Inmet announces second quarter earnings of $1.37 per share compared with $1.40 per share in the second quarter of 2008

Posted on: Tuesday, 28 July 2009, 07:50 CDT

All amounts in Canadian dollars unless indicated otherwise

TORONTO, July 28 /PRNewswire-FirstCall/ -

Second quarter highlights - Earnings from operations were down because of lower metal prices and sales volumes Lower copper and zinc prices reduced sales by $57 million this quarter compared to the same quarter in 2008. This was offset somewhat by higher gold and other metal prices, which increased sales by $16 million. Copper prices this quarter averaged US $2.22 per pound compared to US $3.83 per pound during the same quarter in 2008. - Copper production in line with last year Copper production this quarter was in line with last year's production. Zinc production was lower because of lower grades mined and gold production was lower because Troilus began to draw from its low grade stockpile. - Copper cash costs were down Copper cash costs this quarter were US $0.52 per pound compared to US $0.65 per pound in the second quarter of 2008. Lower direct production costs and treatment charges helped lower cash costs, but these were partly offset by lower zinc metal credits. Cash costs are a non-GAAP measure (see pages 30 to 32). - Revised production outlook for 2009 Production in the first half of the year was lower than we expected because of lower grades mined at Cayeli and lower throughput at Ok Tedi. As a result we have revised our 2009 production objectives to reflect this. We now expect to produce 100,000 tonnes of copper, 78,000 tonnes of zinc, 230,000 ounces of gold and 411,000 tonnes of pyrite in 2009. - Las Cruces produces first copper cathode and receives final approval for amended dewatering and reinjection system permit On June 3, Las Cruces produced its first copper cathode and is working towards achieving its designed annualized production rate capacity of 72,000 tonnes by February 2010. On July 16, the Water Authority of Andalucia approved an amended permit for the dewatering and reinjection system. - Petaquilla completes its drilling program We completed the drilling program in June, but we have to finalize a National Instrument 43-101 compliant technical report and the front- end engineering and design study before we can establish a final mineral reserve estimate for the Petaquilla project. Preliminary results, however, indicate that we can expect to meet or exceed our target for mineral reserves that would support a minimum mine life of 30 years at a throughput rate of 150,000 tonnes per day. - We successfully issued 7.8 million shares for gross proceeds of $348 million On June 25, we closed a bought deal offering of 7.8 million common shares at an offering price of $44.50 per share for gross proceeds of $348 million. We plan to use about US $240 million of the proceeds to fund the repayment of the Las Cruces credit facility, which is scheduled for July 31, 2009. Key financial data ------------------------------------------------------------------------- three months ended June 30 2009 2008 change ------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (thousands, except per share amounts) Sales Gross sales $213,042 $281,463 -24% Net income Net income $66,528 $67,705 -2% Net income per share $1.37 $1.40 -2% Cash flow Cash flow provided by operating activities $90,596 $114,797 -21% Cash flow provided by operating activities per share(1) $1.86 $2.38 -21% Capital spending $86,263 $121,028 -29% ------------------------------------------------------------------------- OPERATING HIGHLIGHTS Production(2) Copper (tonnes) 19,200 19,300 -1% Zinc (tonnes) 17,500 20,900 -16% Gold (ounces) 50,600 59,900 -16% Cash costs(3) Copper (US $ per pound) $0.52 $0.65 -20% Gold (US $ per ounce) $259 $360 -28% ------------------------------------------------------------------------- ------------------------------------------------------------------------- six months ended June 30 2009 2008 change ------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (thousands, except per share amounts) Sales Gross sales $452,194 $557,744 -19% Net income Net income $117,855 $174,379 -32% Net income per share $2.43 $3.61 -32% Cash flow Cash flow provided by operating activities $107,693 $195,708 -45% Cash flow provided by operating activities per share(1) $2.22 $4.05 -45% Capital spending $181,122 $232,442 -22% ------------------------------------------------------------------------- OPERATING HIGHLIGHTS Production(2) Copper (tonnes) 39,300 38,600 +2% Zinc (tonnes) 32,800 41,200 -20% Gold (ounces) 129,400 116,200 +11% Cash costs(3) Copper (US $ per pound) $0.55 $0.48 +15% Gold (US $ per ounce) $164 $374 -56% ------------------------------------------------------------------------- -------------------------- as at as at June 30 December 31 FINANCIAL CONDITION 2009 2008 -------------------------- Current ratio 2.7 to 1 2.4 to 1 Gross debt to total equity(4) 12% 19% Net working capital balance (millions) $689 $475 Cash balance (millions) $835 $573 Shareholders' equity (millions) $2,247 $1,868 ------------------------------------------------------------------------- (1) Calculated as cash flow provided by operating activities divided by average shares outstanding for the respective period. (2) Inmet's share. (3) Cash cost per pound of copper and cash cost per ounce of gold are non-GAAP measures - see Supplementary financial information on pages 30 to 32. (4) Gross debt includes long-term debt and current portion of long-term debt less the non-recourse note owing from Las Cruces to its non- controlling shareholder.

Current market environment

Although we saw improvement in base metal prices during the first half of the year and despite signs of economic recovery, we continue to consider market conditions to be unsettled. The strength of our financial position, together with our relatively low operating costs, however, lead us to expect that:

- market conditions will not have any impact on our ability to meet expected production levels - we will be able to sustain our capital expenditures and remain consistent with our objectives - we will continue to pursue our growth objectives by advancing the Petaquilla project and considering other opportunities as they arise.

We will continue to monitor the metal and financial markets, our financial performance and resources, and our capital spending to make sure we maintain the financial strength we need in these volatile and uncertain markets.

Second quarter press release Where to find it Our financial results........................ 4 Key changes in 2009.......................... 4 Understanding our performance................ 5 Earnings from operations................... 7 Corporate costs............................ 11 Results of our operations.................... 13 Cayeli..................................... 14 Pyhasalmi.................................. 16 Las Cruces................................. 18 Troilus.................................... 20 Ok Tedi.................................... 22 Status of our development project............ 24 Petaquilla................................. 24 Managing our liquidity....................... 25 Financial condition.......................... 28 Accounting changes........................... 29 Supplementary financial information.......... 30 Consolidated financial statements............ 34

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 June 30, 2009.

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 June 30 (thousands, except per share amounts) 2009 2008 change ------------------------------------------------------------------------- EARNINGS FROM OPERATIONS(1) Cayeli $22,185 $45,262 -51% Pyhasalmi 11,783 27,232 -57% Troilus 16,032 7,510 +113% Ok Tedi 35,530 49,656 -28% Other (508) (494) +3% ------------------------------------------------------------------------- 85,022 129,166 -34% ------------------------------------------------------------------------- DEVELOPMENT AND EXPLORATION Corporate development and exploration (2,727) (2,483) +10% ------------------------------------------------------------------------- CORPORATE COSTS General and administration (4,785) (2,790) +72% Investment and other income 16,466 (11,358) -245% Asset impairment - - - Interest expense (493) (471) +5% Income and capital taxes (24,177) (44,457) -46% Non-controlling interest (2,778) 98 -2,935% ------------------------------------------------------------------------- (15,767) (58,978) -73% ------------------------------------------------------------------------- Net income $66,528 $67,705 -2% ------------------------------------------------------------------------- Basic net income per share $1.37 $1.40 -2% ------------------------------------------------------------------------- Diluted net income per share $1.36 $1.40 -3% ------------------------------------------------------------------------- Weighted average shares outstanding 48,712 48,282 +1% ------------------------------------------------------------------------- ------------------------------------------------------------------------- six months ended June 30 (thousands, except per share amounts) 2009 2008 change ------------------------------------------------------------------------- EARNINGS FROM OPERATIONS(1) Cayeli $37,086 $98,917 -63% Pyhasalmi 18,326 55,226 -67% Troilus 70,516 16,145 +337% Ok Tedi 53,115 103,574 -49% Other (992) (988) - ------------------------------------------------------------------------- 178,051 272,874 -35% ------------------------------------------------------------------------- DEVELOPMENT AND EXPLORATION Corporate development and exploration (5,959) (5,101) +17% ------------------------------------------------------------------------- CORPORATE COSTS General and administration (8,909) (6,438) +38% Investment and other income 5,263 3,396 +55% Asset impairment (6,419) - -100% Interest expense (985) (918) +7% Income and capital taxes (43,192) (89,327) -52% Non-controlling interest 5 (107) -105% ------------------------------------------------------------------------- (54,237) (93,394) -42% ------------------------------------------------------------------------- Net income $117,855 $174,379 -32% ------------------------------------------------------------------------- Basic net income per share $2.43 $3.61 -32% ------------------------------------------------------------------------- Diluted net income per share $2.42 $3.61 -33% ------------------------------------------------------------------------- Weighted average shares outstanding 48,498 48,282 - ------------------------------------------------------------------------- (1) Gross sales less smelter processing charges and freight, cost of sales, depreciation and provisions for mine reclamation. Key changes in 2009 ------------------------------------------------------------------------- three months six months ended ended (millions) June 30 June 30 see page ------------------------------------------------------------------------- EARNINGS FROM OPERATIONS Sales Lower copper and zinc prices denominated in Canadian dollars $(57) $(139) 7 Higher gold prices and other prices 16 51 7 Lower sales volumes (13) (3) 8 Lower pyrite sales, net of costs to sell (2) (9) Costs Lower smelter processing charges and freight 5 7 9 Lower operating costs, including costs that vary with income and cash flows 11 9 10 Higher depreciation (4) (11) 10 ------------------------------------------------------------------------- Lower earnings from operations, compared to 2008 $(44) $(95) CORPORATE COSTS Lower income tax expense from lower earnings 20 40 12 Lower interest income on cash balances (6) (13) 11 Foreign exchange changes on Las Cruces debt 15 4 11 Other foreign exchange changes 22 16 11 Other (8) (9) ------------------------------------------------------------------------- Lower net income, compared to 2008 $(1) $(57) ------------------------------------------------------------------------- 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 June 30 six months ended June 30 2009 2008 change 2009 2008 change ------------------------------------------------------------------------- US dollar metal prices Copper (per pound) $2.22 $3.83 -42% $2.14 $4.00 -47% Zinc (per pound) $0.69 $0.94 -27% $0.60 $1.00 -40% Gold (per ounce) $900 $725 +24% $932 $748 +25% ------------------------------------------------------------------------- Canadian dollar metal prices Copper (per pound) $2.60 $3.87 -33% $2.58 $4.04 -36% Zinc (per pound) $0.81 $0.95 -15% $0.72 $1.01 -29% Gold (per ounce) $1,050 $732 +43% $1,124 $755 +49% -------------------------------------------------------------------------

There has been an overall improvement in base metal prices in 2009 so far, and a steady increase in the price of gold.

Copper

The price of copper increased by over 25 percent this quarter, following a more than 30 percent increase in the first quarter, and reaching a high of US $2.39 per pound in June. The average market copper price for the quarter was US $2.11 per pound, and in June was US $2.27 per pound.

The increase was supported by a steady decline in metals exchange inventories, a rise in demand from China, and an improvement in business sentiment.

LME warehouse copper inventories fell in June to 266,000 tonnes - the lowest level since November of 2008. Over the last four months, total global exchange stocks have dropped by over 200,000 tonnes and, at the end of June, were 14,000 tonnes lower than they were at the end of 2008.

Zinc

Zinc averaged US $0.67 per pound this quarter, a 25 percent increase over last quarter, hitting a 9 month high in mid June of US $0.76 per pound. Exchange stocks at LME warehouses increased by 10 percent in June, to 353,000 tonnes, reversing the downward movement of the prior three months.

Gold

Gold prices continued to increase this quarter, closing at US $935 per ounce. This is a 2 percent increase over the first quarter, which ended at US $917 per ounce. Gold averaged US $923 per ounce this quarter, up from US $908 per ounce in the first quarter. The price of gold was as high as US $982 at the beginning of June because of the weakness of the US dollar and concerns about inflation.

Pyrite

Toward the end of 2008, the economic downturn began to have a significant effect on demand for sulphur and sulphuric acid. According to analysts, the sulphuric acid market will continue to deteriorate and sulphur prices will continue to be lower over the short to medium term. This will have a direct impact on pyrite prices.

Exchange rates

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

------------------------------------------------------------------------- three months ended June 30 six months ended June 30 2009 2008 change 2009 2008 change ------------------------------------------------------------------------- Exchange rates 1 US$ to C$ $1.17 $1.01 +16% $1.21 $1.01 +20% 1 euro to C$ $1.59 $1.58 +1% $1.61 $1.54 +5% 1 euro to US$ $1.36 $1.56 -13% $1.33 $1.53 -13% -------------------------------------------------------------------------

Sales are affected by the conversion of US dollar revenue to Canadian dollars. Foreign exchange had a significant impact on our results this quarter compared to the same period last year. The Canadian dollar dropped 16 percent this quarter relative to the US dollar and 1 percent relative to the euro.

Net income was $34 million higher this quarter compared to the same quarter last year because of fluctuations in the value of the US dollar and euro relative to the Canadian dollar, as described in the table below.

