first ore delivery to the crusher around
Because the original authorization did not contemplate long-term water purification, the permit to operate the DRS has to be amended through a public review process. The relevant authorities have agreed that Las Cruces can resume mining and start up the hydrometallurgical plant during this process, which will be initiated in the next month.
We expect the public review process to proceed without complication, that Las Cruces will receive an amended DRS permit in due course, and that there will not be any adverse impact on its copper production in the interim.
Preparation for first copper
Construction of the process plant is essentially completed and commissioning well underway. The commissioning process will take several months, and we expect first copper cathode production around the beginning of the second quarter of 2009.
2009 outlook for development and production
Las Cruces construction is essentially complete with only minor finishing work required during the first quarter of 2009. To date, (euro)448 million has been spent on the project and (euro)31 million committed, and we expect to spend the balance in the first quarter of 2009.
The following table shows total spending for the project to the end of 2008 and our 2009 capital objective:
------------------------------------------------------------------------- (millions) Up to December Objective Total project 31, 2008 2009 estimate at December 31, 2009 ------------------------------------------------------------------------- Construction capital (euro)448 (euro)56 (euro)504 Mine development 6 19 25 Sustaining capital - 22 22 Capitalized interest 18 5 23 Pre-operating costs capitalized, net of sales - 8 8 Value added tax 25 (25) - Other 5 4 9 ------------------------------------------------------------------------- Capital expenditures (euro)502 (euro)89 (euro)591 ------------------------------------------------------------------------- The following table shows expected production for 100 percent of Las Cruces ------------------------------------------------------------------------- 2009 Life of target mine ------------------------------------------------------------------------- Tonnes of ore processed (thousands) 479 17,492 ------------------------------------------------------------------------- Strip ratio 23 12.5 ------------------------------------------------------------------------- Copper grades (percent) 8.8 6.2 ------------------------------------------------------------------------- Copper production (tonnes) 54,600 997,200 ------------------------------------------------------------------------- Cost per tonne of ore processed (C $) $167 $87 -------------------------------------------------------------------------Copper production for 2009 includes 37,200 tonnes of copper cathode and 17,400 tonnes of copper in ore that, depending on market conditions, we plan to ship directly to smelters. If market conditions change and smelters refuse to accept the ore, we will stockpile the ore and process it in the hydrometallurgical plant. In that situation, the Las Cruces production target for 2009 would be reduced to 37,200 tonnes of copper.
Based on the 2009 production targets and the assumptions laid out on page 13, we are estimating operating earnings and cash flows for 2009 as follows.
100% ------------------------------------------------------------- ----------- (millions of Canadian dollars unless objective otherwise stated) 2009 ------------------------------------------------------------- ----------- Copper sales (tonnes) 54,600 ------------------------------------------------------------- ----------- Gross copper sales $188 ------------------------------------------------------------- ----------- Smelter processing charges and freight (26) ------------------------------------------------------------- ----------- Net sales $162 ------------------------------------------------------------- ----------- Tonnes of ore milled (thousands) 479 ------------------------------------------------------------- ----------- Direct production costs ($ per tonne) $167 ------------------------------------------------------------- ----------- Direct production costs $60 ------------------------------------------------------------- ----------- Change in inventory 11 ------------------------------------------------------------- ----------- Depreciation and other non-cash costs 24 ------------------------------------------------------------- ----------- Operating costs $95 ------------------------------------------------------------- ----------- Operating earnings $67 ------------------------------------------------------------- ----------- Operating cash flow $76 ------------------------------------------------------------- -----------PETAQUILLA
Quarterly development update
Increased equity interest in Petaquilla to 100 percent
In
Following our successful unsolicited take-over bid in September to acquire all of the shares of Petaquilla Copper Ltd., the other partner in the project, we acquired the remaining shares of Petaquilla Copper in November under a plan of arrangement approved by its remaining shareholders. This increased our interest in the project by 26 percent.
These two transactions increased our ownership in the Petaquilla project to 100 percent. Our total investment in the Petaquilla project is now
At a time when most mining companies have decided to suspend their copper growth projects, not necessarily for strategic reasons but out of necessity, we have decided to advance what we believe to be one of the most promising copper porphyry projects in the world. Given the rapidly deteriorating supply of new copper mines, we believe that having a "ready-to-build" project the size of Petaquilla in Inmet's portfolio, will put us in a very strong position when the general economy and with it the demand for metals turn around once again. Our vision is to progress Petaquilla over the next two years before a major decision on construction will have to be made. We will do this carefully always ensuring that our balance sheet remains strong and our liquidity is not impacted to endure the current economic environment.
We are pursuing three main objectives over the next two years: (1) Complete sufficient drilling to establish a National Instrument 43-101 compliant resource large enough to support a daily mill throughput of 150,000 tonnes per day for a minimum of 25 years (2) Complete all front-end-engineering and design on the basis of a 150,000-tonne-per-day mill throughput and third-party power supply scenario. (3) Complete and submit for approval the Environmental and Social Impact Assessment (EsIA), advance permitting and continue to build our social license. The following is an update on the status of the related field activities.Drilling
We anticipate that approximately 60,000 metres of drilling will be needed to reach our project mineral reserve targets, and that this work will take until mid-2009 to complete. At the same time, we will carry out drilling for geotechnical and hydrogeological purposes. Once the resource drilling and the grinding variability test work is completed, we intend to develop a detailed mine plan based on a throughput of 150,000 tonnes per day. As of early February we have eight drills working on the property and have completed close to 30,000 metres of the required drilling.
Social and environmental impact assessment and community development
Now that baseline studies are substantially complete, we are moving to the impact assessment stage. We expect to submit our impact assessment to the Panamanian environmental authorities towards the end of 2009. As a result of findings from our commitment to build our social license, we are already developing a number of community development initiatives. These include helping local businesses to develop capacity to service future operational needs in areas such as food supply, road maintenance and services. Other initiatives, such as local scholarship programs and a hot lunch program for school children, have been adopted.
Engineering
Engineering work is advancing, and our goal is to complete the FEED study by the end of 2009. The base case is a 150,000 tonne per day conventional flotation operation which will produce a copper concentrate with gold and molybdenum by-products. The concentrate will be sent by pipeline to a new port to be constructed on the coast approximately 30 kilometres from the mine. We are in discussions with third party independent power producers to provide the power required for the operation.
2009 outlook for development
By the end of 2009, once the FEED studies are complete and the EsIA is submitted, we expect to begin detailed engineering. At the same time, we will seek approval for the EsIA and begin the permitting for construction. We expect construction to take approximately 44 months from the time the construction permits are issued. We expect to spend approximately
Managing our liquidity
We plan our financing strategy by assessing our long-term financial requirements, reviewing our future capital needs and determining the optimal mix of several alternatives, including our significant cash position, future operating cash flow, credit facilities and project financing. In planning our capital structure, we include a liquidity cushion that allows us to address operational disruptions or general market downturns, such as the current weakening of the global economy.
------------------------------------------------------------------------- three months ended December 31 year ended December 31 (millions) 2008 2007 2008 2007 ------------------------------------------------------------------------- CASH FROM OPERATING ACTIVITIES Cayeli ($7) $51 $82 $215 Pyhasalmi 21 5 100 109 Troilus 20 5 41 15 Ok Tedi 11 23 117 98 Corporate development and exploration not included in operations' cash flow (1) (2) (7) (6) General and administration (3) (13) (13) (20) Other (10) 7 5 16 ------------------------------------------------------------------------- 31 76 325 427 ------------------------------------------------------------------------- CASH FROM INVESTING AND FINANCING Acquisition of Petaquilla Copper (43) - (380) - Capital spending (134) (94) (461) (346) Investing in Petaquilla prior to consolidation - - (25) - Long-term - borrowing 22 24 128 98 - repayment - - (14) (9) Funding from non- controlling shareholder 25 16 62 56 Settlement of foreign exchange forward contract - - 52 - Financial assurance deposits 1 8 (14) (4) Dividends paid on common shares (5) (5) (10) (10) Disposition of portfolio investments - - 2 51 Foreign exchange on cash held in foreign currency 37 6 60 (51) Other 3 (5) 7 (11) ------------------------------------------------------------------------- (94) (50) (593) (226) ------------------------------------------------------------------------- Increase (decrease) in cash (63) (26) (268) 201 Cash and short-term investments Beginning of period 636 815 841 640 ------------------------------------------------------------------------- End of period $573 $841 $573 $841 ------------------------------------------------------------------------- OPERATING ACTIVITIES Key components of the change in operating cash flows ------------------------------------------------------------------------- three months year ended ended (millions) December 31 December 31 ------------------------------------------------------------------------- Lower earnings from operations (see page 4) $(92) $(178) Non-cash changes in operating earnings: Add back higher non-cash charges included in earnings from operations 13 10 Lower tax expense 19 34 Changes in working capital 15 32 ------------------------------------------------------------------------- Decrease in operating cash flow, compared to 2007 $(45) $(102) -------------------------------------------------------------------------Operating cash flows are lower than they were in 2007 mainly because of lower operating earnings.
2009 outlook for cash from operating activities
In the current volatile markets it is even more difficult than usual to develop reliable estimates for commodity prices and foreign exchange rates. The table below shows our expected operating cash at our operations, based on the market assumptions described on page 13, and the assumptions in Results of our operations, which starts on page 13.
2009 estimated operating cash flow by operation --------------------------------------------------------- (millions) --------------------------------------------------------- Cayeli $51 Pyhasalmi 33 Troilus 90 Ok Tedi 63 Las Cruces 76 --------------------------------------------------------- $313 --------------------------------------------------------- Our estimates of the sensitivity of our earnings and cash flow to key operating parameters are shown on page 30. INVESTING AND FINANCING Capital spending ---------------------------------------------------------------- -------- three months ended year ended December 31 December 31 objective (millions) 2008 2007 2008 2007 2009 ---------------------------------------------------------------- -------- Cayeli $4 $2 $20 $18 $22 Pyhasalmi 4 1 10 3 11 Troilus - - 2 2 - Ok Tedi 12 11 38 32 26 Las Cruces 94 76 356 283 133 Cerattepe 3 4 18 8 - Petaquilla(1) 17 - 42 - 94 ---------------------------------------------------------------- -------- $134 $94 $486 $346 $286 ---------------------------------------------------------------- -------- (1) Includes our 48 percent share of funding provided to Petaquilla prior to acquisition of PTCPlease see Results of our operations and Status of our development projects for a discussion of actual results and our 2009 objective.