------------------------------------------------------------------------- three months ended (millions) June 30 ------------------------------------------------------------------------- US dollar sales translated into Canadian dollars (reflected in Canadian dollar sales price) $47 Cayeli and Ok Tedi US dollar costs translated into Canadian dollars (25) Pyhasalmi euro based costs translated into Canadian dollars (2) Foreign exchange gain on Las Cruces debt, net of tax and non-controlling interest 7 Foreign exchange realized from distributions of funds from subsidiaries 4 Other 3 ------------------------------------------------------------------------- $34 ------------------------------------------------------------------------- Treatment charges up for copper and down for zinc Treatment charges are one component of smelter processing charges. We also pay smelters for content losses and price participation. The table below shows the average charges we realized this quarter and year to date. ------------------------------------------------------------------------- three months ended June 30 2009 2008 change ------------------------------------------------------------------------- Treatment charges Copper (per dry metric tonne of concentrate) US $66 US $40 +65% Zinc (per dry metric tonne of concentrate) US $131 US $292 -55% ------------------------------------------------------------------------- Price participation Copper (per pound) US $0.03 US $0.05 -40% Zinc (per pound) US $0.05 US $(0.01) +600% ------------------------------------------------------------------------- Freight charges Copper (per dry metric tonne of concentrate) US $34 US $54 -37% Zinc (per dry metric tonne of concentrate) US $28 US $41 -32% ------------------------------------------------------------------------- ------------------------------------------------------------------------- six months ended June 30 2009 2008 change ------------------------------------------------------------------------- Treatment charges Copper (per dry metric tonne of concentrate) US $67 US $46 +46% Zinc (per dry metric tonne of concentrate) US $192 US $291 -34% ------------------------------------------------------------------------- Price participation Copper (per pound) US $0.03 US $0.05 -40% Zinc (per pound) US $0.01 US $(0.02) +150% ------------------------------------------------------------------------- Freight charges Copper (per dry metric tonne of concentrate) US $30 US $50 -40% Zinc (per dry metric tonne of concentrate) US $26 US $41 -37% -------------------------------------------------------------------------

Copper treatment charges were higher this quarter and year to date than they were last year because contract terms with smelters were less favourable. We finalized our contract terms for zinc smelters in the second quarter at more favourable terms than last year. The second quarter includes adjustments to first quarter charges that were priced at 2008 rates.

Statutory tax rates remain consistent

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

------------------------------------------------------------------------- 2009 2008 change ------------------------------------------------------------------------- Statutory tax rates Cayeli 24% 24% - Pyhasalmi 26% 26% - Ok Tedi 37% 37% - Las Cruces 30% 30% - ------------------------------------------------------------------------- Earnings from operations Earnings from operations include the following: ------------------------------------------------------------------------- three months ended June 30 (thousands) 2009 2008 change ------------------------------------------------------------------------- Gross sales $213,042 $281,463 -24% Smelter processing charges and freight (40,589) (53,209) -24% Cost of sales: Direct production costs (71,935) (82,076) -12% Inventory changes 2,222 (1,744) -227% Provisions for mine rehabilitation and other non-cash charges (4,114) (6,073) -32% Depreciation (13,604) (9,195) +48% ------------------------------------------------------------------------- Earnings from operations $85,022 $129,166 -34% ------------------------------------------------------------------------- ------------------------------------------------------------------------- six months ended June 30 (thousands) 2009 2008 change ------------------------------------------------------------------------- Gross sales $452,194 $557,744 -19% Smelter processing charges and freight (81,129) (97,366) -17% Cost of sales: Direct production costs (150,354) (159,610) -6% Inventory changes (1,673) 1,196 -240% Provisions for mine rehabilitation and other non-cash charges (11,704) (10,725) +9% Depreciation (29,283) (18,365) +59% ------------------------------------------------------------------------- Earnings from operations $178,051 $272,874 -35% ------------------------------------------------------------------------- Gross sales were down this year ------------------------------------------------------------------------- three months ended June 30 (thousands) 2009 2008 change ------------------------------------------------------------------------- Gross sales by operation Cayeli $63,711 $98,313 -35% Pyhasalmi 43,001 61,249 -30% Troilus 37,407 35,171 +6% Ok Tedi(1) 68,923 86,730 -21% ------------------------------------------------------------------------- $213,042 $281,463 -24% ------------------------------------------------------------------------- Gross sales by metal Copper $105,260 $161,530 -35% Zinc 33,028 52,185 -37% Gold 55,711 45,046 +24% Other 19,043 22,702 -16% ------------------------------------------------------------------------- $213,042 $281,463 -24% ------------------------------------------------------------------------- ------------------------------------------------------------------------- six months ended June 30 (thousands) 2009 2008 change ------------------------------------------------------------------------- Gross sales by operation Cayeli $123,732 $198,929 -38% Pyhasalmi 76,982 116,157 -34% Troilus 124,397 69,422 +79% Ok Tedi(1) 127,083 173,236 -27% ------------------------------------------------------------------------- $452,194 $557,744 -19% ------------------------------------------------------------------------- Gross sales by metal Copper $209,999 $329,698 -36% Zinc 60,052 100,991 -41% Gold 148,725 88,333 +68% Other 33,418 38,722 -14% ------------------------------------------------------------------------- $452,194 $557,744 -19% ------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's sales. Key components of the change in sales: lower copper and zinc prices, higher gold prices ------------------------------------------------------------------------- three months ended six months ended (millions) June 30 June 30 ------------------------------------------------------------------------- Lower copper prices, denominated in Canadian dollars $(51) $(116) Lower zinc prices, denominated in Canadian dollars (6) (23) Higher gold prices, denominated in Canadian dollars 17 50 Changes in other metal prices (1) - Lower sales volumes (27) (17) ------------------------------------------------------------------------- Lower gross sales, compared to 2008 $(68) $(106) -------------------------------------------------------------------------

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 calculated using 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).

In the second quarter, we recorded $8 million in positive finalization adjustments from first quarter sales.

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

- 18 million pounds of copper provisionally priced at US $2.25 per pound - 14 million pounds of zinc provisionally priced at US $0.70 per pound.

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

---------------------------------------------------- (millions of pounds) copper zinc ---------------------------------------------------- July 2009 7 14 August 2009 6 - September 2009 3 - October 2009 2 - ---------------------------------------------------- Unsettled sales at June 30, 2009 18 14 ---------------------------------------------------- Lower sales volumes Our sales volumes are directly affected by the amount of production from our mines, and our ability to ship to our customers. ------------------------------------------------------------------------- three months ended June 30 six months ended June 30 2009 2008 change 2009 2008 change ------------------------------------------------------------------------- Sales volumes Copper (tonnes) 18,300 18,900 -3% 36,800 37,200 -1% Zinc (tonnes) 18,600 25,000 -26% 37,300 45,500 -18% Gold (ounces) 52,500 61,600 -15% 131,900 117,000 +13% Pyrite (tonnes) 121,000 142,700 -15% 197,000 266,800 -26% ------------------------------------------------------------------------- Production ------------------------------------------------------------------------- three months ended six months ended revised Inmet's June 30 June 30 objective share(1) 2009 2008 change 2009 2008 change 2009 ------------------------------------------------------------------------- Copper (tonnes) Ok Tedi 6,900 7,400 -7% 13,500 14,100 -4% 28,600 Cayeli 7,500 7,600 -1% 14,600 15,800 -8% 32,700 Pyhasalmi 3,700 3,100 +19% 7,300 6,600 +11% 13,000 Las Cruces - - - - - - 20,200 Troilus 1,100 1,200 -8% 3,900 2,100 +86% 6,000 ------------------------------------------------------------------------- 19,200 19,300 -1% 39,300 38,600 +2% 100,500 ------------------------------------------------------------------------- Zinc (tonnes) Cayeli 11,800 13,200 -11% 23,600 25,900 -9% 55,300 Pyhasalmi 5,700 7,700 -26% 9,200 15,300 -40% 22,600 ------------------------------------------------------------------------- 17,500 20,900 -16% 32,800 41,200 -20% 77,900 ------------------------------------------------------------------------- Gold (ounces) Troilus 26,700 37,800 -29% 84,800 72,800 +16% 128,000 Ok Tedi 23,900 22,100 +8% 44,600 43,400 +3% 102,000 ------------------------------------------------------------------------- 50,600 59,900 -16% 129,400 116,200 +11% 230,000 ------------------------------------------------------------------------- Pyrite (tonnes) Pyhasalmi 132,200 111,200 +19% 323,000 305,700 +6% 411,000 ------------------------------------------------------------------------- (1) Inmet's share represents 100 percent for Cayeli, Pyhasalmi and Troilus, 18 percent for Ok Tedi and 70 percent for Las Cruces.

Copper production this quarter was consistent to the same quarter in 2008, because of higher grades at Pyhasalmi, and lower grades at Ok Tedi.

Zinc production was down mainly because zinc grades and recoveries at Cayeli and Pyhasalmi were lower.

Gold production was down because grades were lower at Troilus as production was drawn from its low grade stockpiles.

2009 outlook for sales

Our outlook for sales ties directly to our production outlook. We have revised our original annual production objectives because production at Cayeli, Ok Tedi and Troilus in the first half of the year was lower than we expected. Turn to Results of our operations starting on page 13 for an explanation for each operation. Overall, our copper production objective is now 7,100 tonnes lower, zinc production is lower by 1,100 tonnes, gold by 11,600 ounces and pyrite production by 99,000 tonnes.

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. Market uncertainty makes it difficult to forecast metal prices, but we remain focused on maximizing the efficiency of our operations to ensure that we remain highly competitive in any economic environment.

Lower smelter processing charges than last year ------------------------------------------------------------------------- three months ended June 30 (thousands) 2009 2008 change ------------------------------------------------------------------------- Smelter processing charges and freight by operation Cayeli $18,438 $25,565 -28% Pyhasalmi 12,326 14,561 -15% Troilus 2,458 2,421 +2% Ok Tedi(1) 7,367 10,662 -31% ------------------------------------------------------------------------- $40,589 $53,209 -24% ------------------------------------------------------------------------- Smelter processing charges and freight by metal Copper $19,827 $21,516 -8% Zinc 11,780 24,679 -52% Other 8,982 7,014 +28% ------------------------------------------------------------------------- $40,589 $53,209 -24% ------------------------------------------------------------------------- Smelter processing charges by type and freight Copper treatment and refining charges $8,882 $5,099 +74% Zinc treatment charges 5,602 14,348 -61% Copper price participation 1,275 2,281 -44% Zinc price participation 2,407 (366) +758% Content losses 10,660 16,104 -34% Other 2,039 2,239 -9% Freight 9,724 13,504 -28% ------------------------------------------------------------------------- $40,589 $53,209 -24% ------------------------------------------------------------------------- ------------------------------------------------------------------------- six months ended June 30 (thousands) 2009 2008 change ------------------------------------------------------------------------- Smelter processing charges and freight by operation Cayeli $37,514 $47,578 -21% Pyhasalmi 21,317 25,381 -16% Troilus 8,718 4,608 +89% Ok Tedi (1) 13,580 19,799 -31% ------------------------------------------------------------------------- $81,129 $97,366 -17% ------------------------------------------------------------------------- Smelter processing charges and freight by metal Copper $38,343 $42,409 -10% Zinc 26,968 44,451 -39% Other 15,818 10,506 +51% ------------------------------------------------------------------------- $81,129 $97,366 -17% ------------------------------------------------------------------------- Smelter processing charges by type and freight Copper treatment and refining charges $18,575 $11,074 +68% Zinc treatment charges 17,281 26,140 -34% Copper price participation 2,738 4,244 -35% Zinc price participation 739 (2,261) +133% Content losses 21,400 32,361 -34% Other 4,010 4,512 -11% Freight 16,386 21,296 -23% ------------------------------------------------------------------------- $81,129 $97,366 -17% ------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's smelter processing charges and freight.

Copper treatment and refining charges were higher in 2009 than they were last year because contract terms with smelters were less favourable. Zinc treatment charges were lower in part because sales volumes were lower and also because of more favourable contract terms.

2009 outlook for smelter processing charges and freight

We expect copper treatment and refining costs to increase in 2009, and our agreements with our smelters reflect this. We sell approximately 90 percent of our copper concentrate under long-term contracts. We are estimating annual treatment costs of US $75 per dry metric tonne in 2009. We also expect that price participation will continue to be minimal.

We expect realized zinc processing charges to be less than US $200 per tonne in 2009. Since the beginning of 2009, smelters have joined mines in cutting zinc production to respond to the decline in demand for refined zinc and to falling prices. We expect zinc mine production to be below smelting requirements this year, which should result in a balanced or deficit zinc concentrate market.

Las Cruces began producing copper in June. Its copper cathode production is sold directly to copper fabricators, bypassing the smelters and eliminating smelting and refining charges. Depending on certain conditions, it may also 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 the ore.

We expect our ocean freight costs to be about 20 percent lower than they were in 2008 because of the general slowdown in global economic activity.

Direct production costs and cost of sales were lower than last year

------------------------------------------------------------------------- three months ended June 30 (thousands) 2009 2008 change ------------------------------------------------------------------------- Direct production costs by operation Cayeli $19,834 $22,638 -12% Pyhasalmi 15,711 15,351 +2% Troilus 13,816 22,345 -38% Ok Tedi(1) 22,574 21,742 +4% ------------------------------------------------------------------------- Total direct production costs 71,935 82,076 -12% Inventory changes (2,222) 1,744 -227% Reclamation, accretion and other non-cash expenses 4,114 6,073 -32% ------------------------------------------------------------------------- Total cost of sales $73,827 $89,893 -18% ------------------------------------------------------------------------- ------------------------------------------------------------------------- six months ended June 30 (thousands) 2009 2008 change ------------------------------------------------------------------------- Direct production costs by operation Cayeli $40,306 $45,978 -12% Pyhasalmi 31,365 29,955 +5% Troilus 32,422 42,292 -23% Ok Tedi(1) 46,261 41,385 +11% ------------------------------------------------------------------------- Total direct production costs 150,354 159,610 -6% Inventory changes 1,673 (1,196) -240% Reclamation, accretion and other non-cash expenses 11,704 10,725 +9% ------------------------------------------------------------------------- Total cost of sales $163,731 $169,139 -3% ------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's direct production costs.

Direct production costs in 2009 were lower than they were last year mainly because Troilus completed mining in April and began recovering ore from its lower cost stockpiles. Cayeli has also seen the benefit of lower labour costs from the drop in value of the Turkish lira.

2009 outlook for cost of sales

We expect cost of sales to increase in 2009 in line with the start of production at Las Cruces. The cost of consumables and energy should go down. The total amount we spend in Canadian dollars will also be affected by the value of the US dollar and euro relative to the Canadian dollar.

Depreciation was higher than last year ------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (thousands) 2009 2008 change 2009 2008 change ------------------------------------------------------------------------- Depreciation by operation Cayeli $3,373 $2,556 +32% $6,846 $4,929 +39% Pyhasalmi 2,162 2,232 -3% 4,764 4,382 +9% Troilus 3,301 1,718 +92% 6,720 4,136 +62% Ok Tedi 4,768 2,689 +77% 10,953 4,918 +123% ------------------------------------------------------------------------- $13,604 $9,195 +48% $29,283 $18,365 +59% -------------------------------------------------------------------------

Depreciation is higher than last year mainly because we started depreciating the mine tailings management plant at Ok Tedi, as well as assets associated with an increase in our asset retirement obligations at Troilus.

2009 outlook for depreciation

We expect depreciation to be about $70 million for 2009. Depreciation for Las Cruces should be about $10 million, assuming we capitalize pre-commercial production costs until November.

Corporate costs Corporate costs include general and administration costs, taxes, interest and other income. Investment and other income was higher because of foreign exchange gains ------------------------------------------------------------------------- three months ended six months ended June 30 June 30 (thousands) 2009 2008 2009 2008 ------------------------------------------------------------------------- Interest income $701 $6,963 $2,743 $15,686 Dividend income and royalty 385 1,504 685 1,504 Foreign exchange gain (loss) 18,195 (18,573) 8,098 (11,715) Other (2,815) (1,252) (6,263) (2,079) ------------------------------------------------------------------------- $16,466 $(11,358) $5,263 $3,396 ------------------------------------------------------------------------- Foreign exchange gain (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) are a result of the following: ------------------------------------------------------------------------- three months ended six months ended June 30 June 30 (millions) 2009 2008 2009 2008 ------------------------------------------------------------------------- Revaluation of US dollar denominated debt at Las Cruces $15 $- $4 $- Distribution of funds from subsidiaries 4 (15) 4 (20) Revaluation of short-term foreign intergroup loans and other monetary items (1) (4) - 8 ------------------------------------------------------------------------- $18 $(19) $8 $(12) -------------------------------------------------------------------------

2009 outlook for investment and other income

Investment and other income is affected by cash balances, interest rates and exchange rates. For the remainder of 2009, we expect to repatriate funds only from Ok Tedi. Because Ok Tedi distributes its earnings more frequently, the effect of repatriation is normally not that significant.

At June 30, 2009, we held (euro)19 million in Canada that could be affected by foreign exchange gains or losses.

We expect to repay 100 percent of Las Cruces' US dollar denominated debt on July 31 (see also 2009 outlook for investing and financing on page 27), and replace it with intergroup debt using the proceeds from our equity offering. As a result of this, Las Cruces terminated its interest rate swap contracts on July 20 paying out $16 million for early termination. This will have the following effects on investment and other income after July 31:

- At June 30, we held US $229 million corporately to be used to fund Las Cruces. These funds were transferred to Las Cruces in July and because of the strengthening in the Canadian dollar in July, we will recognize a foreign exchange loss of about $17 million in the third quarter. - We will no longer have to report foreign exchange on revaluation of bank debt, because we are replacing it with intergroup debt and therefore foreign exchange impacts will eliminate on consolidation. Las Cruces will continue to be subject to foreign exchange fluctuations on the intergroup debt on a stand-alone basis. - When we converted the Las Cruces debt from euro to US dollars in 2008, Las Cruces settled a foreign exchange forward contract and received proceeds of $52 million. We deferred the proceeds in accumulated other comprehensive income, and have been amortizing it to income over the term of the debt. When we repay the debt, we will realize the remaining deferred gain of $36 million in investment and other income. - When we repay the debt, we will reflect the $16 million paid for early termination of the interest rate swap as a loss in investment and other income.

Asset impairment

We made a decision in 2008 not to proceed with the Cerattepe project. All work ceased on the project and we took a $34 million charge to write down the assets to net realizable value. We took an additional impairment charge of $6 million in the first quarter of 2009, as well as a $6 million tax recovery.

Income tax expense was lower because earnings were lower ------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (thousands) 2009 2008 change 2009 2008 change ------------------------------------------------------------------------- Cayeli $2,212 $8,655 -74% $1,631 $27,779 -94% Pyhasalmi 1,870 6,425 -71% 2,305 12,448 -81% Ok Tedi 12,469 23,803 -48% 19,009 43,150 -56% Las Cruces 4,302 (84) -5,221% 267 166 +61% Corporate 3,324 5,658 -41% 19,980 5,784 +245% ------------------------------------------------------------------------- $24,177 $44,457 -46% $43,192 $89,327 -52% ------------------------------------------------------------------------- Our tax expense changes as our earnings change. - At Cayeli, we recorded a $6 million tax recovery in the first six months, related to the impairment on Cerattepe. - At Las Cruces, we recorded a tax expense for foreign exchange gains from the translation of US dollar denominated debt. - The tax expense at Corporate relates to a provision for Quebec mining duties and a reduction in our future income tax asset to reflect Troilus' earnings. We reduced our future income tax asset by $10 million for the six months of 2009 and $1 million for the quarter. We also recorded Quebec mining duties of $10 million for the six months and $2 million for the quarter.

2009 outlook for income tax expense

We are not expecting any further changes in statutory tax rates at our operations this year. We do, however, expect to expense approximately $12 million in Quebec mining duties, depending on Troilus' 2009 net income.

Results of our operations

2009 estimates

Our financial review by operation includes estimates for our 2009 operating earnings and operating cash flows. We used our 2009 objectives for production and cost per tonne of ore milled to build these estimates, along with the following assumptions for the remaining six months of the year:

------------------------------------------------------------------------- Copper price US $1.80 per pound Zinc price US $0.60 per pound Gold price US $920 per ounce Copper treatment cost US $75 per tonne Zinc treatment cost US $190 per tonne US $ to C$ exchange rate $1.15 euro to C$ exchange rate $1.58 Working capital Assume no changes for the year ------------------------------------------------------------------------- Cayeli ------------------------------------------------------------------------- three months ended June 30 2009 2008 change ------------------------------------------------------------------------- Tonnes of ore milled (000's) 296 279 +6% Tonnes of ore milled per day 3,300 3,100 +6% ------------------------------------------------------------------------- Grades (percent) copper 3.2 3.5 -9% zinc 5.9 6.3 -6% ------------------------------------------------------------------------- Mill recoveries (percent) copper 80 78 +3% zinc 68 75 -9% ------------------------------------------------------------------------- Production (tonnes) copper 7,500 7,600 -1% zinc 11,800 13,200 -11% ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $67 $81 -17% ------------------------------------------------------------------------- ------------------------------------------------------------------------- revised six months ended June 30 objective 2009 2008 change 2009 ------------------------------------------------------------------------- Tonnes of ore milled (000's) 561 557 +1% 1,200 Tonnes of ore milled per day 3,100 3,100 - 3,300 ------------------------------------------------------------------------- Grades (percent) copper 3.3 3.6 -8% 3.5 zinc 6.0 6.4 -6% 6.4 ------------------------------------------------------------------------- Mill recoveries (percent) copper 79 79 - 79 zinc 70 73 -4% 72 ------------------------------------------------------------------------- Production (tonnes) copper 14,600 15,800 -8% 32,700 zinc 23,600 25,900 -9% 55,300 ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $72 $83 -13% $68 -------------------------------------------------------------------------

Production throughput on target for the year

Cayeli processed ore this quarter consistent with our annual objective and higher than last year. Grades this quarter and year to June were lower than last year and our 2009 plan because of interruptions in stope sequencing. Copper and zinc production were therefore lower this quarter and year to date compared to 2008.

Operating costs for the quarter and year to date were lower than last year, mainly because of the drop in the value of the Turkish lira, which reduced labour costs, and a reduction in the cost of key commodities, such as copper sulphate and electricity. Royalty charges were $2 million less than the second quarter of last year because earnings were lower.

2009 outlook for production and costs

We expect grades in 2009 to average 3.5 percent for copper and 6.4 percent for zinc, down from our initial objectives because grades in the first half of the year have been lower than expected. Grades and recoveries should improve during the second half of 2009. We have therefore lowered our annual objectives from 36,800 tonnes of copper to 32,700 tonnes and 56,400 tonnes of zinc to 55,300 tonnes.

We have reduced our objective for cost per tonne of ore milled for the year from $81 per tonne to $68 per tonne for the following reasons:

- a stronger Canadian dollar - cost savings programs - lower commodity input prices - lower labour costs.

Royalties also have a significant effect on costs and are variable depending on earnings. Cost per tonne of ore milled included $3 per tonne in royalties in the second quarter and $5 per tonne year to date. We estimate that royalties will be $3 per tonne out of our total 2009 objective of $68 per tonne of ore milled, depending on metal prices.

The current three-year labour agreement expired in May 2009 and negotiations with the union are underway. Pay increases for the Cayeli workers have typically been higher than Turkish inflation levels, which we believe is not sustainable. We will make a strong effort to manage labour cost escalations to maintain our competitiveness knowing that this position could result in a short term labour disruption to achieve a long term improvement in our labour costs.

Financial review Lower earnings because of a significant decline in copper and zinc prices ------------------------------------------------------------------------- (millions of Canadian three months six months dollars unless ended June 30 ended June 30 objective otherwise stated) 2009 2008 2009 2008 2009 ------------------------------------------------------------------------- Sales analysis Copper sales (tonnes) 6,800 6,800 13,300 13,500 32,700 Zinc sales (tonnes) 12,700 17,300 27,500 31,200 55,300 ------------------------------------------------------------------------- Gross copper sales $36 $57 $73 $121 $162 Gross zinc sales 23 37 44 70 86 Other metal sales 5 4 7 8 16 ------------------------------------------------------------------------- Gross sales 64 98 124 199 264 Smelter processing charges and freight (19) (25) (38) (48) (88) ------------------------------------------------------------------------- Net sales $45 $73 $86 $151 $176 ------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 296 279 561 557 1,200 Direct production costs ($ per tonne) $67 $81 $72 $83 $68 ------------------------------------------------------------------------- Direct production costs $20 $23 $40 $46 $82 Change in inventory (1) 1 - - - Depreciation and other non-cash costs 4 4 9 6 18 ------------------------------------------------------------------------- Operating costs $23 $28 $49 $52 $100 ------------------------------------------------------------------------- Operating earnings $22 $45 $37 $99 $76 ------------------------------------------------------------------------- Operating cash flow $24 $35 $15 $50 $82 ------------------------------------------------------------------------- The objective for 2009 uses the assumptions listed on page 13. The table below shows what contributed to the change in operating earnings and operating cash flow between 2009 and 2008. ------------------------------------------------------------------------- Three months ended six months ended (millions) June 30 June 30 ------------------------------------------------------------------------- Lower metal prices, denominated in Canadian dollars $(25) $(66) Lower sales volumes (3) (6) Lower smelter processing charges 2 6 Lower royalty 2 4 Lower operating costs 2 2 Higher depreciation (1) (2) ------------------------------------------------------------------------- Lower operating earnings, compared to 2008 $(23) $(62) Lower tax expense because earnings were lower 7 18 Changes in working capital 3 8 Other 2 1 ------------------------------------------------------------------------- Lower operating cash flow, compared to 2008 $(11) $(35) ------------------------------------------------------------------------- Spending in 2009 will be limited to sustaining capital ------------------------------------------------------------------------- three months ended six months ended June 30 June 30 objective 2009 2008 change 2009 2008 change 2009 ------------------------------------------------------------------------- Capital spending $3,000 $6,300 -52% $6,600 $12,000 -45% $22,000 ------------------------------------------------------------------------- Capital spending in the quarter was for mine equipment replacements. 2009 outlook for capital spending Cayeli expects to spend $22 million in 2009 on mine equipment replacements, mill upgrades and mine development. Pyhasalmi ------------------------------------------------------------------------- three months ended June 30 2009 2008 change ------------------------------------------------------------------------- Tonnes of ore milled (000's) 355 344 +3% Tonnes of ore milled per day 3,900 3,800 +3% ------------------------------------------------------------------------- Grades (percent) copper 1.1 1.0 +10% zinc 1.8 2.5 -28% sulphur 42 40 +5% ------------------------------------------------------------------------- Mill recoveries (percent) copper 96 95 +1% zinc 88 92 -4% ------------------------------------------------------------------------- Production (tonnes) copper 3,700 3,100 +19% zinc 5,700 7,700 -26% pyrite 132,200 111,200 +19% ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $44 $45 -2% ------------------------------------------------------------------------- ------------------------------------------------------------------------- revised six months ended June 30 objective 2009 2008 change 2009 ------------------------------------------------------------------------- Tonnes of ore milled (000's) 704 691 +2% 1,370 Tonnes of ore milled per day 3,900 3,800 +3% 3,750 ------------------------------------------------------------------------- Grades (percent) copper 1.1 1.0 +10% 1.0 zinc 1.5 2.4 -38% 1.9 sulphur 43 41 +5% 42 ------------------------------------------------------------------------- Mill recoveries (percent) copper 95 96 -1% 94 zinc 87 92 -5% 87 ------------------------------------------------------------------------- Production (tonnes) copper 7,300 6,600 +11% 13,000 zinc 9,200 15,300 -40% 22,600 pyrite 323,000 305,700 +6% 411,000 ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $45 $43 +5% $41 -------------------------------------------------------------------------

Lower zinc grades reduce zinc production

Pyhasalmi maintained its strong production record in the second quarter of 2009, processing at an annualized rate of 1.4 million tonnes.

Copper production was higher than the second quarter of last year mainly because of higher grades. Zinc production this quarter continued to be lower than we planned and lower than the second quarter of 2008 because changes in stope sequencing resulted in lower grades. Pyrite production was above the same period last year, but persisting weakness in pyrite demand has reduced sales prices and volumes. Pyhasalmi sold 121,000 tonnes of pyrite in the second quarter of 2009 compared to 142,700 tonnes in the same quarter last year.

2009 outlook for production and costs

We expect zinc grades to increase in the second half of the year and anticipate copper and zinc production for the year to be consistent with our earlier estimates. Pressure on mine operating costs caused by increased ground support requirements in the first half of 2009 are expected to be reduced in the second half of the year from lower mill operating materials.

We adjusted our pyrite production objective from 510,000 tonnes to 411,000 in response to lower demand.

2009 outlook for capital spending

We expect to spend $11 million in 2009, mainly for mine equipment, making improvements in the mill and renovating process water pumps. We expect to replace the zinc circuit cells in September, and these should remain reliable for the remaining mine life.

Las Cruces First copper cathode produced on June 3

On April 7, 2009 Andalucian Regional Ministry of Innovation, Science and Business (CICE) issued a resolution that authorized lifting the mining suspension that had been imposed in May 2008.