Long-term borrowings and settlement of hedge
By
In 2008, Las Cruces repaid (euro)9 million under Tranche B of its credit facility which is equal to the amount of VAT refunds received. At
Acquisition of Petaquilla
Details of the transactions that increased our ownership in the Petaquilla project to 100 percent are described on page 24. We acquired Petaquilla Copper (whose principal asset is a 26 percent interest in Petaquilla) at a cost of
Until we start receiving proceeds from sales at Las Cruces, we expect to use sponsor contributions, value added tax refunds and government subsidies to fund its costs. We are expecting (euro)45 million in subsidies, but we must meet certain conditions before we receive the funds (mainly reaching specific levels of employment and completing construction of the plant, which we believe have been or will be met).
Market conditions ----------------- These market conditions will have some impact on our overall financial position. However, based on the strength of our financial position entering into this downturn, together with our relatively low operating costs we expect to: - be able to meet expected production levels - continue to make ongoing capital expenditures at our current operations and to complete the development of Las Cruces - continue to pursue our growth objectives through the advancement of the Petaquilla project and consideration of other opportunities as they arise.We will continually monitor the metal and financial markets, our financial performance and resources, and our capital spending to maintain the financial strength required in the current volatile and uncertain markets.
Financial condition
CASH
Our cash and cash equivalents balance at
Since the end of the third quarter, general worldwide economic conditions have weakened dramatically. In response, we adjusted our investment positions and are now mainly invested in treasury funds to minimize liquidity risk until normal market conditions return. Turn to note 6 on page 51 in the consolidated financial statements for more details on where our cash is invested.
Our restricted cash balance of $61 million included: - $17 million in trust for future reclamation at Ok Tedi - $16 million of cash collateralized letters of credit for Inmet - $26 million related to issuing letters of credit to suppliers at Las Cruces and its labour bond - $2 million for future reclamation at Pyhasalmi COMMON SHARES ------------------------------------------------------------------------- Common shares outstanding as of December 31, 2008 and February 10, 2009 48,281,950 ------------------------------------------------------------------------- Deferred share units outstanding as of December 31, 2008 (redeemable on a one-for-one basis for common shares) 82,992 ------------------------------------------------------------------------- FINANCIAL INSTRUMENTS The table below shows the gold and copper forward sales, and interest rate hedges (and their marked-to-market valuations) recorded on our balance sheet at the end of 2008. ------------------------------------------------------------------------- C$ marked-to- market loss Type of at December 31, contract Expiry Quantity Price 2008 ------------------------------------------------------------------------- Ok Tedi copper forward sales 2009 3.2 million lbs US $2.44 per lb $4.3 million(1) Ok Tedi gold forward sales 2010 3,600 ounces US $748 per oz. 2011 3,600 ounces US $775 per oz. 2012 3,600 ounces US $803 per oz. 2013 1,800 ounces US $825 per oz. ---------------------------------------- 12,600 ounces US $783 per oz. ($1.7 million)(2) Las Cruces interest rate swaps 2009 to 2014 US $179 million 5.2 percent ($23.4 million) (reducing in conjunction with debt repayment schedule) ------------------------------------------------------------------------- (1) At a copper price of US $1.33 per pound. (2) At a gold price of US $869 per ounce. SENSITIVITY ANALYSIS The table below shows you the effect of key variables on our net income based on our 2009 objectives. ------------------------------------------------------------------------- Would change Would change our 2009 net our 2009 net income per A change of: income by: share by: ------------------------------------------------------------------------- Metal prices Copper (per pound) US $0.30 $74 million $1.54 Zinc (per pound) US $0.10 $11 million $0.24 Gold (per ounce)(1) US $100 $25 million $0.52 ------------------------------------------------------------------------- Exchange rates Canadian dollar per US dollar C$0.10 $43 million $0.89 Canadian dollar per euro C$0.10 $14 million $0.29 ------------------------------------------------------------------------- Treatment and refining charges Copper treatment charge per tonne US $10 and copper refining charge per pound US $0.01 $5 million $0.11 Zinc treatment charge per tonne US $10 $1 million $0.03 ------------------------------------------------------------------------- Freight and energy costs Concentrate freight per tonne 10% $3 million $0.06 Fuel price per litre $0.10 $3 million $0.05 Electricity per kilowatt hour $0.01 $4 million $0.09 ------------------------------------------------------------------------- (1) Calculations include hedging in place at December 31, 2008. Accounting changes We adopted a new section of the CICA Handbook: Section 3031 - Inventories Effective January 1, 2008, we adopted CICA Handbook section 3031 - Inventories on a prospective basis. This section requires inventory to be measured at the lower of cost or net realizable value. It also clarifies how to allocate fixed production overhead, and requires: - consistent use of either first-in, first-out or weighted average to measure inventories - insurance and capital spares be accounted for as property, plant and equipment - any previous write-downs be reversed when the value of inventories increases. The amount of the reversal is limited to the amount of the original write-down.We are now expensing certain administrative and other costs as we incur them, rather than including them in the cost of inventory. We measure finished goods inventory and materials and supplies at the lower of weighted average cost or net realizable value.
This change in policy had the following impact on our 2008 consolidated financial statements:
- decreased opening 2008 inventory by $3.5 million - increased opening 2008 property, plant and equipment by $1.8 million - decreased opening 2008 future income tax liability by $0.6 million - decreased opening 2008 retained earnings by $1.1 million Plans on transition to International Financial Reporting Standards (IFRS):The Accounting Standards Board confirmed in
While the adoption of IFRS will not change the actual cash flows we generate, it will result in changes to our reported financial position and results of operations - which could have material effects.
We have prepared a comprehensive IFRS convergence plan that addresses the changes in accounting policy, restatement of comparative periods, internal control over financial reporting, modification of existing systems, the training and awareness of staff, as well as other related business matters. Senior financial management who report to and are overseen by Inmet's Audit Committee are responsible for planning and implementing the conversion.
In 2008, we completed an initial analysis of the differences between IFRS and our current accounting policies under Canadian GAAP. We expect the most significant effects of adopting IFRS will be on the carrying values of property, plant and equipment, our accounting for joint venture interests which currently includes our investment in Ok Tedi, future income taxes and our accounting for business combinations.
In 2009, we will develop our accounting policies under IFRS, calculate all differences and document new internal controls. Our goal is to restate our
Recently issued accounting pronouncement:
Section 3064 - Goodwill and intangible assets
This section establishes standards for recognizing, measuring, presenting and disclosing goodwill after it has been recognized, as well as intangible assets. It replaces Section 3062, Goodwill and Other Intangible Assets and Section 3450, Research and Development Costs. It provides guidance for recognizing internally developed intangible assets, and ensuring consistent treatment of all intangible assets. It does not change the standards that apply to goodwill.
This section will apply beginning on
Section 1602 - Non-controlling interests
This section provides guidance on accounting for non-controlling interests (NCI) subsequent to a business combination and replicates the provisions of International Accounting Standard (IAS) 27 - Consolidated and separate financial statements. NCI in subsidiaries are presented in the consolidated balance sheet with equity, separate from the parent shareholder's equity. In the income statement, NCI is not deducted in arriving at consolidated net income but is allocated to the controlling interest and the NCI according to their percentage ownership. Losses are attributed to NCI even if they exceed its carrying amount. Acquisitions or dispositions that do not result in a change of control are accounted for as equity transactions.
Section 1601 - Consolidated financial statements
This section carries forward the consolidation guidance previously included in its predecessor section 1600 except that it removes all guidance on accounting for NCI that is replaced by that provided in section 1602, and guidance already included in section 1582.
Sections 1582, 1601 and 1602, are to be implemented concurrently. Section 1582 is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after
Supplementary financial information
Pages 34 and 35 include supplementary financial information on cash costs. These measures do not fall into the category of generally accepted accounting principles.
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 measures under Canadian generally accepted accounting principles they should not be considered in isolation of earnings or cash flows. There is also no standard way to calculate cash costs, so they are not a reliable way to compare us to other companies.
About Inmet
Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in four mining operations in locations around the world: Cayeli, Pyhasalmi, Troilus and Ok Tedi. We also have interests in two development properties, Las Cruces and Petaquilla.