On April 29, Las Cruces resumed mining, delivered the first truck load of ore to the crusher on May 26, and produced the first copper cathode on June 3. On July 16, the Water Authority of Andalucia authorized and approved operation of the dewatering and reinjection system, based on the modifications proposed in technical documentation Las Cruces provided in September 2008 (the "Global Plan"). The authorization was granted for an operational period of 15 years and a closure period of 5 years.

Operations in the pit are progressing well. In May and June, Las Cruces mined 249,000 tonnes of gossan and 23,500 tonnes of copper ore, and produced two tonnes of copper cathode. As expected, there have been normal challenges in the plant during the start-up related to equipment operation, adjustment and component reliability, including for example, performance of the belt filters, adjustment of the pressure filter and corrosion failure of the leaching thickener drive. We consider all of these problems typical in the commissioning of a complex plant and are correcting them as they occur. We do not expect them to have any long term effect on the performance of the metallurgical plant.

Metallurgical recoveries to date are encouraging indicating that the target rates are achievable. We delivered the first shipment of LME grade cathode to Cunext Copper Industry in Cordoba, Spain on July 15, 2009.

We are focusing on ramping up production to reach the design capacity of 72,000 tonnes of copper cathode per year. Our goal continues to be to reach full production by February 2010 and commercial production (about 60 percent of design capacity) by November 2009.

Capital update

Las Cruces construction is complete and on budget, and, as at the end of June, only (euro)7 million of the (euro)504 million construction budget remained to be spent. The following table shows total spending for the project to the end of June 2009 and our capital objective for the rest of the year:

------------------------------------------------------------------------- (millions) up to December January to revised total project 31, 2008 June 2009 objective estimate at July to December 31, December 2009 2009 ------------------------------------------------------------------------- Construction capital (euro)448 (euro)49 (euro)7 (euro)504 Mine development 6 5 17 28 Sustaining capital - 7 19 26 Capitalized interest 18 6 - 24 Pre-operating costs capitalized, net of sales - 8 (3) 5 Value added tax 25 9 (34) - Other 5 (10) 10 5 ------------------------------------------------------------------------- Capital expenditures (euro)502 (euro)74 (euro)16 (euro)592 ------------------------------------------------------------------------- 2009 outlook The table below shows expected production for 100 percent of Las Cruces for 2009 and for the mine life. ------------------------------------------------------------------------- 2009 target life of mine ------------------------------------------------------------------------- Tonnes of ore processed (thousands) 305 17,492 ------------------------------------------------------------------------- Strip ratio 40 12.5 ------------------------------------------------------------------------- Copper grades (percent) 9.8 6.2 ------------------------------------------------------------------------- Copper production (tonnes) 28,800 997,200 ------------------------------------------------------------------------- Cost per tonne of ore processed (C $) $195 $87 -------------------------------------------------------------------------

Expected copper production for 2009 includes 23,400 tonnes of copper cathode and 5,400 tonnes of copper in ore. We expect to ship ore directly to smelters beginning in December of this year, subject to regulatory approval. Depending on shipping dates and contract terms for title transfer, sales of any production may not be recorded until after the start of 2010.

Our overall plan includes shipping a total of 18,200 tonnes of copper ore to smelters, including 12,800 tonnes in 2010.

We estimate the following operating earnings and cash flow in 2009, based on commencement of commercial production in November and the assumptions listed on page 13:

100% ----------------------------------------------------- ------------------ (millions of Canadian dollars unless revised objective otherwise stated) 2009 ----------------------------------------------------- ------------------ Gross copper sales $69 Smelter processing charges and freight (14) ----------------------------------------------------- ------------------ Net sales $55 ----------------------------------------------------- ------------------ Direct production costs $24 Depreciation and other non-cash costs 11 ----------------------------------------------------- ------------------ Operating costs $35 ----------------------------------------------------- ------------------ Operating earnings $20 ----------------------------------------------------- ------------------ Operating cash flow - ----------------------------------------------------- ------------------ Troilus ------------------------------------------------------------------------- three months ended June 30 2009 2008 change ------------------------------------------------------------------------- Tonnes of ore milled (000's) 1,542 1,454 +6% Tonnes of ore milled per day 16,900 16,000 +6% ------------------------------------------------------------------------- Strip ratio - 1.6 -100% ------------------------------------------------------------------------- Grades gold (grams/tonne) 0.65 0.96 -32% copper (percent) 0.08 0.09 -11% ------------------------------------------------------------------------- Mill recoveries (percent) Gold 83 84 -1% Copper 88 92 -4% ------------------------------------------------------------------------- Production gold (ounces) 26,700 37,800 -29% copper (tonnes) 1,100 1,200 -8% ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $9 $15 -40% ------------------------------------------------------------------------- ------------------------------------------------------------------------- revised six months ended June 30 objective 2009 2008 change 2009 ------------------------------------------------------------------------- Tonnes of ore milled (000's) 3,019 2,851 +6% 6,100 Tonnes of ore milled per day 16,700 15,700 +6% 16,700 ------------------------------------------------------------------------- Strip ratio 0.1 1.4 -93% 0.1 ------------------------------------------------------------------------- Grades gold (grams/tonne) 1.03 0.94 +10% 0.82 copper (percent) 0.14 0.08 +75% 0.11 ------------------------------------------------------------------------- Mill recoveries (percent) Gold 84 84 - 81 Copper 93 92 +1% 92 ------------------------------------------------------------------------- Production gold (ounces) 84,800 72,800 +16% 128,000 copper (tonnes) 3,900 2,100 +86% 6,000 ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $11 $15 -27% $10 -------------------------------------------------------------------------

Completion of mining activity

Troilus completed mining the main 87 pit in April and began recovering the lower-grade stockpile it had accumulated over the past several years.

This lowered gold and copper grades and production in the second quarter, and lowered cost per tonne compared to the previous year.

Site restoration began this quarter, with Troilus placing moraine on dumps and safety berms around the pits.

2009 outlook for production and costs

Troilus will continue to recover stockpiled ore for the rest of the year,and should meet its targeted copper production.

We have reduced Troilus' gold production objective to 128,000 ounces from 132,200 ounces because deteriorating mining conditions prevented recovery of ore from the pit bottom in April.

We will submit our revised closure plan to the provincial authorities in the second half of the year and will continue with restoration of the site. We will continue to lay off mining and maintenance personnel as primary reclamation activities and pit clean up are completed.

Financial review Higher gold prices improved earnings this quarter even though sales volumes were down ------------------------------------------------------------------------- (millions of Canadian three months six months revised dollars unless ended June 30 ended June 30 objective otherwise stated) 2009 2008 2009 2008 2009 ------------------------------------------------------------------------- Sales analysis Gold sales (ounces) 28,200 36,300 88,300 71,500 128,000 Copper sales (tonnes) 1,100 1,200 4,000 2,000 6,000 ------------------------------------------------- Gross gold sales $29 $24 $99 $50 $139 Gross copper sales 8 10 24 18 31 Other metal sales - 1 1 1 2 ------------------------------------------------- Gross sales 37 35 124 69 172 Smelter processing charges and freight (2) (2) (8) (4) (13) ------------------------------------------------------------------------- Net sales $35 $33 $116 $65 $159 ------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 1,542 1,454 3,019 2,851 6,100 Direct production costs ($ per tonne) $9 $15 $11 $15 $10 ------------------------------------------------------------------------- Direct production costs $14 $22 $33 $42 $61 Change in inventory - - 2 - 1 Depreciation and other non-cash costs 5 3 10 7 11 ------------------------------------------------------------------------- Operating costs $19 $25 $45 $49 $73 ------------------------------------------------------------------------- Operating earnings $16 $8 $71 $16 $86 ------------------------------------------------------------------------- Operating cash flow $29 $8 $78 $15 $101 ------------------------------------------------------------------------- The objective for 2009 uses the assumptions listed on page 13. The table below shows what contributed to the change in operating earnings and operating cash flow between 2009 and 2008. ------------------------------------------------------------------------- Three months ended six months ended (millions) June 30 June 30 ------------------------------------------------------------------------- Higher gold price denominated in Canadian dollars $10 $37 Lower copper price denominated in Canadian dollars (2) (12) Higher (lower) sales volumes (4) 28 Higher smelter processing charges (2) (5) Lower operating costs 8 10 Higher amortization (2) (3) ------------------------------------------------------------------------- Higher operating earnings, compared to 2008 $8 $55 Changes in working capital 12 7 Other 1 1 ------------------------------------------------------------------------- Higher operating cash flow, compared to 2008 $21 $63 ------------------------------------------------------------------------- Ok Tedi ------------------------------------------------------------------------- three months ended June 30 (100 percent) 2009 2008 change ------------------------------------------------------------------------- Tonnes of ore milled (000's) 5,400 5,400 - Tonnes of ore milled per day 59,300 59,300 -1% ------------------------------------------------------------------------- Strip ratio 1.9 1.5 +27% ------------------------------------------------------------------------- Grades copper (percent) 0.8 0.9 -11% gold (grams/tonne) 1.1 1.0 +10% ------------------------------------------------------------------------- Mill recoveries (percent) copper 86 87 -1% gold 71 74 -4% ------------------------------------------------------------------------- Production copper (tonnes) 38,200 41,100 -7% gold (ounces) 132,800 122,700 +8% ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $23 $22 +5% ------------------------------------------------------------------------- ------------------------------------------------------------------------- revised six months ended June 30 objective (100 percent) 2009 2008 change 2009 ------------------------------------------------------------------------- Tonnes of ore milled (000's) 10,500 10,400 +1% 23,300 Tonnes of ore milled per day 58,300 57,100 +2% 64,000 ------------------------------------------------------------------------- Strip ratio 1.7 1.7 - 1.5 ------------------------------------------------------------------------- Grades copper (percent) 0.8 0.9 -11% 0.8 gold (grams/tonne) 1.1 1.0 +10% 1.1 ------------------------------------------------------------------------- Mill recoveries (percent) copper 86 86 - 84 gold 68 74 -8% 68 ------------------------------------------------------------------------- Production copper (tonnes) 75,100 78,400 -4% 159,000 gold (ounces) 248,000 241,200 +3% 567,000 ------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $24 $22 +9% $26 ------------------------------------------------------------------------- Throughput will improve after mine tailings management plant has reached designed performance

Ok Tedi has begun to modify the tailings management plant, and expects to complete this work in the third quarter. It therefore mined only ores with low sulphur content in the first and second quarters. Despite this change in mine plan, however, gold and copper grades were consistent with expectations.

Mill throughput this quarter and year to date was consistent with last year, but lower than expected because of low grinding rates on certain ores.

The cost per tonne of ore milled this quarter and year to date was higher than in 2008 mainly because of the weaker value of the Canadian dollar.

On June 2, we entered into a non-binding draft term sheet with PNG Sustainable Development Programme Limited (PNG SDPL), the 52 percent majority shareholder of Ok Tedi Mining Limited (OTML), to exchange our 18 percent equity interest in OTML for a 5 percent net smelter return (NSR) royalty from OTML on product revenues from the Ok Tedi mine. We are waiting for the consent of the Independent State of Papua New Guinea, which owns 30 percent of OTML and the consent of BHP Billiton Ltd., which previously ceded its 52 percent interest in OTML to PNG SDPL, among other things, before the transaction can proceed.

2009 outlook for production and costs

We have adjusted our objectives for 2009 to compensate for the shortfall in production in the first half of the year. We expect gold and copper production to be lower than originally anticipated because of lower throughput.

Until the mine tailings management plant is completed and working at designed levels, Ok Tedi can put only a limited amount of sulphur in the ore feed. Staying within these limits is a constraint on mining and, if the project is delayed, could result in shortfalls in ore tonnes or grades. Operating the plant to achieve designed results is critical not only to achieve annual production objectives but also for the continued responsible operation of the mine.

The pit drainage tunnel project is behind schedule because there have been changes to the construction plan. The tunnel is critical because it allows water to drain freely from the pit until the end of the mine life. Ok Tedi has installed a temporary pumping system so mining can continue uninterrupted while the tunnel is being built.

Financial review Lower earnings and operating cash flow ------------------------------------------------------------------------- (millions of Canadian three months six months revised dollars unless ended June 30 ended June 30 objective otherwise stated) 2009 2008 2009 2008 2009 ------------------------------------------------------------------------- Sales analysis at 18% Copper sales (tonnes) 6,900 7,600 12,400 15,000 28,600 Gold sales (ounces) 24,400 25,300 43,700 45,500 102,000 ------------------------------------------------- Gross copper sales $41 $65 $76 $134 $134 Gross gold sales 27 21 49 38 109 Other metal sales 1 1 2 1 3 ------------------------------------------------- Gross sales 69 87 127 173 246 Smelter processing charges and freight (7) (11) (14) (20) (38) ------------------------------------------------------------------------- Net sales $62 $76 $113 $153 $208 ------------------------------------------------------------------------- Cost analysis at 18% Tonnes of ore milled (thousands) 967 978 1,898 1,877 4,200 Direct production costs ($ per tonne) $23 $22 $24 $22 $26 ------------------------------------------------------------------------- Direct production costs $23 $22 $46 $41 $109 Change in inventory (1) (1) - - - Depreciation and other non-cash costs 4 5 14 8 29 ------------------------------------------------------------------------- Operating costs $26 $26 $60 $49 $138 ------------------------------------------------------------------------- Operating earnings $36 $50 $53 $104 $70 ------------------------------------------------------------------------- Operating cash flow $29 $42 $15 $81 $71 ------------------------------------------------------------------------- The objective for 2009 uses the assumptions listed on page 13. The table below shows what contributed to the change in operating earnings and operating cash flow between 2009 and 2008. ------------------------------------------------------------------------- three months ended six months ended (millions) June 30 June 30 ------------------------------------------------------------------------- Lower copper prices, denominated in Canadian dollars $(18) $(35) Higher gold prices, denominated in Canadian dollars 7 13 Lower sales volumes (5) (21) Lower smelter processing and freight charges 2 3 (Higher) lower operating costs 2 (5) Higher depreciation (2) (6) ------------------------------------------------------------------------- Lower operating earnings, compared to 2008 $(14) $(51) Lower tax expense because of lower earnings 25 37 Changes in net working capital (from higher accounts receivable balances) (21) (55) Add back - non-cash higher depreciation 2 6 Other (5) (3) ------------------------------------------------------------------------- Lower operating cash flow, compared to 2008 $(13) $(66) ------------------------------------------------------------------------- Capital spending on pit drainage Ok Tedi's capital spending this quarter was mainly for the pit drainage project. ------------------------------------------------------------------------- three months ended six months ended June 30 June 30 objective (18 percent) 2009 2008 change 2009 2008 change 2009 ------------------------------------------------------------------------- Capital spending $3,300 $10,900 -70% $6,600 $18,900 -65% $26,000 -------------------------------------------------------------------------

2009 outlook for capital spending

Ok Tedi plans to spend US $115 million (our 18 percent share is $26 million) in 2009 on the pit drainage project, further pit development and other capital projects.