This press release is also available at www.inmetmining.com
Fourth quarter conference call Will be held on - Wednesday, February 11, 2009 - 8:30 a.m. Eastern Time - webcast available at www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2515700 or www.inmetmining.com. You can also dial in by calling - Local or international: +1.416.644.3415 - Toll-free within North America: +1.800.731.6941 Starting 10:30 a.m. (ET) Wednesday February 11, 2009, conference call replay will be available - Local or international: +1.416.640.1917 passcode 21294126# - Toll-free within North America: +1.877.289.8525 passcode 21294126 followed by the number sign. INMET MINING CORPORATION Supplementary financial information Cash costs 2008 For the year ended December 31 per ounce per pound of copper of gold --------------------------------------- --------- TOTAL CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- (US dollars) Direct production costs $1.07 $1.92 $1.32 $1.32 $550 Royalties and variable compensation 0.10 - 0.07 0.07 - Smelter processing charges and freight 1.13 1.10 0.49 0.88 70 Metal credits (1.55) (3.33) (1.25) (1.75) (203) --------------------------------------- --------- Cash cost $0.75 ($0.31) $0.63 $0.52 $417 --------------------------------------- --------- --------------------------------------- --------- 2007 For the year ended December 31 per ounce per pound of copper of gold --------------------------------------- --------- TOTAL CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- (US dollars) Direct production costs $1.01 $1.58 $1.09 $1.14 $522 Royalties and variable compensation 0.13 - 0.05 0.08 - Smelter processing charges and freight 1.18 1.64 0.53 1.00 52 Metal credits (1.97) (4.63) (0.90) (2.02) (153) --------------------------------------- --------- Cash cost $0.35 ($1.41) $0.77 $0.20 $421 --------------------------------------- --------- --------------------------------------- --------- ------------------------------------------------------------------------- Reconciliation of cash costs to statements of earnings 2008 For the year ended December 31 per ounce per pound of copper of gold --------------------------------------- --------- (millions of Canadian dollars, except where TOTAL otherwise noted) CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- GAAP reference page 14 page 16 page 20 page 18 Direct production costs $90 $60 $93 $243 $89 Smelter processing charges and freight 78 57 33 168 12 By product sales (111) (127) (84) (322) (33) Adjust smelter processing and freight, and sales to production basis 1 - 1 2 (1) --------------------------------------- --------- Operating costs net of metal credits $58 ($10) $43 $91 $67 US $ to C$ exchange rate $1.07 $1.07 $1.07 $1.07 $1.07 Inmet's share of production (000's) 72,100 29,300 63,400 164,800 151,300 --------------------------------------- --------- Cash cost $0.75 ($0.31) $0.63 $0.52 $417 --------------------------------------- --------- --------------------------------------- --------- 2007 For the year ended December 31 per ounce per pound of copper of gold --------------------------------------- --------- (millions of Canadian dollars, except where TOTAL otherwise noted) CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- GAAP reference page 14 page 16 page 20 page 18 Direct production costs $87 $50 $81 $218 $78 Smelter processing charges and freight 95 62 41 198 8 By product sales (165) (155) (68) (388) (23) Adjust smelter processing and freight, and sales to production basis 9 (2) 1 8 - --------------------------------------- --------- Operating costs net of metal credits $26 ($45) $55 $36 $63 US $ to C$ exchange rate $1.07 $1.07 $1.07 $1.07 $1.07 Inmet's share of production (000's) 72,000 30,000 67,000 169,000 138,400 --------------------------------------- --------- Cash cost $0.35 ($1.41) $0.77 $0.20 $421 --------------------------------------- --------- --------------------------------------- --------- INMET MINING CORPORATION Supplementary financial information Cash costs 2008 For the three months ended December 31 per ounce per pound of copper of gold --------------------------------------- --------- TOTAL CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- (US dollars) Direct production costs $0.98 $1.73 $1.41 $1.28 $466 Royalties and variable compensation (0.07) - - (0.03) - Smelter processing charges and freight 0.88 0.82 0.33 0.66 80 Metal credits (1.18) (2.46) (1.18) (1.41) (86) --------------------------------------- --------- Cash cost $0.61 $0.09 $0.56 $0.50 $460 --------------------------------------- --------- --------------------------------------- --------- 2007 For the three months ended December 31 per ounce per pound of copper of gold --------------------------------------- --------- CAYELI PYHASALMI OK TEDI TOTAL TROILUS ----------------------------------------------------- --------- --------- (US dollars per pound) Direct production costs $1.10 $1.95 $1.10 $1.23 $640 Royalties and variable compensation 0.07 - 0.03 0.04 - Smelter processing charges and freight 1.09 1.77 0.43 0.92 51 Metal credits (1.64) (5.05) (0.99) (1.90) (139) --------------------------------------- --------- Cash cost $0.62 ($1.33) $0.57 $0.29 $552 --------------------------------------- --------- --------------------------------------- --------- ------------------------------------------------------------------------- Reconciliation of cash costs to statements of earnings 2008 For the three months ended December 31 per ounce per pound of copper of gold --------------------------------------- --------- (millions of Canadian dollars, except where TOTAL otherwise note) CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- GAAP reference page 14 page 16 page 20 page 18 Direct production costs $21 $16 $28 $65 $23 Smelter processing charges and freight 13 10 6 29 4 By product sales (13) (24) (23) (60) (4) Adjust smelter processing and freight, and sales to production basis (7) (1) - (8) - --------------------------------------- --------- Operating costs net of metal credits $14 $1 $11 $26 $23 US $ to C$ exchange rate $1.21 $1.21 $1.21 $1.21 $1.21 Inmet's share of production (000's) 18,400 7,400 16,100 41,900 40,500 --------------------------------------- --------- Cash cost $0.61 $0.09 $0.56 $0.50 $460 --------------------------------------- --------- --------------------------------------- --------- 2007 For the three months ended December 31 per ounce per pound of copper of gold --------------------------------------- --------- (millions of Canadian dollars, except where TOTAL otherwise note) CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- GAAP reference page 14 page 16 page 20 page 18 Direct production costs $24 $13 $21 $58 $21 Smelter processing charges and freight 20 16 7 43 2 By product sales (26) (38) (17) (81) (5) Adjust smelter processing and freight, and sales to production basis (6) - - (6) - --------------------------------------- --------- Operating costs net of metal credits $12 ($9) $11 $14 $18 US $ to C$ exchange rate $0.98 $0.98 $0.98 $0.98 $0.98 Inmet's share of production (000's) 20,000 7,200 19,200 46,400 33,700 --------------------------------------- --------- Cash cost $0.62 ($1.33) $0.57 $0.29 $552 --------------------------------------- --------- --------------------------------------- --------- Quarterly review INMET MINING CORPORATION Quarterly review (unaudited) Latest Four Quarters ------------------------------------------------------------------------- 2008 2008 2008 2008 (thousands of Canadian dollars, Fourth Third Second First except per share amounts) quarter quarter quarter quarter ------------------------------------------------------------------------- STATEMENTS OF EARNINGS Gross sales $139,626 $247,495 $281,463 $276,281 Smelter processing charges and freight (32,870) (49,502) (53,209) (44,157) Cost of sales (91,715) (84,948) (89,893) (79,246) Depreciation (14,844) (11,395) (9,195) (9,170) ------------------------------------------- 197 101,650 129,166 143,708 Corporate development and exploration (1,971) (3,548) (2,483) (2,618) General and administration (3,289) (3,411) (2,790) (3,648) Investment and other income (expense) 8,057 (5,467) (11,358) 14,754 Asset impairment (36,275) - - - Interest expense (490) (476) (471) (447) Capital tax expense (1,304) (125) (124) (126) Income tax recovery (expense) 767 (17,379) (44,333) (44,744) Non-controlling interest 1,794 3,813 98 (205) ------------------------------------------- Net income (loss) ($32,514) $75,057 $67,705 $106,674 ------------------------------------------- Net income (loss) per common share ($0.67) $1.55 $1.40 $2.21 ------------------------------------------- Diluted net income (loss) per common share ($0.67) $1.55 $1.40 $2.21 ------------------------------------------- Previous Four Quarters ------------------------------------------------------------------------- 2007 2007 2007 2007 (thousands of Canadian dollars, Fourth Third Second First except per share amounts) quarter quarter quarter quarter ------------------------------------------------------------------------- STATEMENTS OF EARNINGS Gross sales $224,773 $272,293 $320,018 $286,614 Smelter processing charges and freight (43,902) (42,557) (55,413) (64,606) Cost of sales (78,809) (72,057) (78,181) (79,377) Depreciation (9,480) (8,739) (8,039) (9,415) ------------------------------------------- 92,582 148,940 178,385 133,216 Corporate development and exploration (3,510) (2,475) (2,086) (1,012) General and administration (12,622) (2,674) (2,162) (2,840) Investment and other income 5,968 9,224 13,665 7,597 Interest expense (407) (424) (424) (438) Capital tax (expense) recovery 212 (273) (274) (274) Income tax expense (18,551) (37,649) (48,509) (35,376) Non-controlling interest (27) 167 (545) 205 ------------------------------------------- Net income $63,645 $114,836 $138,050 $101,078 ------------------------------------------- Net income per common share $1.32 $2.38 $2.86 $2.09 ------------------------------------------- Diluted net income per common share $1.32 $2.37 $2.86 $2.09 ------------------------------------------- Consolidated Financial Statements INMET MINING CORPORATION Consolidated balance sheets December 31 December 31 (thousands of Canadian dollars) 2008 2007 ------------------------------------------------------------------------- (unaudited) Assets Current assets: Cash and short-term investments (note 6) $572,733 $840,823 Restricted cash (note 7) 8,311 1,569 Accounts receivable (note 8) 135,742 131,197 Inventories (note 2) 74,362 52,725 Future income tax asset 14,311 14,515 ------------------------- 805,459 1,040,829 Restricted cash (note 7) 52,893 37,205 Property, plant and equipment 1,950,535 870,965 Investments (note 9) 17,514 32,266 Future income tax asset 5,499 7,884 Derivatives (note 10) 4,327 33,565 Other assets 5,031 25,751 ------------------------- $2,841,258 $2,048,465 ------------------------------------------------------------------------- Liabilities Current liabilities: Accounts payable and accrued liabilities (note 11) $212,527 $172,800 Derivatives 8,693 - Current portion of long-term debt 109,666 12,971 ------------------------- 330,886 185,771 Long-term debt (note 12) 384,848 234,317 Asset retirement obligations (note 13) 126,782 84,017 Derivatives (note 10) 16,417 43,960 Other liabilities 27,122 19,249 Future income tax liabilities 15,971 37,084 Non-controlling interest 71,449 51,574 ------------------------- 973,475 655,972 ------------------------- Commitments (note 14) Shareholders' equity Share capital 337,464 337,464 Contributed surplus 61,925 60,722 Stock based compensation 2,688 1,085 Retained earnings 1,283,074 1,076,958 Accumulated other comprehensive income (loss) (note 15) 182,632 (83,736) ------------------------- 1,867,783 1,392,493 ------------------------- $2,841,258 $2,048,465 ------------------------------------------------------------------------- (see accompanying notes) INMET MINING CORPORATION Segmented balance sheets 2008 As at December 31 (unaudited) CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Assets Cash and short-term investments $241,238 $192,881 $65,976 $ - Other current assets 15,992 43,946 39,428 22,595 Restricted cash 16,343 - 2,104 - Property, plant and equipment 916 144,124 74,790 27,659 Investments 17,514 - - - Derivatives - - - - Other assets 3,183 454 - 1,825 ----------------------------------------------- $295,186 $381,405 $182,298 $52,079 ----------------------------------------------- Liabilities Current liabilities $15,983 $52,112 $11,537 $11,029 Long-term debt 19,741 - - - Asset retirement obligations 23,501 9,654 16,307 12,626 Derivatives - - - - Other liabilities 4,911 5,374 - 1,484 Future income tax liabilities 1,026 5,509 9,215 - Non-controlling interest - - - - ----------------------------------------------- $65,162 $72,649 $37,059 $25,139 ----------------------------------------------- 2008 As at December 31 (unaudited) OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------------------- ----------- (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Assets Cash and short-term investments $37,547 $33,981 $1,110 $572,733 Other current assets 43,148 66,774 843 232,726 Restricted cash 16,667 17,779 - 52,893 Property, plant and equipment 105,145 1,065,435 532,466 1,950,535 Investments - - - 17,514 Derivatives 4,327 - - 4,327 Other assets 2,712 2,356 - 10,530 ----------------------------------- ----------- $209,546 $1,186,325 $534,419 $2,841,258 ----------------------------------- ----------- Liabilities Current liabilities $45,711 $182,535 $11,979 $330,886 Long-term debt - 365,107 - 384,848 Asset retirement obligations 25,016 39,678 - 126,782 Derivatives 1,670 14,747 - 16,417 Other liabilities 2,232 13,121 - 27,122 Future income tax liabilities - 221 - 15,971 Non-controlling interest - 71,449 - 71,449 ----------------------------------- ----------- $74,629 $686,858 $11,979 $973,475 ----------------------------------- ----------- 2007 As at December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Assets Cash and short-term investments $359,359 $333,671 $111,492 $ - Other current assets 23,455 29,384 55,069 23,644 Restricted cash 14,444 - - - Property, plant and equipment 629 115,064 63,147 28,413 Investments 32,266 - - - Derivatives - - - - Other assets 5,618 441 - 6,289 ----------------------------------------------- $435,771 $478,560 $229,708 $58,346 ----------------------------------------------- Liabilities Current liabilities $16,948 $39,161 $14,560 $11,972 Long-term debt 16,267 - - - Asset retirement obligations 24,393 3,169 13,104 7,662 Derivatives - - - 26,889 Other liabilities 5,057 4,787 - - Future income tax liabilities - 17,723 27,122 7,393 Non-controlling interest - - - - ----------------------------------------------- $62,665 $64,840 $35,057 $46,523 ----------------------------------------------- 2007 As at December 31 OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------------------- ----------- (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Assets Cash and short-term investments $13,473 $22,828 $ - $840,823 Other current assets 38,162 30,292 - 200,006 Restricted cash 11,836 10,925 - 37,205 Property, plant and equipment 63,655 600,057 - 870,965 Investments - - - 32,266 Derivatives - 33,565 - 33,565 Other assets 2,101 2,461 16,725 33,635 ----------------------------------- ----------- $129,227 $700,128 $16,725 $2,048,465 ----------------------------------- ----------- Liabilities Current liabilities $21,487 $81,643 $ - $185,771 Long-term debt - 218,050 - 234,317 Asset retirement obligations 19,708 15,981 - 84,017 Derivatives 9,034 8,037 - 43,960 Other liabilities 1,412 7,993 - 19,249 Future income tax liabilities - 11,968 - 37,084 Non-controlling interest - 51,574 - 51,574 ----------------------------------- ----------- $51,641 $395,246 $ - $655,972 ----------------------------------- ----------- INMET MINING CORPORATION Consolidated statements of earnings (unaudited) (thousands of Canadian Three Months Ended Year Ended dollars except per share December 31 December 31 amounts) 2008 2007 2008 2007 ------------------------------------------------- ----------------------- Gross sales $139,626 $224,773 $944,865 $1,103,698 Smelter processing charges and freight (32,870) (43,902) (179,738) (206,478) Cost of sales (91,715) (78,809) (345,802) (308,424) Depreciation (14,844) (9,480) (44,604) (35,673) ------------------------------------------------- ----------------------- 197 92,582 374,721 553,123 Corporate development and exploration (1,971) (3,510) (10,620) (9,083) General and administration (3,289) (12,622) (13,138) (20,298) Investment and other income (note 16) 8,057 5,968 5,986 36,454 Asset impairment (note 19) (36,275) - (36,275) - Interest expense (490) (407) (1,884) (1,693) Capital tax expense (1,304) 212 (1,679) (609) Income tax recovery (expense) (note 17) 767 (18,551) (105,689) (140,085) Non-controlling interest 1,794 (27) 5,500 (200) ------------------------------------------------- ----------------------- Net income (loss) ($32,514) $63,645 $216,922 $417,609 ------------------------------------------------- ----------------------- Basic net income (loss) per common share (note 18) ($0.67) $1.32 $4.49 $8.65 ------------------------------------------------- ----------------------- Diluted net income (loss) per common share (note 18) ($0.67) $1.32 $4.48 $8.64 ------------------------------------------------- ----------------------- Weighted average shares outstanding (000's) 48,282 48,282 48,282 48,279 ------------------------------------------------- ----------------------- (see accompanying notes) INMET MINING CORPORATION Segmented statements of earnings (unaudited) 2008 For the year ended December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Gross sales $ - $305,190 $221,124 $141,251 Smelter processing charges and freight - (78,400) (56,954) (11,053) Cost of sales (1,951) (92,859) (62,245) (94,631) Depreciation - (11,448) (9,227) (9,239) ----------------------------------------------- (1,951) 122,483 92,698 26,328 Corporate development and exploration (7,325) (487) (2,808) - General and administration (13,138) - - - Investment and other income (expense) 23,490 (3,009) 603 5,444 Asset impairment - (34,200) - (2,075) Interest expense (1,884) - - - Capital tax expense (1,679) - - - Income tax (expense) recovery (14,930) (32,216) (19,814) - Non-controlling interest - - - - ----------------------------------------------- Net income (loss) ($17,417) $52,571 $70,679 $29,697 ----------------------------------------------- 2008 For the year ended December 31 OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------------------- ----------- (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Gross sales $277,300 $ - $ - $944,865 Smelter processing charges and freight (33,331) - - (179,738) Cost of sales (94,116) - - (345,802) Depreciation (14,690) - - (44,604) ----------------------------------- ----------- 135,163 - - 374,721 Corporate development and exploration - - - (10,620) General and administration - - - (13,138) Investment and other income (expense) 6,780 (27,322) - 5,986 Asset impairment - - (36,275) Interest expense - - - (1,884) Capital tax expense - - - (1,679) Income tax (expense) recovery (49,779) 11,050 - (105,689) Non-controlling interest - 5,500 - 5,500 ----------------------------------- ----------- Net income (loss) $92,164 ($10,772) $ - $216,922 ----------------------------------- ----------- 2007 For the year ended December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Gross sales $ - $418,694 $260,246 $108,378 Smelter processing charges and freight - (94,700) (62,081) (7,989) Cost of sales (1,953) (91,245) (51,144) (80,441) Depreciation - (8,857) (8,439) (10,120) ----------------------------------------------- (1,953) 223,892 138,582 9,828 Corporate development and exploration (5,590) (1,686) (2,077) 270 General and administration (20,298) - - - Investment and other income (expense) 34,807 (2,004) - 5,549 Interest expense (1,693) - - - Capital tax expense (609) - - - Income tax (expense) recovery 3,302 (46,445) (30,911) Non-controlling interest - - - - ----------------------------------------------- Net income $7,966 $173,757 $105,594 $15,647 ----------------------------------------------- 2007 For the year ended December 31 OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------------------- ----------- (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Gross sales $316,380 $ - $ - $1,103,698 Smelter processing charges and freight (41,708) - - (206,478) Cost of sales (83,641) - - (308,424) Depreciation (8,257) - - (35,673) ----------------------------------- ----------- 182,774 - - 553,123 Corporate development and exploration - - - (9,083) General and administration - - - (20,298) Investment and other income (expense) (2,850) 952 - 36,454 Interest expense - - - (1,693) Capital tax expense - - - (609) Income tax (expense) recovery (65,745) (286) - (140,085) Non-controlling interest - (200) - (200) ----------------------------------- ----------- Net income $114,179 $466 $ - $417,609 ----------------------------------- ----------- INMET MINING CORPORATION Segmented statements of earnings (unaudited) 2008 For the three months ended December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Gross sales $ - $ 27,481 $ 37,273 $ 36,391 Smelter processing charges and freight - (13,279) (9,615) (3,904) Cost of sales (487) (19,490) (17,344) (25,838) Depreciation - (3,150) (2,502) (2,954) ----------------------------------------------- (487) (8,438) 7,812 3,695 Corporate development and exploration (818) (209) (1,007) 63 General and administration (3,289) - - - Investment and other income (expense) 15,007 (5,149) 831 1,361 Asset impairment - (34,200) - (2,075) Interest expense (490) - - - Capital tax expense (1,304) - - - Income tax (expense) recovery (6,870) 1,991 (948) - Non-controlling interest - - - - ----------------------------------------------- Net income (loss) 1,749 ($46,005) $6,688 $3,044 ----------------------------------------------- 2008 For the three months ended December 31 OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------------------- ----------- (thousands of (Papua New Canadian dollars) Guinea) (Spain) (Panama) Gross sales $ 38,481 $ - $ - $ 139,626 Smelter processing charges and freight (6,072) - - (32,870) Cost of sales (28,556) - - (91,715) Depreciation (6,238) - - (14,844) ----------------------------------- ----------- (2,385) - - 197 Corporate development and exploration - - - (1,971) General and administration - - - (3,289) Investment and other income (expense) 6,539 (10,532) - 8,057 Asset impairment - - - (36,275) Interest expense - - - (490) Capital tax expense - - - (1,304) Income tax (expense) recovery 545 6,049 - 767 Non-controlling interest - 1,794 - 1,794 ----------------------------------- ----------- Net income (loss) $ 4,699 ($2,689) $ - ($32,514) ----------------------------------- ----------- 2007 For the three months ended December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------ (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Gross sales $ - $ 81,088 $ 58,672 $ 27,317 Smelter processing charges and freight - (19,756) (15,384) (1,798) Cost of sales (491) (22,559) (13,258) (22,554) Depreciation - (2,635) (1,881) (2,620) ------------------------------------------------ (491) 36,138 28,149 345 Corporate development and exploration (2,438) (526) (506) (40) General and administration (12,622) - - - Investment and other income (expense) 6,447 (587) - 1,361 Interest expense (407) - - - Capital tax expense 212 - - - Income tax (expense) recovery 4,459 (5,956) (6,200) - Non-controlling interest - - - - ------------------------------------------------ Net income (loss) ($4,840) $ 29,069 $ 21,443 $ 1,666 ------------------------------------------------ OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------ ----------- (thousands of Canadian (Papua New dollars) Guinea) (Spain) (Panama) Gross sales $ 57,696 $ - $ - $ 224,773 Smelter processing charges and freight (6,964) - - (43,902) Cost of sales (19,947) - - (78,809) Depreciation (2,344) - - (9,480) ------------------------------------ ----------- 28,441 - - 92,582 Corporate development and exploration - - - (3,510) General and administration - - - (12,622) Investment and other income (expense) (1,358) 105 - 5,968 Interest expense - - - (407) Capital tax expense - - - 212 Income tax (expense) recovery (10,822) (32) - (18,551) Non-controlling interest - (27) - (27) ------------------------------------ ----------- $ 16,261 $ 46 $ - $ 63,645 ------------------------------------ ----------- INMET MINING CORPORATION Consolidated statements of cash flows (unaudited) Three Months Ended Year Ended (thousands of Canadian December 31 December 31 dollars) 2008 2007 2008 2007 ------------------------------------------------------------------------- Cash provided by (used in) operating activities (1) Net income ($32,514) $63,645 $216,922 $417,609 Add (deduct) items not affecting cash: Gain on disposition of investments - - (256) (11,730) Depreciation 14,844 9,480 44,604 35,673 Future income tax (4,050) (4,217) (5,980) (5,724) Accretion expense on asset retirement obligations 1,131 899 4,360 3,609 Non-controlling interest (1,794) 27 (5,500) 200 Asset impairment (note 19) 34,428 - 34,428 - Foreign exchange loss 5,541 4,657 35,688 10,491 Other (877) 2,796 4,292 1,982 Settlement of gold forward contracts (note 10) - - (12,399) - Reclamation costs (1,330) (1,460) (2,792) (3,410) Net change in non-cash working capital (note 5) 15,613 498 11,138 (21,349) ------------------------------------------------ 30,992 76,325 324,505 427,351 ------------------------------------------------ Cash provided by (used in) investing activities Acquisition of Petaquilla Copper, net of cash acquired (note 4) (42,863) - (379,774) - Capital spending (102,976) (149,097) (422,676) (376,569) Working capital changes associated with capital spending (31,003) 55,208 (38,116) 30,677 Loans to other Petaquilla shareholders - - (13,234) - Investment in Petaquilla prior to consolidation - - (12,167) - Disposition of investments - - 1,521 50,170 Sale (purchase) of short-term investments 78,405 (29,363) 282,644 (64,949) Other - - - (43) ------------------------------------------------ (98,437) (123,252) (581,802) (360,714) ------------------------------------------------ Cash provided by (used in) financing activities Long-term debt: Borrowings (note 12) 22,199 23,599 128,439 97,537 Repayment (note 12) - - (13,871) (8,604) Funding by non-controlling shareholder 25,450 16,277 61,638 55,805 Settlement of foreign currency forward contract (note 10) - - 52,256 - Financial assurance deposits 1,101 8,487 (14,215) (4,164) Dividends paid on common shares (4,828) (4,828) (9,656) (9,656) Other (746) (4,588) 2,349 (8,672) ------------------------------------------------ 43,176 38,947 206,940 122,246 ------------------------------------------------ Cash assumed on consolidation of Petaquilla - - 4,414 - ------------------------------------------------ Foreign exchange change on cash held in foreign currency 36,911 5,602 60,497 (50,988) ------------------------------------------------ Increase (decrease) in cash 12,642 (2,378) 14,554 137,895 Cash: Beginning of period 524,417 524,883 522,505 384,610 ------------------------------------------------ End of period 537,059 522,505 537,059 522,505 Short-term investments 35,674 318,318 35,674 318,318 ------------------------------------------------ Cash and short-term investments $572,733 $840,823 $572,733 $840,823 ------------------------------------------------------------------------- (see accompanying notes) (1) Supplementary cash flow information: Cash interest paid $8,782 $1,557 $18,562 $7,119 Cash taxes paid $19,945 $58,076 $143,357 $173,645 ------------------------------------------------------------------------- INMET MINING CORPORATION Segmented statements of cash flows (unaudited) 2008 For the year ended December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Cash provided by (used in) operating activities Before net change in non-cash working capital ($6,881) $ 94,440 $ 82,801 $ 41,456 Net change in non-cash working capital (8,398) (11,988) 16,856 (635) ------------------------------------------------- ($15,279) 82,452 99,657 40,821 ------------------------------------------------- Cash provided by (used in) investing activities Acquisition of Petaquilla Copper, net of cash acquired (379,774) - - - Capital spending (361) (37,632) (9,772) (1,510) Working capital changes associated with capital spending - - - - Disposition of investments 1,521 - - - Sale of short-term investments 282,644 - - - Loans to Petaquilla shareholders (13,234) - - - Investment in Petaquilla prior to consolidation (12,167) - - - ------------------------------------------------- (121,371) (37,632) (9,772) (1,510) ------------------------------------------------- Cash provided by (used in) financing activities (10,287) - (1,932) (700) ------------------------------------------------- Cash assumed on consolidation of Petaquilla - - - - ------------------------------------------------- Foreign exchange change on cash held in foreign currency - 37,298 13,018 - ------------------------------------------------- Intergroup funding (distributions) 311,460 (222,908) (146,487) (38,611) ------------------------------------------------- Increase (decrease) in cash 164,523 (140,790) (45,516) - ------------------------------------------------- Cash: Beginning of period 41,041 333,671 111,492 - ------------------------------------------------- End of period 205,564 192,881 65,976 - Short-term investments 35,674 - - - ------------------------------------------------- Cash and short-term investments $ 241,238 $ 192,881 $ 65,976 $ - ------------------------------------------------- 2008 For the year ended December 31 LAS OK TEDI CRUCES PETAQUILLA TOTAL ------------------------------------- ----------- (thousands of (Papua New Canadian dollars) Guinea) (Spain) (Panama) Cash provided by (used in) operating activities Before net change in non-cash working capital $ 101,551 - $ - $ 313,367 Net change in non-cash working capital 15,303 - - 11,138 ------------------------------------- ----------- 116,854 - - 324,505 ------------------------------------- ----------- Cash provided by (used in) investing activities Acquisition of Petaquilla Copper, net of cash acquired - - - (379,774) Capital spending (38,357) (318,019) (17,025) (422,676) Working capital changes associated with capital spending - (38,116) - (38,116) Disposition of investments - - - 1,521 Sale of short-term investments - - - 282,644 Loans to Petaquilla shareholders - - - (13,234) Investment in Petaquilla prior to consolidation - - - (12,167) ------------------------------------- ----------- (38,357) (356,135) (17,025) (581,802) ------------------------------------- ----------- Cash provided by (used in) financing activities (1,317) 221,176 - 206,940 ------------------------------------- ----------- Cash assumed on consolidation of Petaquilla - - 4,414 4,414 ------------------------------------- ----------- Foreign exchange change on cash held in foreign currency 6,387 4,668 (874) 60,497 ------------------------------------- ----------- Intergroup funding (distributions) (59,493) 141,444 14,595 - ------------------------------------- ----------- Increase (decrease) in cash 24,074 11,153 1,110 14,554 Cash: Beginning of period 13,473 22,828 - 522,505 ------------------------------------- ----------- End of period 37,547 33,981 1,110 537,059 Short-term investments - - - 35,674 ------------------------------------- ----------- Cash and short-term investments $ 37,547 $ 33,981 $ 1,110 $ 572,733 ------------------------------------- ----------- 2007 For the year ended December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Cash provided by (used in) operating activities Before net change in non-cash working capital ($1,583) $ 191,754 $ 114,982 $ 19,584 Net change in non-cash working capital (7,210) 22,773 (6,470) (4,935) ------------------------------------------------- (8,793) 214,527 108,512 14,649 ------------------------------------------------- Cash provided by (used in) investing activities Capital spending (191) (26,073) (3,451) (1,742) Working capital changes associated with capital spending - - - - Disposition of investments 50,170 - - - Sale (purchase) of short-term investments (90,940) 16,113 - - Other - - - (43) ------------------------------------------------- (40,961) (9,960) (3,451) (1,785) ------------------------------------------------- Cash provided by (used in) financing activities (14,472) - - (4,000) ------------------------------------------------- Foreign exchange change on cash held in foreign currency - (40,362) (4,405) - Intergroup funding (distributions) 65,368 10,271 (108,424) (8,864) ------------------------------------------------- Increase (decrease) in cash 1,142 174,476 (7,768) - Cash: Beginning of period 39,899 159,195 119,260 - ------------------------------------------------- End of period 41,041 333,671 111,492 - Short-term investments 318,318 - - - ------------------------------------------------- Cash and short-term investments $ 359,359 $ 333,671 $ 111,492 $ - ------------------------------------------------- 2007 For the year ended December 31 LAS OK TEDI CRUCES PETAQUILLA TOTAL -------------------------------------- ---------- (thousands of (Papua New Canadian dollars) Guinea) (Spain) (Panama) Cash provided by (used in) operating activities Before net change in non-cash working capital $ 123,963 $ - $ - $ 448,700 Net change in non-cash working capital (25,507) - - (21,349) ------------------------------------- ----------- 98,456 - - 427,351 ------------------------------------- ----------- Cash provided by (used in) investing activities Capital spending (31,527) (313,585) - (376,569) Working capital changes associated with capital spending - 30,677 - 30,677 Disposition of investments - - - 50,170 Sale (purchase) of short-term investments 9,878 - - (64,949) Other - - - (43) ------------------------------------- ----------- (21,649) (282,908) - (360,714) ------------------------------------------------- Cash provided by (used in) financing activities (1,609) 142,327 - 122,246 ------------------------------------- ----------- Foreign exchange change on cash held in foreign currency (7,375) 1,154 - (50,988) ------------------------------------- ----------- Intergroup funding (distributions) (88,322) 129,971 - - ------------------------------------- ----------- Increase (decrease) in cash (20,499) (9,456) - 137,895 Cash: Beginning of period 33,972 32,284 - 384,610 ------------------------------------- ----------- End of period 13,473 22,828 - 522,505 Short-term investments - - - 318,318 ------------------------------------- ----------- Cash and short-term investments $ 13,473 $ 22,828 $ - $ 840,823 ------------------------------------- ----------- INMET MINING CORPORATION Segmented statements of cash flows (unaudited) 2008 For the three months ended December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Cash provided by (used in) operating activities Before net change in non-cash working capital ($6,322) ($8,736) $ 10,269 $ 16,174 Net change in non-cash working capital (6,977) 1,543 10,795 3,488 ----------------------------------------------- (13,299) (7,193) 21,064 19,662 ----------------------------------------------- Cash provided by (used in) investing activities Acquisition of Petaquilla Copper, net of cash acquired (42,863) - - - Capital spending 7 (6,687) (3,924) (153) Working capital changes associated with capital spending - - - - Purchase of short-term investments 78,405 - - - Loans to Petaquilla shareholders - - - - Investment in Petaquilla prior to consolidation - - - - ----------------------------------------------- 35,549 (6,687) (3,924) (153) ----------------------------------------------- Cash provided by (used in) financing activities (3,591) - (74) (700) ----------------------------------------------- Foreign exchange change on cash held in foreign currency - 20,553 9,432 - ----------------------------------------------- Intergroup funding (distributions) 8,323 (1,366) (37,627) (18,809) ----------------------------------------------- Increase (decrease) in cash 26,982 5,307 (11,129) - Cash: Beginning of period 178,582 187,574 77,105 - ----------------------------------------------- End of period 205,564 192,881 65,976 - Short-term investments 35,674 - - - ----------------------------------------------- Cash and short-term investments $ 241,238 $ 192,881 $ 65,976 $ - ----------------------------------------------- OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------------------- ----------- (thousands of Canadian (Papua New dollars) Guinea) (Spain) (Panama) Cash provided by (used in) operating activities Before net change in non-cash working capital $ 3,994 - $ - $ 15,379 Net change in non-cash working capital 6,764 - - 15,613 ----------------------------------- ----------- 10,758 - - 30,992 ----------------------------------- ----------- Cash provided by (used in) investing activities Acquisition of Petaquilla Copper, net of cash acquired - - - (42,863) ----------------------------------- ----------- Capital spending (11,704) (63,490) (17,025) (102,976) Working capital changes associated with capital spending - (31,003) - (31,003) Purchase of short-term investments - - - 78,405 Loans to Petaquilla shareholders - - - - Investment in Petaquilla prior to consolidation - - - - ----------------------------------- ----------- (11,704) (94,493) (17,025) (98,437) ----------------------------------- ----------- Cash