Status of our development project Petaquilla Quarterly development update

There are three main activities at Petaquilla: drilling, social and environmental impact assessment and engineering.

Drilling

We completed the drilling program in June, but we have to finalize a National Instrument 43-101 compliant technical report and the front-end engineering and design (FEED) study before we can establish a final mineral reserve estimate for the Petaquilla project. Preliminary results, however, indicate that we can expect to meet or exceed our target for mineral reserves that would support a minimum mine life of 30 years at a throughput rate of 150,000 tonnes per day.

Social and environmental impact assessment and community development

First drafts of the baseline studies are being completed and we are progressing with impact assessment and identification of options. We expect to submit an impact assessment (EsIA) to the Panamanian environmental authorities by the end of 2009.

Engineering

We continued with engineering work and expect to complete the FEED study by the end of 2009. The base case for the FEED study is a throughput rate of 150,000 tonnes per day, which equates to an average annual production of 275,000 tonnes of copper for the first 10 years. We have also begun a metallurgical program to further review the throughput rate and explore opportunities to optimize this rate.

We are working with a large international power company to pursue the development of a coal-fired electric generating plant in parallel with the development of Petaquilla. This plant would supply all the electricity required for operation of the project.

2009 outlook for development

In early 2010, once the final FEED study is complete and the EsIA is submitted, we expect to begin detailed engineering. At the same time, we intend to seek approval of the EsIA and begin the permitting process for construction. If we receive the permits in time, we should be able to complete construction in 2014.

We expect to spend approximately $94 million in 2009 to fund this work.

We are continuing to meet with potential partners for the development of Petaquilla. We have approached certain potential partners and some of them have expressed an interest in the project. Others have approached us to express their interest.

We will evaluate the suitability of all potential partners. Proposals could take a variety of forms or structures including, but not limited to, direct investments in the project, financing related to concentrate purchases, direct investments in Inmet or other forms of financing. We plan to pursue these opportunities but there can be no assurance that any transaction will be consummated.

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.

When planning our capital structure, we include a liquidity cushion that allows us to address operational disruptions or general market downturns, such as the current weakness of the global economy.

------------------------------------------------------------------------- three months ended six months ended June 30 June 30 (millions) 2009 2008 2009 2008 ------------------------------------------------------------------------- CASH FROM OPERATING ACTIVITIES Cayeli $24 $35 $15 $50 Pyhasalmi 23 19 21 50 Troilus 29 8 78 15 Ok Tedi 29 42 15 81 Corporate development and exploration not included in operations' cash flow (2) (2) (3) (4) General and administration (5) (3) (9) (6) Other (7) 16 (9) 10 ------------------------------------------------------------------------- 91 115 108 196 ------------------------------------------------------------------------- CASH FROM INVESTING AND FINANCING Capital spending (86) (121) (181) (232) Proceeds from issuance of common shares, net of transaction costs 334 - 334 - Long-term debt - borrowings - 56 - 106 - repayments (74) - (83) - Funding by non-controlling shareholder 28 20 44 35 Subsidies received 58 - 66 3 Settlement of foreign currency forward contract - 52 - 52 Foreign exchange on cash held in foreign currency (18) (9) (13) 24 Other (5) (20) (13) (26) ------------------------------------------------------------------------- 237 (22) 154 (38) ------------------------------------------------------------------------- Increase in cash 328 93 262 158 Cash and short-term investments Beginning of period 507 906 573 841 ------------------------------------------------------------------------- End of period $835 $999 $835 $999 ------------------------------------------------------------------------- OPERATING ACTIVITIES Key components of the change in operating cash flows ------------------------------------------------------------------------- Three months ended six months ended (millions) June 30 June 30 ------------------------------------------------------------------------- Lower earnings from operations (see page 4) $(44) $(95) Non-cash changes in operating earnings: Add back higher depreciation in earnings from operations 4 11 Lower tax expense 41 62 Lower interest income (6) (13) Reclamation spending at Troilus (2) (2) Changes in working capital (11) (39) Other (6) (12) ------------------------------------------------------------------------- Lower operating cash flow, compared to 2008 $(24) $(88) -------------------------------------------------------------------------

Operating cash flows are lower than they were in 2008 because of lower operating earnings and a large outflow of cash related to working capital. We repaid smelters the excess provisional payments they made in 2008, before copper prices dropped, which decreased cash flow by approximately $48 million for the first six months.

2009 outlook for cash from operating activities

Volatile markets make it 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 listed 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 $82 Pyhasalmi 34 Troilus 101 Ok Tedi 71 Las Cruces - --------------------------------------------------- $288 --------------------------------------------------- INVESTING AND FINANCING Capital spending ------------------------------------------------------------------------- three months six months revised ended June 30 ended June 30 objective (millions) 2009 2008 2009 2008 2009 ------------------------------------------------------------------------- Cayeli $3 $6 $6 $12 $22 Pyhasalmi 3 2 4 3 11 Troilus - - - - - Ok Tedi 3 11 7 19 26 Las Cruces 54 97 119 190 141 Petaquilla 23 - 45 - 94 Cerattepe - 5 - 8 - ------------------------------------------------------------------------- $86 $121 $181 $232 $294 -------------------------------------------------------------------------

Please see Results of our operations and Status of our development project for a discussion of actual results and our 2009 objective.

Proceeds from public offering

On June 25 we completed a public offering of 7.825 million common shares of Inmet Mining, on a bought deal basis, at a price of $44.50 per share, for aggregate gross proceeds of $348 million ($334 million net of transaction costs).

We will use about US $240 million of the net proceeds of the offering to repay the debt under Las Cruces' project financing facility. We will use the balance for general corporate purposes.

Long-term debt repayments

In the first half of 2009, Las Cruces made its first scheduled repayment of US $12 million under Tranche A of its credit facility. It also repaid (euro)42 million under Tranche B (an amount equal to the subsidies received). We expect Las Cruces to receive the remaining (euro)3 million in subsidies in the third quarter.

On July 31, we expect Las Cruces to repay the remaining US $203 million under Tranche A, (euro)5 million under Tranche B and to cash collateralize about US $30 million in letters of credit. This will eliminate the Las Cruces project credit facility. In connection with the decision to repay the credit facility, Las Cruces paid US $14 million in July to terminate its interest rate swap contract.

Settlement of foreign currency forward contract

When we converted the Las Cruces debt from euro to US dollars on June 30, 2008, Las Cruces settled a foreign exchange forward contract and received proceeds of $52 million on that date.

2009 outlook for investing and financing

We expect capital spending to be $294 million in 2009. The more significant items include:

- $88 for the Las Cruces processing plant - $94 million for work on the development plan at Petaquilla - $10 million for pit development and $7 million for an underground drainage tunnel at Ok Tedi.

Until we start receiving proceeds from sales at Las Cruces, we plan to fund its costs using sponsor contributions and value added tax refunds. We also plan to fund Las Cruces so it can repay its credit facility. We will be funding 100 percent of the repayment of the credit facility at Las Cruces and as a result the funding will be effected so that Leucadia's 30 percent interest in Las Cruces is neither economically benefited nor disadvantaged as compared to the terms currently in effect under the Las Cruces credit facility.

After we repay the debt, long-term debt on our consolidated financial statements will be significantly lower and restricted cash will increase by about $36 million. The restricted cash will be used as cash collateral for the letters of credit that had been secured under the credit facility.

Financial condition CASH

Our cash and cash equivalents balance at June 30, 2009 was $835 million. This included cash and money market instruments that mature in 90 days or less, and short-term investments that mature in 91 days to a year.

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

General worldwide economic conditions have weakened dramatically since the end of the third quarter of 2008. In response, we are now mainly invested in treasury funds to minimize liquidity risk until normal market conditions return. At June 30, 2009, we held cash and short-term investments in the following:

- Canada and provincial T-Bills - Short-term debt instruments issued by Canadian Crown Corporations - Highest rated asset backed commercial paper programs sponsored by leading Canadian financial institutions backed by global style liquidity lines - AAA rated treasury funds and money market funds managed by leading international fund managers investing in money market and short-term debt securities and fixed income securities issued by leading international financial institutions and their sponsored securitization vehicles - Cash, term and overnight deposits with leading Canadian and international financial institutions benefiting directly and indirectly from support programs by various governments and central banks. See note 4 on page 45 in the consolidated financial statements for more details about where our cash is invested. Our restricted cash balance of $69 million included: - $17 million in trust for future reclamation at Ok Tedi - $17 million of cash collateralized letters of credit for Inmet - $33 million related to issuing letters of credit to suppliers at Las Cruces and for its labour bond to the government - $2 million for future reclamation at Pyhasalmi.

After we repay the Las Cruces credit facility, restricted cash will increase by about $36 million mainly to secure the Las Cruces reclamation bond that had been secured under the credit facility.

COMMON SHARES --------------------------------------------------- Common shares outstanding as of June 30, 2009 and July 28, 2009 56,106,660 --------------------------------------------------- Deferred share units outstanding as of June 30, 2009 (redeemable on a one-for-one basis for common shares) 85,563 ---------------------------------------------------

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 this quarter.

------------------------------------------------------------------------- C$ marked-to-market Type of gain (loss) at contract Expiry Quantity Price June 30, 2009 ------------------------------------------------------------------------- Copper forward sales Ok Tedi 2009 1.6 million lbs US $2.41 per lb --------------------------------------------------------------- 2.4 million lbs US $2.41 per lb $0.3 million(1) Gold forward sales Ok Tedi 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. $(2.7 million)(2) Interest rate swaps Las Cruces 2009 US $167 million 5.2 percent $(15.1) million(3) to (reducing in 2014 conjunction with debt repayment schedule) ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) At a copper price of US $2.25 per pound. (2) At a gold price of US $942 per ounce. (3) Settled on July 20 at a cost of $16 million. Accounting changes Plans on transition to International Financial Reporting Standards (IFRS):

The Accounting Standards Board confirmed in February 2008 that International Financial Reporting Standards (IFRS) will replace current Canadian GAAP for financial periods beginning on and after January 1, 2011. IFRS is based on a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition, measurement and disclosure.

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.

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.

To date, we have completed an initial draft of all our significant accounting policies. Over the next several months we will quantify and prepare the calculations to adjust our financial statements using these initial new policies. This exercise will either validate our accounting policy choices or tell us to rethink them. The work prepared to date has indicated that we are not expecting significant changes to the carrying values of property, plant and equipment, but based on current IFRS we expect significant effects on our accounting for business combinations going forward. Current exposure drafts on accounting for joint venture interests, which currently includes our investment in Ok Tedi, and future income taxes could also have significant effects on our financial statements. We will continue to monitor these exposure drafts.

We will complete and finalize our accounting policies under IFRS during the rest of the year, prepare the notes to our IFRS financial statements, calculate all differences and document new internal controls. Our goal is to restate our December 31, 2009 Canadian GAAP balance sheet to IFRS in the first quarter of 2010.

Supplementary financial information

Pages 31 and 32 include supplementary financial information about 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 five mining operations in locations around the world: Cayeli, Pyhasalmi, Las Cruces, Troilus and Ok Tedi. We also have a 100 percent interest in the Petaquilla development property in Panama.