provided by (used in) financing activities (59) 47,600 - 43,176 ----------------------------------- ----------- Foreign exchange change on cash held in foreign currency 3,911 3,889 (874) 36,911 ----------------------------------- ----------- Intergroup funding (distributions) (18,863) 53,747 14,595 - ----------------------------------- ----------- Increase (decrease) in cash (15,957) 10,743 (3,304) 12,642 Cash: Beginning of period 53,504 23,238 4,414 524,417 ----------------------------------- ----------- End of period 37,547 33,981 1,110 537,059 Short-term investments - - - 35,674 ----------------------------------- ----------- Cash and short-term investments $ 37,547 $ 33,981 $ 1,110 $ 572,733 ----------------------------------- ----------- 2007 For the three months ended December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Cash provided by (used in) operating activities Before net change in non-cash working capital ($7,167) $ 33,684 $ 23,976 $ 3,260 Net change in non-cash working capital 234 16,910 (19,143) 1,866 ----------------------------------------------- (6,933) 50,594 4,833 5,126 ----------------------------------------------- Cash provided by (used in) investing activities Capital spending (46) (5,814) (1,380) (285) Working capital changes associated with capital spending - - - - Purchase of short-term investments (28,617) (462) - - Other - - - - ----------------------------------------------- (28,663) (6,276) (1,380) (285) ----------------------------------------------- Cash provided by (used in) financing activities (8,000) - - (1,000) ----------------------------------------------- Foreign exchange change on cash held in foreign currency - (448) 2,863 - ----------------------------------------------- Intergroup funding (distributions) 2,312 4,068 (3,775) (3,841) ----------------------------------------------- Increase (decrease) in cash (41,284) 47,938 2,541 - Cash: Beginning of period 82,325 285,733 108,951 - ----------------------------------------------- End of period 41,041 333,671 111,492 - Short-term investments 318,318 - - - ----------------------------------------------- Cash and short-term investments $ 359,359 $ 333,671 $ 111,492 $ - ----------------------------------------------- 2007 For the three months ended December 31 OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------------------- ----------- (thousands of (Papua New Canadian dollars) Guinea) (Spain) (Panama) Cash provided by (used in) operating activities Before net change in non-cash working capital $ 22,074 $ - $ - $ 75,827 Net change in non-cash working capital 631 - - 498 ----------------------------------- ----------- 22,705 - - 76,325 ----------------------------------- ----------- Cash provided by (used in) investing activities Capital spending (10,113) (131,459) - (149,097) Working capital changes associated with capital spending - 55,208 - 55,208 Purchase of short-term investments (284) - - (29,363) Other - - - - ----------------------------------- ----------- (10,397) (76,251) - (123,252) ----------------------------------- ----------- Cash provided by (used in) financing activities 50 47,897 - 38,947 ----------------------------------- ----------- Foreign exchange change on cash held in foreign currency 973 2,214 - 5,602 ----------------------------------- ----------- Intergroup funding (distributions) (36,041) 37,277 - - ----------------------------------- ----------- Increase (decrease) in cash (22,710) 11,137 - (2,378) Cash: Beginning of period 36,183 11,691 - 524,883 ----------------------------------- ----------- End of period 13,473 22,828 - 522,505 Short-term investments - - - 318,318 ----------------------------------- ----------- Cash and short-term investments $ 13,473 $ 22,828 $ - $ 840,823 ----------------------------------- ----------- INMET MINING CORPORATION Consolidated statements of retained earnings (unaudited) Three Months Ended Year Ended (thousands of Canadian December 31 December 31 dollars) 2008 2007 2008 2007 ------------------------------------------------- ----------------------- Retained earnings, beginning of period, as previously reported $1,320,416 $1,018,141 $1,076,958 $ 669,005 Adjustment for inventory (note 2) - - (1,150) - ----------------------- ----------------------- Retained earnings, as adjusted 1,320,416 1,018,141 1,075,808 669,005 Net income (loss) (32,514) 63,645 216,922 417,609 Dividends on common shares (4,828) (4,828) (9,656) (9,656) ------------------------------------------------- ----------------------- Retained earnings, end of period $1,283,074 $1,076,958 $1,283,074 $1,076,958 ------------------------------------------------- ----------------------- (see accompanying notes) Consolidated statements of comprehensive income (loss) (unaudited) Three Months Ended Year Ended (thousands of Canadian December 31 December 31 dollars) 2008 2007 2008 2007 ------------------------------------------------- ----------------------- Net income (loss) ($32,514) $ 63,645 $ 216,922 $ 417,609 ----------------------- ----------------------- Other comprehensive income (loss) for the period(1) : Changes in fair value of gold forward sales contracts (5,309) (6,017) (8,999) (8,576) Changes in fair value of interest rate swap contracts (5,538) (2,392) (5,865) (3,929) Changes in fair value of foreign exchange forward contracts 54 2,193 7,137 8,264 Changes in fair value of investments (6,260) 2,820 (10,936) 23,202 Currency translation adjustments 195,945 10,907 236,401 (88,296) Reclassification to net income of gains/losses realized: Gain on sale of investments - - (256) (11,730) Troilus gold hedges loss 7,440 4,872 31,812 15,689 Amortization of deferred Troilus gold hedges (1,361) - (5,444) - Amortization of gains on foreign exchange forward contracts 43 - (3,181) - Ok Tedi gold hedges loss 5,723 3,595 6,736 3,595 Foreign exchange gain (loss) on reduction of net investment in self-sustaining foreign operations (note 16) (1,421) 2,083 18,963 5,394 ----------------------- ----------------------- 189,316 18,061 266,368 (56,387) ----------------------- ----------------------- Comprehensive income $ 156,802 $ 81,706 $ 483,290 $ 361,222 ------------------------------------------------- ----------------------- (see accompanying notes) (1) Net of applicable income tax and non-controlling interest. INMET MINING CORPORATION Notes to the consolidated financial statements 1. Significant accounting policies Our interim consolidated financial statements do not include all of the disclosure required for annual financial statements under generally accepted accounting principles (GAAP), and they have not been reviewed by our external auditors. These statements do, however, follow the same accounting policies and methods of application used in our most recent annual consolidated financial statements, except for the differences explained in note 2. You should read our interim statements in conjunction with our annual statements, which you can find in our 2007 Annual Review. 2. Changes in accounting policies Section 3031 - Inventories Effective January 1, 2008, we adopted CICA Handbook section 3031 - Inventories on a prospective basis. This section requires inventory to be measured at the lower of cost or net realizable value. It also clarifies how to allocate fixed production overhead, and requires: - consistent use of either first-in, first-out or weighted average to measure inventories - insurance and capital spares be accounted for as property, plant and equipment - any previous write-downs be reversed when the value of inventories increases. The amount of the reversal is limited to the amount of the original write-down. We are now expensing certain administrative and other costs as we incur them, rather than including them in the cost of inventory. We measure finished goods inventory and materials and supplies at the lower of weighted average cost or net realizable value. This change in policy had the following impact on our 2008 consolidated financial statements: - decreased opening 2008 inventory by $3.5 million - increased opening 2008 property, plant and equipment by $1.8 million - decreased opening 2008 future income tax liability by $0.6 million - decreased opening 2008 retained earnings by $1.1 million 3. Recently issued accounting pronouncement Section 3064 - Goodwill and intangible assets This section establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets. This section replaces Section 3062, Goodwill and Other Intangible Assets and Section 3450, Research and Development Costs. Various changes have been made to other sections of the CICA Handbook for consistency purposes. It provides guidance for the recognition of internally developed intangible assets and ensuring consistent treatment of all intangible assets, whether separately acquired or internally developed. Standards concerning goodwill are unchanged from the standards included in the previous section. This section becomes effective for us beginning on January 1, 2009. The adoption of this standard will not have an impact on our financial statements. Section 1582 - Business combinations This section establishes new standards for accounting for business combinations and is the Canadian equivalent to IFRS 3 - Business combinations. This section requires that: - most identifiable assets, liabilities, non-controlling interests and goodwill acquired in a business combination be recorded at full fair value - acquisition-related costs are recognized as expenses as incurred - obligations for contingent consideration are measured and recognized at fair value at the acquisition date - liabilities associated with restructuring or exit activities are recognized only if they meet the definition of a liability as of the acquisition date - an acquisition date gain is reflected for a bargain purchase - for step acquisitions, where control is obtained the acquirer re- measures its non-controlling equity investment in the acquiree at fair value as of the date control is obtained and recognizes any gain or loss in income. Section 1602 - Non-controlling interests This section provides guidance on accounting for non-controlling interests (NCI) subsequent to a business combination and replicates the provisions of International Accounting Standard (IAS) 27 - Consolidated and separate financial statements. NCI in subsidiaries are presented in the consolidated balance sheet with equity, separate from the parent shareholder's equity. In the income statement, NCI is not deducted in arriving at consolidated net income but is allocated to the controlling interest and the NCI according to their percentage ownership. Losses are attributed to NCI even if they exceed its carrying amount. Acquisitions or dispositions that do not result in a change of control are accounted for as equity transactions. Section 1601 - Consolidated financial statements This section carries forward the consolidation guidance previously included in its predecessor section 1600 except that it removes all guidance on accounting for NCI that is replaced by that provided in section 1602, and guidance already included in section 1582. Sections 1582, 1601 and 1602, are to be implemented concurrently. Section 1582 is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011. Sections 1601 and 1602 are effective for fiscal years beginning on or after January 1, 2011 with earlier adoption permitted as of the beginning of a fiscal year. Section 1602 is to be applied retrospectively, with certain exceptions. We are currently assessing the impact these changes in accounting policies will have on our consolidated financial statements. 4. Acquisition (a) Petaquilla Copper Ltd. In 2008 and through a wholly-owned subsidiary, we acquired all the outstanding common shares of Petaquilla Copper Ltd. ("PTC"), a Canadian junior mining company listed on the Toronto Stock Exchange. PTC's principal asset is a 26 percent interest in Minera Panama S.A. (MPSA), the Panamanian company that owns Petaquilla. We acquired 95 percent of PTC on September 19, 2008, and the remaining 5 percent on November 28, 2008 under a court approved plan of arrangement, paying a total of $378 million in cash or $2.20 per PTC common share for our interest. The table below shows the fair value of the assets we acquired and liabilities we assumed at the date of acquisition, based on the consideration paid. --------------------------------------------------------------------- (thousands of Canadian dollars) --------------------------------------------------------------------- Consideration: Cash paid $377,669 Transaction costs 24,411 --------------------------------------------------------------------- Cost of acquisition $402,080 --------------------------------------------------------------------- --------------------------------------------------------------------- Assets acquired: Cash $21,909 Other current assets 918 Property, plant and equipment and other assets 395,380 --------------------------------------------------------------------- 418,207 Liabilities assumed: Current liabilities (16,127) --------------------------------------------------------------------- Net assets acquired $402,080 --------------------------------------------------------------------- --------------------------------------------------------------------- Transaction costs include Panamanian advanced capital gains taxes of $18.9 million on the transfer of share ownership. We included 95 percent of PTC's earnings in our consolidated statement of earnings from September 19, 2008 to November 28, 2008 and 100 percent after November 28, 2008. Until September 19, 2008, we proportionally consolidated our 48 percent interest in Petaquilla. Our acquisition of PTC gave us a 76 percent interest in Petaquilla, and we have determined that we control this entity, so we consolidated Petaquilla's balance sheet effective September 19, 2008. (b) Teck Cominco Limited's 26 percent interest in Petaquilla On March 26, 2008, we entered into an agreement with Teck Cominco Limited (Teck) to proceed with the development of Petaquilla. We agreed to work closely with Teck in project development, acting as operator of the project on their behalf. We also agreed to fund our and Teck's share of project expenditures until we had contributed US $50 million in development costs, or until September 30, 2009, whichever was earlier. On November 20, 2008, Teck chose not to continue to participate in the Petaquilla copper project. We acquired their 26 percent interest in the project at a purchase price of US $30 million. No payments were required, as provided by our March 26, 2008 agreement. The transaction closed in December 2008. The table below shows the fair value of the assets we acquired and liabilities we assumed at the date of acquisition, based on the consideration paid. --------------------------------------------------------------------- (thousands of Canadian dollars) --------------------------------------------------------------------- Consideration: Funding provided on behalf of Teck and PTC plus accrued interest $32,065 Indemnity fee 3,654 --------------------------------------------------------------------- Cost of acquisition $35,719 --------------------------------------------------------------------- --------------------------------------------------------------------- Assets acquired: Cash $289 Other current assets 219 Property, plant and equipment 38,879 --------------------------------------------------------------------- 39,387 Liabilities assumed: Current liabilities (3,668) --------------------------------------------------------------------- Net assets acquired $35,719 --------------------------------------------------------------------- --------------------------------------------------------------------- 5. Statement of cash flows The following tables show the components of our net change in non- cash working capital by segment. For the twelve months ended December 31, 2008 ------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ------------------------------------------------------------------------- Accounts receivable $8,506 $11,980 $30,408 $1,220 $17,136 $69,250 Inventories - (2,851) (682) 1,241 (8,348) (10,640) Accounts payable and accrued liabilities (10,594) (2,453) (5,114) (3,096) 17,374 (3,883) Taxes (6,310) (18,742) (7,756) - (12,128) (44,936) Other - 78 - - 1,269 1,347 ------------------------------------------------------------------------- $(8,398) $(11,988) $16,856 $(635) $15,303 $11,138 ------------------------------------------------------------------------- For the twelve months ended December 31, 2007 ------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ------------------------------------------------------------------------- Accounts receivable $(4,814) $17,032 $14,383 $(7,685) $(14,877) $4,039 Inventories - 557 (853) 1,814 (1,362) 156 Accounts payable and accrued liabilities 5,927 (2,707) 94 936 2,528 6,778 Taxes (3,905) 7,920 (20,094) - (8,450) (24,529) Other (4,418) (29) - - (3,346) (7,793) ------------------------------------------------------------------------- $(7,210) $22,773 $(6,470) $(4,935) $(25,507) $(21,349) ------------------------------------------------------------------------- For the three months ended December 31, 2008 ------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ------------------------------------------------------------------------- Accounts receivable $(2,247) $13,168 $18,421 $687 $(1,118) $28,911 Inventories - (1,859) (591) 2,435 239 224 Accounts payable and accrued liabilities (64) (3,788) (6,005) 366 18,782 9,291 Taxes (4,557) (6,024) (1,030) - (12,503) (24,114) Other (109) (46) - - 1,364 1,301 ------------------------------------------------------------------------- $(6,977) $1,543 $10,795 $3,488 $6,764 $15,613 ------------------------------------------------------------------------- For the three months ended December 31, 2007 ------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ------------------------------------------------------------------------- Accounts receivable $(2,061) $16,777 $(3,436) $(2,613) $7,923 $16,590 Inventories - (690) (149) 3,619 (1,845) 935 Accounts payable and accrued liabilities 7,052 3,617 280 860 5,317 17,126 Taxes (357) (2,783) (15,838) - (8,871) (27,849) Other (4,400) (11) - - (1,893) (6,304) ------------------------------------------------------------------------- $234 $16,910 $(19,143) $1,866 $631 $498 ------------------------------------------------------------------------- 6. Cash and short-term investments At December 31, our cash and short-term investments are held in: --------------------------------------------------------------------- December December (thousands) 31 2008 31 2007 --------------------------------------------------------------------- Cash: Liquidity funds $276,301 $424,390 Term deposits 78,041 22,186 Overnight deposits 14,684 50,822 Bankers acceptances 64,293 - Money market funds 38,683 18,531 Provincial short-term notes 12,628 - Bank deposits 52,429 7,018 --------------------- 537,059 522,947 Short-term investments: Federal and crown corporation investments - 317,876 Provincial short-term notes 35,674 - --------------------------------------------------------------------- 35,674 317,876 --------------------------------------------------------------------- Total cash and short-term investments $572,733 $840,823 --------------------------------------------------------------------- 7. Restricted cash The table below shows our restricted cash balances. --------------------------------------------------------------------- December December (thousands) 31 2008 31 2007 --------------------------------------------------------------------- Collateralized cash for letter of credit facility - Inmet Mining $16,343 $14,444 In trust for Ok Tedi reclamation 16,667 11,836 Collateralized cash for letters of credit - Las Cruces 26,090 12,494 Collateralized cash for Pyhasalmi reclamation 2,104 - --------------------------------------------------------------------- 61,204 38,774 Less current portion: Collateralized cash for letters of credit - Las Cruces (8,311) (1,569) --------------------------------------------------------------------- $52,893 $37,205 --------------------------------------------------------------------- Cash collateralized letters of credit for Las Cruces are for the following: - (euro)3.1 million to secure payments that will ultimately be for the use of an electrical substation - (euro)2.5 million to secure payments to local townships that it will owe once certain licences are granted - (euro)5 million for a labour bond previously issued under Tranche A of its credit facility. The labour bond is fixed at (euro)5 million for the life of the mine. - (euro)4.7 million for dewatering and other purposes. 8. Accounts receivable --------------------------------------------------------------------- 2008 2007 --------------------------------------------------------------------- Accounts receivable from sale of metal $39,232 $70,407 Value-added and other taxes receivable 66,817 30,368 Advances and prepaid expenses 23,373 15,772 Other amounts receivable 6,320 14,649 --------------------------------------------------------------------- $135,742 $131,197 --------------------------------------------------------------------- 9. Investments The table below shows our investments. --------------------------------------------------------------------- December December (thousands) 31 2008 31 2007 --------------------------------------------------------------------- Available-for-sale equity securities: Premier Gold Mines Ltd. $15,309 $22,680 Other 2,205 9,586 --------------------------------------------------------------------- $17,514 $32,266 --------------------------------------------------------------------- 10. Derivatives The table below shows the fair value of our derivatives. --------------------------------------------------------------------- December December (thousands) 31 2008 31 2007 (fair (fair value) value) --------------------------------------------------------------------- Derivative asset: Ok Tedi copper forward sales contracts $4,327 Las Cruces currency forward sales contracts - 33,565 --------------------------------------------------------------------- $4,327 $33,565 --------------------------------------------------------------------- Derivative liabilities: Troilus gold forward sales contracts $- $26,889 Ok Tedi gold forward sales contracts 1,670 6,603 Ok Tedi copper forward sales contracts - 2,431 Las Cruces interest rate swaps 23,440 8,037 --------------------------------------------------------------------- $25,110 $43,960 --------------------------------------------------------------------- During the second quarter, Las Cruces' currency forward sale settled and Las Cruces received (euro)32.6 million. As this hedge was highly effective from inception to the date of settlement, we continue to apply hedge accounting for this contract. The gain on settlement continues to be deferred in Accumulated other comprehensive income (note 15) and will be recognized in income as a reduction of interest expense over the life of Las Cruces' credit facility - Tranche A. Las Cruces is currently capitalizing interest on long-term debt as a cost of deferred development, therefore the amortized gain is being recognized as a reduction of this interest. During 2008, this amounted to a reduction of $6.5 million. During the third quarter, we settled Troilus' remaining gold forward sales contracts for 24,250 ounces relating to gold shipments taking place during the remainder of 2008. These contracts were settled at a market price of US $819 per ounce, resulting in a cash payment of $12.4 million. We applied hedge accounting up to the point of settlement of these contracts therefore the settlement loss will be recognized against gross sales at the same time as the originally hedged gold shipments. 11. Accounts payable and accrued liabilities The table below shows the significant components of our accounts payable and accrued liabilities balance at December 31. --------------------------------------------------------------------- 2008 2007 --------------------------------------------------------------------- Accounts payables and accrued liabilities $143,715 $140,168 Amounts payable related to metal sales 47,639 5,029 Income taxes payable 17,173 23,603 Current portion of asset retirement obligations 4,000 4,000 --------------------------------------------------------------------- $212,527 $172,800 --------------------------------------------------------------------- 12. Long-term debt --------------------------------------------------------------------- December December (thousands) 31 2008 31 2007 --------------------------------------------------------------------- Credit facility - Tranche A $262,504 $125,776 - Tranche B 80,364 34,656 Promissory note 19,741 16,267 Loans from non-controlling shareholder 131,905 70,589 --------------------------------------------------------------------- 494,514 247,288 Less current portion: Credit facility - Tranche A (29,302) - Tranche B (80,364) (12,971) --------------------------------------------------------------------- $384,848 $234,317 --------------------------------------------------------------------- Credit facility In the first half of 2008, Las Cruces borrowed an additional (euro)52 million under Tranche A, the US $215 million senior secured facility. On June 30, 2008, Tranche A was fully drawn and was converted from a euro-denominated loan to a US $215 million loan. Beginning July 1, we revalued the loan to euros (the functional currency of Las Cruces). Foreign exchange gains and losses on revaluations are reflected in Investment and other income (note 16). In this quarter, there was additional borrowings of (euro)14 million (2008 year to date - (euro)33 million) under Tranche B, the (euro)69 million senior secured bridge financing facility. During the third quarter, Las Cruces repaid (euro)9 million under Tranche B equal to value-added tax refunds received. The credit facility loans approximate fair value because the loans accrue interest at prevailing market rates. Loans from non-controlling shareholder This quarter, Las Cruces received (euro)23 million (2008 year to date - (euro)101 million) of intercompany loan advances. These loans bear interest at EURIBOR plus 6.1 percent and are due to be repaid on February 25, 2020. The non-controlling portion of these loans, (euro)78 million, is reflected in long-term debt at December 31, 2008. Loans from non-controlling shareholders approximate fair value because the loans accrue interest at prevailing market rates. 13. Asset retirement obligations During 2008, we have recognized additional liabilities of $17.6 million at Las Cruces as a result of development activities that have taken place. During the second quarter, we recognized additional liabilities of $4.3 million at Cayeli primarily as a result of cost escalation. At December 31, 2008, we recognized additional liabilities of $5.3 million at Troilus because of additional owner's costs. 14. Commitments Our operations have the following capital commitments as at December 31, 2008: - Ok Tedi committed approximately $86.5 million (our proportionate share is $15.6 million) for expenditures related to pit drainage, dredging and other mining equipment. - Las Cruces committed $39.8 million for engineering, procurement and construction management related to the plant. - Petaquilla committed $177.7 million for the design and supply of certain SAG mill and ball mill equipment. 15. Accumulated other comprehensive income (loss) (AOCI) The table below shows the components of the beginning and ending balances of AOCI. --------------------------------------------------------------------- (thousands) --------------------------------------------------------------------- Unrealized losses on gold forward sales contracts (net of tax of $2,169) $(31,951) Deferred Troilus gold hedges 5,444 Unrealized gains on foreign exchange forward contract(1) 17,067 Unrealized losses on interest rate swap contracts(2) (4,097) Unrealized losses on investments (net of tax of $2,951) 14,506 Currency translation adjustment (84,705) --------------------------------------------------------------------- AOCI, December 31, 2007 $(83,736) Other comprehensive income for the year ending December 31, 2008 266,368 --------------------------------------------------------------------- AOCI, December 31, 2008 $182,632 --------------------------------------------------------------------- AOCI December 31, 2008 comprises: Unrealized losses on gold forward sales contracts (net of tax of $1,030) $(2,402) Unrealized gains on foreign exchange forward contract(3) 21,023 Unrealized losses on interest rate swap contract(4) (9,962) Unrealized gains on investments (net of tax of $667) 3,314 Currency translation adjustment 170,659 --------------------------------------------------------------------- AOCI, December 31, 2008 $182,632 --------------------------------------------------------------------- (1) Net of tax of $10,448 and non-controlling interest of $7,315. (2) Net of tax of $2,510 and non-controlling interest of $1,756. (3) Net of tax of $14,818 and non-controlling interest of $10,373. (4) Net of tax of $6,102 and non-controlling interest of $4,270. The table below shows the breakdown of the currency translation adjustment included in AOCI. --------------------------------------------------------------------- December December (thousands) 31 2008 31 2007 --------------------------------------------------------------------- Pyhasalmi (euro functional currency) $17,480 $(1,466) Las Cruces (euro functional currency) 57,947 (1,919) Cayeli (US dollar functional currency) 24,751 (65,822) Ok Tedi (US dollar functional currency) 6,224 (15,498) Petaquilla (US dollar functional currency) 64,257 - --------------------------------------------------------------------- $170,659 $(84,705) --------------------------------------------------------------------- The US dollar to Canadian dollar exchange rate was $1.22 at December 31, 2008 and $0.99 at December 31, 2007. The euro to Canadian dollar exchange rate was $1.70 at December 31, 2008 and $1.45 at December 31, 2007. 16. Investment and other income Investment and other income are summarized as follows: --------------------------------------------------------------------- Three months ended Twelve months ended December 31 December 31 (thousands) 2008 2007 2008 2007 --------------------------------------------------------------------- Interest income $6,188 $9,703 $28,182 $32,647 Foreign exchange loss (5,607) (2,969) (33,875) (14,519) Dividend and royalty income 1,825 1,677 4,979 5,748 Gain on sale of Wolfden - - - 11,730 Mark to market on Ok Tedi copper forward contracts 3,791 (1,615) 3,791 (3,109) Other 1,860 (828) 2,909 3,957 --------------------------------------------------------------------- $8,057 $5,968 $5,986 $36,454 --------------------------------------------------------------------- Foreign exchange For transactions with foreign currencies we use: - the exchange rates in effect at year-end for monetary assets and liabilities - the exchange rates in effect on the date of the transaction for non-monetary assets and liabilities - the exchange rates in effect on the date of the transaction for income and expenses Foreign exchange loss is a result of: --------------------------------------------------------------------- Three months ended Twelve months ended December 31 December 31 2008 2007 2008 2007 --------------------------------------------------------------------- Translation of foreign- denominated cash $4,292 ($(722) $5,102 $(5,511) Translation of Las Cruces' US dollar-denominated debt (note 12) (12,001) - (24,896) - Translation of other- monetary assets and liabilities 681 (138) 4,882 (3,614) Reduction in our net investments 1,421 (2,109) (18,963) (5,394) --------------------------------------------------------------------- $(5,607) $(2,969) $(33,875) $(14,519) --------------------------------------------------------------------- Gain on sale of Wolfden In 2007, we sold our shares in Wolfden for cash proceeds of $51.4 million and recorded a gain of $11.7 million. 17. Income tax expense (recovery) The tables below show our current and future income tax expense. For the twelve months ended December 31, 2008 ------------------------------------------------------------------------- Las (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total ------------------------------------------------------------------------- Current income taxes $9,930 $32,965 $18,995 $49,779 $ - $111,669 Future income taxes 5,000 (749) 819 - (11,050) (5,980) ------------------------------------------------------------------------- $14,930 $32,216 $19,814 $49,779 $(11,050) $105,689 ------------------------------------------------------------------------- For the twelve months ended December 31, 2007 ------------------------------------------------------------------------- Las (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total ------------------------------------------------------------------------- Current income taxes $1,698 $45,866 $30,117 $68,128 $ - $145,809 Future income taxes (5,000) 579 794 (2,383) 286 (5,724) ------------------------------------------------------------------------- $(3,302) $46,445 $30,911 $65,745 $286 $140,085 ------------------------------------------------------------------------- For the three months ended December 31, 2008 ------------------------------------------------------------------------- Las (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total ------------------------------------------------------------------------- Current income taxes $1,870 $(3,600) $398 $332 $4,283 $3,283 Future income taxes 5,000 1,609 550 (877) (10,332) (4,050) ------------------------------------------------------------------------- $6,870 $(1,991) $948 $(545) $(6,049) $(767) ------------------------------------------------------------------------- For the three months ended December 31, 2007 ------------------------------------------------------------------------- Las (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total ------------------------------------------------------------------------- Current income taxes $541 $5,735 $5,569 $10,923 $ - $22,768 Future income taxes (5,000) 221 631 (101) 32 (4,217) ------------------------------------------------------------------------- $(4,459) $5,956 $6,200 $10,822 $32 $18,551 ------------------------------------------------------------------------- 18. Net income (loss) per share The following tables show our calculation of basic and diluted net income (loss) per share. --------------------------------------------------------------------- Three months ended Twelve months ended December 31 December 31 (thousands) 2008 2007 2008 2007 --------------------------------------------------------------------- Net income (loss) available to common shareholders $(32,514) $63,645 $216,922 $417,609 --------------------------------------------------------------------- (thousands) --------------------------------------------------------------------- Weighted average common shares outstanding 48,282 48,282 48,282 48,279 Plus incremental shares from assumed conversions: Deferred share units 83 75 83 75 Long-term incentive plan units 43 - 43 - --------------------------------------------------------------------- Diluted weighted average common shares outstanding 48,408 48,357 48,408 48,354 --------------------------------------------------------------------- (Canadian dollars per share) --------------------------------------------------------------------- Basic net income (loss) per common share $(0.67) $1.32 $4.49 $8.65 Dilutive effect from assumed conversions of deferred share units per common share - - (0.01) (0.01) --------------------------------------------------------------------- Diluted net income (loss) per common share $(0.67) $1.32 $4.48 $8.64 --------------------------------------------------------------------- 19. Asset impairment At December 31, 2008, we have recorded impairment charges as follows: --------------------------------------------------------------------- 2008 2007 --------------------------------------------------------------------- Long-lived assets - Cerattepe $34,200 $ - Materials and supplies inventory - Troilus 2,075 - --------------------------------------------------------------------- $36,275 $ - --------------------------------------------------------------------- (a) Cerattepe On March 26, 2008 we received notice from the Rize Administrative Court of its decision to grant an injunction against the Cerattepe property. The injunction prevented us from doing any further development work on the project. We appealed the injunction and on October 24, 2008 the Court ruled to cancel our operating licences. We made a further appeal to the Supreme Administrative Court. We continue to believe that the applications to cancel the operating licences are without merit. Nonetheless, we have decided that we will not proceed with the project, regardless of the decision on the appeal. All work has ceased and we took a $34 million charge to write down the assets to its fair value of $5.5 million. We calculated the impairment charges using expected discounted cash flows. (b) Troilus During the quarter, we recognized an impairment charge of $2 million to write down materials and supplies that Troilus will not use over the remainder of its operations to its net realizable value.SOURCE Inmet Mining Corporation
Source: PR Newswire
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