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

Second quarter conference call Will be held on - Wednesday, July 29, 2009 - 8:30 a.m. Eastern Time - webcast available at www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2720080 or www.inmetmining.com. You can also dial in by calling - Local or international: +1.416.644.3418 - Toll-free within North America: +1.800.731.6941 Starting 10:30 a.m. (ET) Wednesday July 29, 2009, conference call replay will be available - Local or international: +1.416.640.1917 passcode 21310329 followed by the number sign. - Toll-free within North America: +1.877.289.8525 passcode 21310329 followed by the number sign. INMET MINING CORPORATION Supplementary financial information Cash costs 2009 For the six months ended June 30 per ounce per pound of copper of gold -------------------------------------- --------- TOTAL CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- (US dollars) Direct production costs $0.98 $1.63 $1.27 $1.23 $317 Royalties and variable compensation 0.07 - 0.01 0.03 - Smelter processing charges and freight 1.06 0.74 0.40 0.74 82 Metal credits (1.28) (1.79) (1.46) (1.45) (235) ---------------------------- --------- --------- Cash cost $0.83 $0.58 $0.22 $0.55 $164 ---------------------------- --------- --------- ---------------------------- --------- --------- 2008 For the six months ended June 30 per ounce per pound of copper of gold -------------------------------------- --------- TOTAL CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- (US dollars) Direct production costs $1.15 $2.06 $1.25 $1.35 $576 Royalties and variable compensation 0.19 - 0.11 0.12 - Smelter processing charges and freight 1.40 1.17 0.58 1.04 63 Metal credits (2.04) (3.73) (1.22) (2.03) (265) -------------------------------------- --------- Cash cost $0.70 ($0.50) $0.72 $0.48 $374 -------------------------------------- --------- -------------------------------------- --------- ------------------------------------------------------------------------- Reconciliation of cash costs to statements of earnings 2009 For the six months ended June 30 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 15 page 17 page 21 page 19 Direct production costs $40 $31 $46 $117 $32 Smelter processing charges and freight 38 21 14 73 9 By product sales (50) (40) (51) (141) (25) Adjust smelter processing and freight, and sales to production basis 4 (1) (1) 2 - -------- --------- --------- --------- --------- Operating costs net of metal credits $32 $11 $8 $51 $16 US $ to C$ exchange rate $1.21 $1.21 $1.21 $1.21 $1.21 Inmet's share of production (000's) 32,200 16,100 29,800 78,100 84,800 -------------------------------------- --------- Cash cost $0.83 $0.58 $0.22 $0.55 $164 -------------------------------------- --------- -------------------------------------- --------- 2008 For the six months ended June 30 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 15 page 17 page 21 page 19 Direct production costs $46 $30 $42 $118 $42 Smelter processing charges and freight 48 26 20 94 5 By product sales (77) (59) (39) (175) (19) Adjust smelter processing and freight, and sales to production basis 8 (4) - 4 - -------------------------------------- --------- Operating costs net of metal credits $25 ($7) $23 $41 $28 US $ to C$ exchange rate $1.01 $1.01 $1.01 $1.01 $1.01 Inmet's share of production (000's) 34,400 14,600 31,100 80,100 72,800 ------------------------------------------------ Cash cost $0.70 ($0.50) $0.72 $0.48 $374 ------------------------------------------------ ------------------------------------------------ Cash costs 2009 For the three months ended June 30 per ounce per pound of copper of gold -------------------------------------- --------- TOTAL CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- (US dollars) Direct production costs $0.98 $1.65 $1.23 $1.21 $443 Royalties and variable compensation 0.04 - 0.07 0.04 - Smelter processing charges and freight 1.10 0.82 0.39 0.77 74 Metal credits (1.46) (1.54) (1.53) (1.50) (258) -------------------------------------- --------- Cash cost $0.66 $0.93 $0.16 $0.52 $259 -------------------------------------- --------- -------------------------------------- --------- 2008 For the three months ended June 30 per ounce per pound of copper of gold -------------------------------------- --------- TOTAL CAYELI PYHASALMI OK TEDI COPPER TROILUS ----------------------------------------------------- --------- --------- (US dollars per pound) Direct production costs $1.24 $2.23 $1.21 $1.40 $584 Royalties and variable compensation 0.14 - 0.12 0.11 - Smelter processing charges and freight 1.39 1.19 0.60 1.03 67 Metal credits (2.02) (3.51) (1.09) (1.89) (291) -------------------------------------- --------- Cash cost $0.75 ($0.09) $0.84 $0.65 $360 -------------------------------------- --------- -------------------------------------- --------- ------------------------------------------------------------------------- Reconciliation of cash costs to statements of earnings 2009 For the three months ended June 30 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 15 page 17 page 21 page 19 Direct production costs $20 $16 $23 $59 $14 Smelter processing charges and freight 18 12 7 37 2 By product sales (27) (22) (28) (77) (8) Adjust smelter processing and freight, and sales to production basis 2 3 1 6 - -------------------------------------- --------- Operating costs net of metal credits $13 $9 $3 $25 $8 US $ to C$ exchange rate $1.17 $1.17 $1.17 $1.17 $1.17 Inmet's share of production (000's) 16,700 8,200 15,200 40,100 26,700 -------------------------------------- --------- Cash cost $0.66 $0.93 $0.16 $0.52 $259 -------------------------------------- --------- -------------------------------------- --------- 2008 For the three months ended June 30 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 15 page 17 page 21 page 19 Direct production costs $23 $15 $22 $60 $22 Smelter processing charges and freight 26 15 11 52 3 By product sales (41) (32) (21) (94) (11) Adjust smelter processing and freight, and sales to production basis 5 1 2 8 - -------------------------------------- --------- Operating costs net of metal credits $13 ($1) $14 $26 $14 US $ to C$ exchange rate $1.01 $1.01 $1.01 $1.01 $1.01 Inmet's share of production (000's) 16,400 6,800 16,300 39,500 37,800 ------------------------------------------------ Cash cost $0.75 ($0.09) $0.84 $0.65 $360 ------------------------------------------------ ------------------------------------------------ Quarterly review INMET MINING CORPORATION Quarterly review (unaudited) Latest Four Quarters ------------------------------------------------------------------------- (thousands of Canadian 2009 2009 2008 2008 dollars, except per Second First Fourth Third share amounts) quarter quarter quarter quarter ------------------------------------------------------------------------- STATEMENTS OF EARNINGS Gross sales $ 213,042 $ 239,152 $ 139,626 $ 247,495 Smelter processing charges and freight (40,589) (40,540) (32,870) (49,502) Cost of sales (73,827) (89,904) (91,715) (84,948) Depreciation (13,604) (15,679) (14,844) (11,395) ------------------------------------------- 85,022 93,029 197 101,650 Corporate development and exploration (2,727) (3,232) (1,971) (3,548) General and administration (4,785) (4,124) (3,289) (3,411) Investment and other income (expense) 16,466 (11,203) 8,057 (5,467) Asset impairment - (6,419) (36,275) - Interest expense (493) (492) (490) (476) Capital tax expense (125) (125) (1,304) (125) Income tax (expense) recovery (24,052) (18,890) 767 (17,379) Non-controlling interest (2,778) 2,783 1,794 3,813 ------------------------------------------- Net income (loss) $ 66,528 $ 51,327 ($32,514) $ 75,057 ------------------------------------------- Net income (loss) per common share $ 1.37 $ 1.06 ($0.67) $ 1.55 ------------------------------------------- Diluted net income (loss) per common share $ 1.36 $ 1.06 ($0.67) $ 1.55 ------------------------------------------- Previous Four Quarters ------------------------------------------------------------------------- (thousands of Canadian 2008 2008 2007 2007 dollars, except per Second First Fourth Third share amounts) quarter quarter quarter quarter ------------------------------------------------------------------------- STATEMENTS OF EARNINGS Gross sales $ 281,463 $ 276,281 $ 224,773 $ 272,293 Smelter processing charges and freight (53,209) (44,157) (43,902) (42,557) Cost of sales (89,893) (79,246) (78,809) (72,057) Depreciation (9,195) (9,170) (9,480) (8,739) ------------------------------------------- 129,166 143,708 92,582 148,940 Corporate development and exploration (2,483) (2,618) (3,510) (2,475) General and administration (2,790) (3,648) (12,622) (2,674) Investment and other income (11,358) 14,754 5,968 9,224 Interest expense (471) (447) (407) (424) Capital tax (expense) recovery (124) (126) 212 (273) Income tax expense (44,333) (44,744) (18,551) (37,649) Non-controlling interest 98 (205) (27) 167 ------------------------------------------- Net income $ 67,705 $ 106,674 $ 63,645 $ 114,836 ------------------------------------------- Net income per common share $ 1.40 $ 2.21 $ 1.32 $ 2.38 ------------------------------------------- Diluted net income per common share $ 1.40 $ 2.21 $ 1.32 $ 2.37 ------------------------------------------- Consolidated financial statements INMET MINING CORPORATION Consolidated balance sheets June 30 December 31 (thousands of Canadian dollars) 2009 2008 ------------------------------------------------------------------------- (unaudited) Assets Current assets: Cash and short-term investments (note 4) $834,678 $572,733 Restricted cash (note 5) 7,210 8,311 Accounts receivable 154,617 135,742 Inventories 80,360 74,362 Derivatives (note 7) 340 - Future income tax asset 11,642 14,311 ------------------------- 1,088,847 805,459 Restricted cash (note 5) 61,399 52,893 Property, plant and equipment 1,925,554 1,950,535 Investments (note 6) 26,915 17,514 Future income tax asset 7,137 5,499 Derivatives (note 7) - 4,327 Other assets 3,183 5,031 ------------------------- $3,113,035 $2,841,258 ------------------------------------------------------------------------- Liabilities Current liabilities: Accounts payable and accrued liabilities $130,887 $212,527 Derivatives (note 7) 15,141 8,693 Future income tax liabilities 11,492 - Current portion of long-term debt (note 8) 242,624 109,666 ------------------------- 400,144 330,886 Long-term debt (note 8) 208,175 384,848 Asset retirement obligations 127,414 126,782 Derivatives (note 7) 2,718 16,417 Other liabilities (note 10) 34,234 27,122 Future income tax liabilities 15,657 15,971 Non-controlling interest 77,984 71,449 ------------------------- 866,326 973,475 ------------------------- Commitments (note 9) Shareholders' equity Share capital (note 12) 670,346 337,464 Contributed surplus 61,857 61,925 Stock based compensation 3,871 2,688 Retained earnings 1,396,101 1,283,074 Accumulated other comprehensive loss (note 13) 114,534 182,632 ------------------------- 2,246,709 1,867,783 ------------------------- $3,113,035 $2,841,258 ------------------------------------------------------------------------- (see accompanying notes) INMET MINING CORPORATION Segmented balance sheets 2009 As at June 30 (unaudited) CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Assets Cash and short-term investments $556,248 $100,665 $94,742 $ - Other current assets 7,710 40,404 32,860 21,190 Restricted cash 16,444 - 1,958 - Property, plant and equipment 1,058 134,389 74,555 20,727 Investments 26,915 - - - Other non-current assets 1,797 413 - - --------------------------------------------- $610,172 $275,871 $204,115 $41,917 --------------------------------------------- Liabilities Current liabilities $19,524 $24,875 $15,731 $10,088 Long-term debt 19,278 - - - Asset retirement obligations 23,879 9,467 16,125 11,043 Derivatives - - - - Other liabilities 4,832 5,463 - - Future income tax liabilities 2,473 3,567 9,405 - Non-controlling interest - - - - --------------------------------------------- $69,986 $43,372 $41,261 $21,131 --------------------------------------------- (unaudited) OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------- ----------- ----------- (thousands of Canadian (Papua New dollars) Guinea) (Spain) (Panama) Assets Cash and short-term investments $42,797 $35,304 $4,922 $834,678 Other current assets 58,247 93,040 718 254,169 Restricted cash 17,144 25,853 - 61,399 Property, plant and equipment 94,992 1,051,994 547,839 1,925,554 Investments - - - 26,915 Other non-current assets 6,216 1,894 - 10,320 --------------------- ----------- ----------- $219,396 $1,208,085 $553,479 $3,113,035 --------------------- ----------- ----------- Liabilities Current liabilities $30,620 $292,848 $6,458 $400,144 Long-term debt - 188,897 - 208,175 Asset retirement obligations 24,281 42,619 - 127,414 Derivatives 2,718 - - 2,718 Other liabilities 2,126 21,813 - 34,234 Future income tax liabilities - 212 - 15,657 Non-controlling interest - 77,984 - 77,984 --------------------- ----------- ----------- $59,745 $624,373 $6,458 $866,326 --------------------------------------------- 2008 As at December 31 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) 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 - - - Other non-current 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 --------------------------------------------- OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------- ----------- ----------- (thousands of Canadian (Papua New dollars) Guinea) (Spain) (Panama) 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 Other non-current assets 7,039 2,356 - 14,857 --------------------------------------------- $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 --------------------------------------------- --------------------------------------------- INMET MINING CORPORATION Consolidated statements of earnings (unaudited) Three Months Ended Six Months Ended (thousands of Canadian dollars June 30 June 30 except per share amounts) 2009 2008 2009 2008 --------------------------------------------------- --------------------- Gross sales $213,042 $281,463 $452,194 $557,744 Smelter processing charges and freight (40,589) (53,209) (81,129) (97,366) Cost of sales (73,827) (89,893) (163,731) (169,139) Depreciation (13,604) (9,195) (29,283) (18,365) --------------------------------------------------- --------------------- 85,022 129,166 178,051 272,874 Corporate development and exploration (2,727) (2,483) (5,959) (5,101) General and administration (4,785) (2,790) (8,909) (6,438) Investment and other income (expense) (note 14) 16,466 (11,358) 5,263 3,396 Asset impairment (note 17) - - (6,419) - Interest expense (493) (471) (985) (918) Capital tax expense (125) (124) (250) (250) Income tax expense (note 15) (24,052) (44,333) (42,942) (89,077) Non-controlling interest (2,778) 98 5 (107) --------------------------------------------------- --------------------- Net income $66,528 $67,705 $117,855 $174,379 --------------------------------------------------- --------------------- Basic net income per common share (note 16) $1.37 $1.40 $2.43 $3.61 --------------------------------------------------- --------------------- Diluted net income per common share (note 16) $1.36 $1.40 $2.42 $3.61 --------------------------------------------------- --------------------- Weighted average shares outstanding (000's) 48,712 48,282 48,498 48,282 --------------------------------------------------- --------------------- (see accompanying notes) INMET MINING CORPORATION Segmented statements of earnings (unaudited) 2009 For the six months ended June 30 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Gross sales $ - $123,732 $ 76,982 $124,397 Smelter processing charges and freight - (37,514) (21,317) (8,718) Cost of sales (992) (42,286) (32,575) (38,443) Depreciation - (6,846) (4,764) (6,720) --------------------------------------------- (992) 37,086 18,326 70,516 Corporate development and exploration (3,374) (901) (1,684) - General and administration (8,909) - - - Investment and other income (expense) 6,420 1,070 (422) 361 Asset impairment charges - (6,419) - - Interest expense (985) - - - Capital tax expense (250) - - - Income tax expense (19,730) (1,631) (2,305) - Non-controlling interest - - - - --------------------------------------------- Net income (27,820) $29,205 $13,915 $70,877 --------------------------------------------- --------------------------------------------- OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------------------------------- (thousands of Canadian (Papua New dollars) Guinea) (Spain) (Panama) Gross sales $127,083 $ - $ - $452,194 Smelter processing charges and freight (13,580) - - (81,129) Cost of sales (49,435) - - (163,731) Depreciation (10,953) - - (29,283) --------------------------------------------- 53,115 - - 178,051 Corporate development and exploration - - - (5,959) General and administration - - - (8,909) Investment and other income (expense) (2,486) 320 - 5,263 Asset impairment charges - - - (6,419) Interest expense - - - (985) Capital tax expense - - - (250) Income tax expense (19,009) (267) - (42,942) Non-controlling interest - 5 - 5 --------------------------------------------- Net income $31,620 $58 $ - $117,855 --------------------------------------------- --------------------------------------------- 2008 For the six months ended June 30 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Gross sales $ - $198,929 $116,157 $69,422 Smelter processing charges and freight - (47,578) (25,381) (4,608) Cost of sales (988) (47,505) (31,168) (44,533) Depreciation - (4,929) (4,382) (4,136) --------------------------------------------- (988) 98,917 55,226 16,145 Corporate development and exploration (3,812) (96) (1,181) (12) General and administration (6,438) - - - Investment and other income 199 3,938 - 2,722 Interest expense (918) - - - Capital tax expense (250) - - - Income tax expense (5,534) (27,779) (12,448) - Non-controlling interest - - - - --------------------------------------------- Net income ($17,741) $74,980 $41,597 $18,855 --------------------------------------------- --------------------------------------------- OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------- ----------------------- (thousands of Canadian (Papua New dollars) Guinea) (Spain) (Panama) Gross sales $173,236 $ - $ - $557,744 Smelter processing charges and freight (19,799) - - (97,366) Cost of sales (44,945) - - (169,139) Depreciation (4,918) - - (18,365) --------------------- ----------------------- 103,574 - - 272,874 Corporate development and exploration - - - (5,101) General and administration - - - (6,438) Investment and other income (3,786) 323 - 3,396 Interest expense - - - (918) Capital tax expense - - - (250) Income tax expense (43,150) (166) - (89,077) Non-controlling interest - (107) - (107) --------------------- ----------------------- Net income $56,638 $50 $ - $174,379 --------------------------------------------- --------------------------------------------- 2009 For the three months ended June 30 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Gross sales $ - $63,711 $43,001 $37,407 Smelter processing charges and freight - (18,438) (12,326) (2,458) Cost of sales (508) (19,715) (16,730) (15,616) Depreciation - (3,373) (2,162) (3,301) --------------------------------------------- (508) 22,185 11,783 16,032 Corporate development and exploration (1,526) (407) (794) - General and administration (4,785) - - - Investment and other income (expense) 5,969 (1,797) (422) 77 Asset impairment charges - - - - Interest expense (493) - - - Capital tax recovery (125) - - - Income tax expense (3,199) (2,212) (1,870) - Non-controlling interest - - - - --------------------------------------------- Net income ($4,667) $17,769 $8,697 $16,109 --------------------------------------------- OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------- ----------------------- (thousands of Canadian (Papua New dollars) Guinea) (Spain) (Panama) Gross sales $68,923 $ - $ - $213,042 Smelter processing charges and freight (7,367) - - (40,589) Cost of sales (21,258) - - (73,827) Depreciation (4,768) - - (13,604) --------------------------------------------- 35,530 - - 85,022 Corporate development and exploration - - - (2,727) General and administration - - - (4,785) Investment and other income (expense) (1,114) 13,753 - 16,466 Asset impairment charges - - - - Interest expense - - - (493) Capital tax recovery - - - (125) Income tax expense (12,469) (4,302) - (24,052) Non-controlling interest - (2,778) - (2,778) --------------------------------------------- Net income $21,947 $6,673 $ - $66,528 --------------------------------------------- 2008 For the three months ended June 30 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Gross sales $ - $98,313 $61,249 $35,171 Smelter processing charges and freight - (25,565) (14,561) (2,421) Cost of sales (494) (24,930) (17,224) (23,522) Depreciation - (2,556) (2,232) (1,718) --------------------------------------------- (494) 45,262 27,232 7,510 Corporate development and exploration (1,835) (26) (615) (7) General and administration (2,790) - - - Investment and other income (expense) (10,362) (923) - 1,361 Interest expense (471) - - - Capital tax expense (124) - - - Income tax expense (5,534) (8,655) (6,425) - Non-controlling interest - - - - --------------------------------------------- Net income ($21,610) $35,658 $20,192 $8,864 --------------------------------------------- OK TEDI LAS CRUCES PETAQUILLA TOTAL ------------------------------------------------- ----------------------- (thousands of Canadian (Papua New dollars) Guinea) (Spain) (Panama) Gross sales $86,730 $ - $ - $281,463 Smelter processing charges and freight (10,662) - - (53,209) Cost of sales (23,723) - - (89,893) Depreciation (2,689) - - (9,195) --------------------------------------------- 49,656 - - 129,166 Corporate development and exploration - - - (2,483) General and administration - - - (2,790) Investment and other income (expense) (924) (510) - (11,358) Interest expense - - - (471) Capital tax expense - - - (124) Income tax expense (23,803) 84 - (44,333) Non-controlling interest - 98 - 98 --------------------------------------------- Net income $24,929 ($328) $ - $67,705 --------------------------------------------- INMET MINING CORPORATION Consolidated statements of cash flows (unaudited) Three Months Ended Six Months Ended June 30 June 30 (thousands of Canadian dollars) 2009 2008 2009 2008 --------------------------------------------------- --------------------- Cash provided by (used in) operating activities(1) Net income $66,528 $67,705 $117,855 $174,379 Add (deduct) items not affecting cash: Depreciation 13,604 9,195 29,283 18,365 Future income tax 13,552 (6,973) 11,319 (4,056) Accretion expense 1,208 1,123 2,475 2,144 Non-controlling interest 2,778 (98) (5) 107 Asset impairment - - 6,419 - Foreign exchange loss (gain) (19,788) 22,476 (8,848) 18,890 Other 5,114 1,156 7,610 3,209 Settlement of asset retirement obligations (2,309) (303) (2,756) (824) Net change in non-cash working capital (note 3) 9,909 20,516 (55,659) (16,506) ------------------------------------------ 90,596 114,797 107,693 195,708 ------------------------------------------ Cash provided by (used in) investing activities Capital spending (86,263) (121,028) (181,122) (232,442) Investment in Petaquilla prior to consolidation - (3,755) - (3,755) Loans to other Petaquilla shareholders - (4,091) - (4,091) Disposition of investments - - - 1,521 Sale (purchase) of short-term investments (47,682) (125,439) (45,251) 174,985 ------------------------------------------ (133,945) (254,313) (226,373) (63,782) ------------------------------------------ Cash provided by (used in) financing activities Long-term debt prepayments (note 8) Borrowings - 55,894 - 106,240 Repayments (74,174) - (82,502) - Issuance of common shares 334,284 - 334,284 - Funding by non-controlling shareholder 28,269 19,627 43,941 34,756 Settlement of foreign currency forward contract - 52,256 - 52,256 Financial assurance deposits 700 (6,478) (8,740) (13,972) Dividends paid on common shares (4,828) (4,828) (4,828) (4,828) Subsidies received (note 11) 57,600 - 66,209 3,233 Other (45) (46) (90) (92) ------------------------------------------ 341,806 116,425 348,274 177,593 ------------------------------------------ Foreign exchange change on cash held in foreign currency (18,400) (9,467) (12,900) 23,568 ------------------------------------------ Increase (decrease) in cash 280,057 (32,558) 216,694 333,087 Cash: Beginning of period 473,696 888,150 537,059 522,505 ------------------------------------------ End of period 753,753 855,592 753,753 855,592 Short-term investments 80,925 143,333 80,925 143,333 ------------------------------------------ Cash and short-term investments $834,678 $998,925 $834,678 $998,925 (see accompanying notes) (1) Supplementary cash flow information: Cash interest paid $5,170 $4,724 $9,895 $8,122 Cash taxes paid $4,792 $65,036 $10,640 $80,249 INMET MINING CORPORATION Segmented statements of cash flows (unaudited) 2009 For the six months ended June 30 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 ($21,139) $34,967 $15,368 $78,859 Net change in non-cash working capital 79 (19,786) 5,873 (1,173) --------------------------------------------- (21,060) 15,181 21,241 77,686 --------------------------------------------- Cash provided by (used in) investing activities Capital spending (261) (6,555) (3,778) - Disposition of investments Purchase of short-term investments (45,251) - - - Other --------------------------------------------- (45,512) (6,555) (3,778) - --------------------------------------------- --------------------------------------------- Cash provided by (used in) financing activities 329,264 - - - --------------------------------------------- Foreign exchange change on cash held in foreign currency - (10,675) (1,652) - --------------------------------------------- Intergroup funding (distributions) 7,067 (90,167) 12,955 (77,686) --------------------------------------------- Increase (decrease) in cash 269,759 (92,216) 28,766 - Cash: Beginning of period 205,564 192,881 65,976 - --------------------------------------------- End of period 475,323 100,665 94,742 - Short-term investments 80,925 - - - --------------------------------------------- Cash and short-term investments $556,248 $100,665 $94,742 - --------------------------------------------- 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 $55,297 $ - $ - $163,352 Net change in non-cash working capital (40,652) - - (55,659) --------------------------------------------- 14,645 - - 107,693 --------------------------------------------- Cash provided by (used in) investing activities Capital spending (6,590) (118,550) (45,388) (181,122) Disposition of investments Purchase of short-term investments - - - (45,251) Other --------------------------------------------- (6,590) (118,550) (45,388) (226,373) --------------------------------------------- --------------------------------------------- Cash provided by (used in) financing activities (749) 19,759 - 348,274 --------------------------------------------- Foreign exchange change on cash held in foreign currency (1,951) 1,371 7 (12,900) --------------------------------------------- Intergroup funding (distributions) (105) 98,743 49,193 - --------------------------------------------- Increase (decrease) in cash 5,250 1,323 3,812 216,694 Cash: Beginning of period 37,547 33,981 1,110 537,059 --------------------------------------------- End of period 42,797 35,304 4,922 753,753 Short-term investments - - - 80,925 --------------------------------------------- Cash and short-term investments $42,797 $35,304 $4,922 $834,678 --------------------------------------------- 2008 For the six months ended June 30 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 ($1,973) $78,116 $46,306 $22,893 Net change in non-cash working capital 1,752 (28,164) 4,298 (8,321) --------------------------------------------- (221) 49,952 50,604 14,572 --------------------------------------------- Cash provided by (used in) investing activities Capital spending (50) (20,255) (3,358) (279) Disposition of investments 1,521 - - - Sale of short-term investments 174,985 - - - Spending on Petaquilla (7,846) - - - --------------------------------------------- 168,610 (20,255) (3,358) (279) --------------------------------------------- --------------------------------------------- Cash provided by (used in) financing activities 45,739 - (1,850) - --------------------------------------------- Foreign exchange change on cash held in foreign currency - 9,517 8,531 - --------------------------------------------- Intergroup funding (distributions) 251,200 (225,032) (103,365) (14,293) --------------------------------------------- Increase (decrease) in cash $465,328 (185,818) (49,438) - Cash: Beginning of period 41,041 333,671 111,492 - --------------------------------------------- End of period 506,369 147,853 62,054 - Short-term investments 143,333 - - - --------------------------------------------- Cash and short-term investments $649,702 $147,853 $62,054 $ - --------------------------------------------- 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 $66,872 $ - $ - $212,214 Net change in non-cash working capital 13,929 - - (16,506) --------------------------------------------- 80,801 - - 195,708 --------------------------------------------- Cash provided by (used in) investing activities Capital spending (18,851) (189,649) - (232,442) Disposition of investments - - - 1,521 Sale of short-term investments - - - 174,985 Spending on Petaquilla - - - (7,846) --------------------------------------------- (18,851) (189,649) - (63,782) --------------------------------------------- --------------------------------------------- Cash provided by (used in) financing activities (616) 134,320 - 177,593 --------------------------------------------- Foreign exchange change on cash held in foreign currency 978 4,542 - 23,568 --------------------------------------------- Intergroup funding (distributions) (40,979) 132,469 - - --------------------------------------------- Increase (decrease) in cash 21,333 81,682 - 333,087 Cash: Beginning of period 13,473 22,828 - 522,505 --------------------------------------------- End of period 34,806 104,510 - 855,592 Short-term investments - - - 143,333 --------------------------------------------- Cash and short-term investments $34,806 $104,510 $ - $998,925 --------------------------------------------- 2009 For the three months ended June 30 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 ($7,607) $23,370 $9,708 $19,143 Net change in non-cash working capital (6,900) 757 13,319 9,817 --------------------------------------------- (14,507) 24,127 23,027 28,960 --------------------------------------------- Cash provided by (used in) investing activities Capital spending (445) (2,988) (3,006) - Purchase of short-term investments (47,682) - - - --------------------------------------------- (48,127) (2,988) (3,006) - --------------------------------------------- --------------------------------------------- Cash provided by (used in) financing activities 329,374 - - - --------------------------------------------- Foreign exchange change on cash held in foreign currency - (17,356) (509) - --------------------------------------------- Intergroup funding (distributions) 14,696 (90,562) 17,107 (28,960) --------------------------------------------- Increase (decrease) in cash 281,436 (86,779) 36,619 - Cash: Beginning of period 193,887 187,444 58,123 - --------------------------------------------- End of period 475,323 100,665 94,742 - Short-term investments 80,925 - - - --------------------------------------------- Cash and short-term investments $556,248 $100,665 $94,742 $ - --------------------------------------------- --------------------------------------------- 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 $36,073 $ - $ - $80,687 Net change in non-cash working capital (7,084) - - 9,909 --------------------------------- ----------- 28,989 - - 90,596 --------------------------------- ----------- Cash provided by (used in) investing activities Capital spending (3,269) (53,999) (22,556) (86,263) Purchase of short-term investments - - - (47,682) --------------------------------- ----------- (3,269) (53,999) (22,556) (133,945) --------------------------------- ----------- --------------------------------- ----------- Cash provided by (used in) financing activities 24 12,408 - 341,806 --------------------------------- ----------- Foreign exchange change on cash held in foreign currency (3,037) 3,039 (537) (18,400) --------------------------------- ----------- Intergroup funding (distributions) (299) 64,149 23,869 - --------------------------------- ----------- Increase (decrease) in cash 22,408 25,597 776 280,057 Cash: Beginning of period 20,389 9,707 4,146 473,696 --------------------------------- ----------- End of period 42,797 35,304 4,922 753,753 Short-term investments - - - 80,925 --------------------------------- ----------- Cash and short-term investments $42,797 $35,304 $4,922 $834,678 --------------------------------- ----------- --------------------------------- ----------- 2008 For the three months ended June 30 CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Cash provided by (used in) operating activities Before net change in non-cash working capital $(3,462) $37,202 $22,192 $10,218 Net change in non-cash working capital 13,829 (2,250) (2,826) (2,124) --------------------------------------------- 10,367 34,952 19,366 8,094 --------------------------------------------- Cash provided by (used in) investing activities Capital spending (18) (11,372) (1,599) (32) Sale (purchase) of short-term investments (125,439) - - - Other (7,846) - - - --------------------------------------------- (133,303) (11,372) (1,599) (32) --------------------------------------------- --------------------------------------------- Cash provided by (used in) financing activities 45,784 - (1,850) - --------------------------------------------- Foreign exchange change on cash held in foreign currency - (2,255) (6,844) - --------------------------------------------- Intergroup funding (distributions) 230,128 (186,420) (91,545) (8,062) --------------------------------------------- Increase (decrease) in cash 152,976 (165,095) (82,472) - Cash: Beginning of period 346,198 312,948 151,721 - --------------------------------------------- End of period 499,174 147,853 69,249 - Short-term investments 143,333 - - - --------------------------------------------- Cash and short-term investments $642,507 $147,853 $69,249 $ - --------------------------------------------- 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 $28,131 $ - $ - $94,281 Net change in non-cash working capital 13,887 - - 20,516 --------------------- ----------- ----------- 42,018 - - 114,797 --------------------- ----------- ----------- Cash provided by (used in) investing activities Capital spending (10,892) (97,115) - (121,028) Sale (purchase) of short-term investments - - - (125,439) Other - - - (7,846) --------------------- ----------- ----------- (10,892) (97,115) - (254,313) --------------------- ----------- ----------- --------------------- ----------- ----------- Cash provided by (used in) financing activities (1) 72,492 - 116,425 --------------------- ----------- ----------- Foreign exchange change on cash held in foreign currency (165) (203) - (9,467) --------------------- ----------- ----------- Intergroup funding (distributions) (41,097) 96,996 - - --------------------- ----------- ----------- Increase (decrease) in cash (10,137) 72,170 - (32,558) Cash: Beginning of period 44,943 32,340 - 888,150 --------------------- ----------- ----------- End of period 34,806 104,510 - 855,592 Short-term investments - - - 143,333 --------------------- ----------- ----------- Cash and short-term investments $34,806 $104,510 $ - $998,925 --------------------- ----------- ----------- INMET MINING CORPORATION Consolidated statements of retained earnings (unaudited) Three Months Ended Six Months Ended (thousands of Canadian June 30 June 30 dollars) 2009 2008 2009 2008 ------------------------------------------------- ----------------------- Retained earnings, beginning of period $1,334,401 $1,181,436 $1,283,074 $1,074,762 Net income 66,528 67,705 117,855 174,379 Dividends on common shares (4,828) (4,828) (4,828) (4,828) ----------------------- ----------------------- Retained earnings, end of period $1,396,101 $1,244,313 $1,396,101 $1,244,313 ------------------------------------------------- ----------------------- (see accompanying notes) Consolidated statements of comprehensive income (unaudited) Three Months Ended Six Months Ended (thousands of Canadian June 30 June 30 dollars) 2009 2008 2009 2008 ------------------------------------------------- ----------------------- Net income $66,528 $67,705 $117,855 $174,379 ----------------------- ----------------------- Other comprehensive income (loss) for the period : Changes in fair value of gold forward sales contracts (344) 2,926 (1,105) (6,999) Changes in fair value of interest rate swap contracts 3,244 4,912 4,984 190 Changes in fair value of foreign exchange forward contracts - (899) - 11,373 Changes in fair value of investments 5,781 5,238 9,401 (2,181) Currency translation adjustments (98,622) (10,883) (71,577) 64,486 Reclassification to net income of gains/losses realized: Gain on sale of investment - - - (256) Troilus gold hedge loss - - - 13,718 Ok Tedi gold hedge loss - 6,721 - 1,013 Amortization of gain on foreign exchange forward contracts (1,523) - (3,031) - Foreign exchange loss (gain) on reduction of net investment in self-sustaining foreign operations (note 14) (3,912) 14,870 (3,912) 20,384 Income tax expense related to other comprehensive income (note 18) (2,098) (2,977) (3,137) (4,240) ----------------------- ----------------------- (97,474) 19,908 (68,377) 97,488 ----------------------- ----------------------- Comprehensive income (loss) ($30,946) $87,613 $49,478 $271,867 ------------------------------------------------- ----------------------- (see accompanying notes) 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 2008 Annual Review. 2. Changes in accounting policies Effective January 1, 2009, we adopted CICA Handbook Section 3064, Goodwill and Intangible Assets, which replaces Section 3062 - Goodwill and Other Intangible Assets and Section 3450 - Research and Development Costs. This new standard establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets. It provides guidance for recognizing 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. The adoption of this standard did not have an impact on our consolidated financial statements. Emerging Issues Committee 173 - Credit Risk and the fair value of financial assets and financial liabilities Effective January 1, 2009, we adopted EIC-173, Credit Risk and the Fair Value of Financial Assets and Financial Liabilities retroactively, without restatement. This EIC provides guidance on how to take into account credit risk of an entity and counterparty when determining the fair value of financial assets and financial liabilities, including derivative instruments. The adoption of EIC 173 did not have a significant impact on our consolidated financial statements. 3. Statement of cash flows The following tables show the components of our net change in non- cash working capital by segment. For the six months ended June 30, 2009 ------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ------------------------------------------------------------------------- Accounts receivable(1) 66 ($15,678) ($6,203) ($495) ($48,400) ($70,710) Inventories - 219 390 3,938 (12) 4,535 Accounts payable and accrued liabilities (2,871) (5,522) 1,257 (4,616) 382 (11,370) Taxes 5,342 1,172 10,429 - 7,671 24,614 Other (2,458) 23 - - (293) (2,728) ------------------------------------------------------------------------- $79 ($19,786) $5,873 ($1,173) ($40,652) ($55,659) ------------------------------------------------------------------------- For the six months ended June 30, 2008 ------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ------------------------------------------------------------------------- Accounts receivable $8,832 ($13,805) $9,362 ($5,113) $1,476 $752 Inventories - (3,180) (714) (2,320) (1,502) (7,716) Accounts payable and accrued liabilities (10,271) 1,966 (80) (467) (4,232) (13,084) Taxes 3,138 (13,255) (4,270) - 18,386 3,999 Other 48 110 - (421) (194) (457) ------------------------------------------------------------------------- $1,747 ($28,164) $4,298 ($8,321) $13,934 ($16,506) ------------------------------------------------------------------------- (1) Includes changes in accounts payable related to metal sales. For the three months ended June 30, 2009 ------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ------------------------------------------------------------------------- Accounts receivable $214 $8,839 ($7,323) $13,290 ($8,967) $6,053 Inventories - (999) 797 998 (1,400) (604) Accounts payable and accrued liabilities (2,137) (3,671) 1,478 (6,162) 1,801 (8,691) Taxes (2,530) (3,381) 18,367 - 2,467 14,923 Other (2,447) (31) - 1,691 (985) (1,772) ------------------------------------------------------------------------- ($6,900) $757 $13,319 $9,817 ($7,084) $9,909 ------------------------------------------------------------------------- For the three months ended June 30, 2008 ------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ------------------------------------------------------------------------- Accounts receivable $8,817 $19,569 ($2,937) ($2,022) $10,537 $33,964 Inventories - (433) 750 367 (1,602) (918) Accounts payable and accrued liabilities 1,533 3,555 1,395 (48) 1,305 7,740 Taxes 3,422 (24,931) (2,034) - 2,705 (20,838) Other 57 (10) - (421) 942 568 ------------------------------------------------------------------------- $13,829 ($2,250) ($2,826) ($2,124) $13,887 $20,516 ------------------------------------------------------------------------- 4. Cash and short-term investments At period end, our cash and short-term investments are held in: --------------------------------------------------------------------- June 30 December 31 (thousands) 2009 2008 --------------------------------------------------------------------- Cash: Liquidity funds $193,645 $276,301 Bankers' acceptances 56,408 64,293 Money market funds 41,700 38,683 Corporate 65,495 - Term deposits 344,422 78,041 Overnight deposits 11,316 14,684 Bank deposits 40,767 52,429 Provincial short-term notes - 12,628 ------------------------- 753,753 537,059 Short-term investments: Provincial short-term notes 11,420 35,674 Bankers' acceptances 26,709 - Bank deposits 19,985 - Other 22,811 - --------------------------------------------------------------------- 80,925 35,674 --------------------------------------------------------------------- Total cash and short-term investments $834,678 $572,733 --------------------------------------------------------------------- 5. Restricted cash --------------------------------------------------------------------- June 30 December 31 (thousands) 2009 2008 --------------------------------------------------------------------- Collateralized cash for letter of credit facility $16,444 $16,343 In trust for Ok Tedi rehabilitation 17,144 16,667 Collateralized cash for letters of credit - Las Cruces 33,063 26,090 Collateralized cash for Pyhasalmi reclamation 1,958 2,104 --------------------------------------------------------------------- 68,609 61,204 Less current portion: Collateralized cash for letters of credit - Las Cruces (7,210) (8,311) --------------------------------------------------------------------- $61,399 $52,893 --------------------------------------------------------------------- Las Cruces' restricted cash which secures a restoration bond increased by (euro) 5.4 million (note 9) year to date. 6. Investments --------------------------------------------------------------------- June 30 December 31 (thousands) 2009 2008 --------------------------------------------------------------------- Available-for-sale equity securities: Premier Gold Mines Ltd. $24,476 $15,309 Other 2,439 2,205 --------------------------------------------------------------------- $26,915 $17,514 --------------------------------------------------------------------- 7. Derivatives --------------------------------------------------------------------- June 30 December 31 (thousands) 2009 2008 --------------------------------------------------------------------- Derivative asset: Ok Tedi copper forward sales contracts $340 $4,327 --------------------------------------------------------------------- Derivative liabilities: Ok Tedi gold forward sales contracts $2,718 $1,670 Las Cruces interest rate swap contracts 15,141 23,440 --------------------------------------------------------------------- $17,859 $25,110 --------------------------------------------------------------------- On July 20, 2009, Las Cruces settled its interest rate swap contracts, requiring a cash payment of US $14 million ($16 million). 8. Long-term debt --------------------------------------------------------------------- June 30 December 31 (thousands) 2009 2008 --------------------------------------------------------------------- Credit facility - Tranche A $234,339 $262,504 - Tranche B 8,285 80,364 Promissory note 19,278 19,741 Loans from non-controlling shareholder 188,897 131,905 --------------------------------------------------------------------- 450,799 494,514 Less current portion: Credit facility - Tranche A (234,339) (29,302) - Tranche B (8,285) (80,364) --------------------------------------------------------------------- $208,175 $384,848 --------------------------------------------------------------------- Credit facility This quarter, Las Cruces repaid (euro) 37.0 million under Tranche B equal to subsidies received. Additionally Las Cruces made a scheduled repayment of US $12 million under Tranche A. The credit facility loans approximate fair value because the loans accrue interest at prevailing market rates. On July 17, 2009, Las Cruces issued a notice to repay amounts outstanding under its credit facility on July 31, 2009 and these amounts have been classified as current liabilities. Loans from non-controlling shareholder This quarter, Las Cruces received intercompany loan advances of (euro) 40 million. 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) 116 million, is reflected in long-term debt at June 30, 2009. Loans from non-controlling shareholders approximate fair value because the loans accrue interest at prevailing market rates. 9. Commitments Our operations have the following capital commitments as at June 30, 2009: - Ok Tedi has committed approximately $116.3 million (our proportionate share is $20.9 million) to capital expenditures related to the mine waste management project. - Las Cruces has committed $6.6 million for engineering, procurement and construction management related to the process plant. - Petaquilla has committed $166 million for the design and supply of certain mill equipment. - Cayeli has capital commitments related to drilling equipment amounting to $2.4 million. Las Cruces' restoration bond increased by (euro) 5.4 million year to date, to (euro) 20.2 million, because of development activities in 2008. 10. Leases Las Cruces has a contract for the supply of oxygen, effective during the first quarter, from a plant owned and operated by a third party and located at the mine site. This arrangement contains a capital lease with minimum lease payments of: 2009 $2,001 2010 2,668 2011 2,668 2012 2,668 2013 2,668 Thereafter 27,348 ---------------------------------------------------- Total $40,021 ---------------------------------------------------- We have recognized the oxygen plant in property, plant and equipment at $25 million. This amount is based on the total minimum future lease payments, discounted at Las Cruces' incremental borrowing rate of 8.2 percent. We have also recognized capital lease obligations of $25 million in other liabilities. The oxygen plant will be depreciated over its estimated useful life of 15 years once Las Cruces is substantially complete. 11. Las Cruces subsidies During the second quarter, Las Cruces received (euro) 37 million in subsidy grants. This operation must meet certain minimum employment and share capital requirements for a five year period, otherwise subsidies received must be repaid. Las Cruces expects to meet these conditions and has recognized total subsidies of (euro) 53 million as a reduction of the cost of the related property, plant and equipment. 12. Share capital On June 25, 2009, we completed a public offering of 7.825 million common shares, on a bought deal basis, at a price of $44.50 per share for aggregate gross proceeds of $348 million ($333 million net of estimated transaction costs). 13. Accumulated other comprehensive 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 $1,030) ($2,402) Unrealized gains on foreign exchange forward contract(1) 21,023 Unrealized losses on interest rate swap contracts(2) (9,962) Unrealized gains on investments (net of tax of $667) 3,314 Currency translation adjustment 170,659 --------------------------------------------------------------------- AOCI, December 31, 2008 $182,632 Impact on adoption of EIC 173 - January 1, 2009 (note 2) 279 Other comprehensive income for the six months ending June 30, 2009 (68,377) --------------------------------------------------------------------- AOCI, June 30, 2009 $114,534 --------------------------------------------------------------------- AOCI June 30, 2009 comprises: Unrealized losses on gold forward sales contracts (net of tax of $1,361) ($3,176) Unrealized gains on foreign exchange forward contract(3) 17,992 Unrealized losses on interest rate swap contract(4) (6,592) Unrealized gains on investments (net of tax of $2,242) 11,140 Currency translation adjustment 95,170 --------------------------------------------------------------------- AOCI, June 30, 2009 $114,534 --------------------------------------------------------------------- (1) Net of tax of $12,792 and non-controlling interest of $8,956. (2) Net of tax of $6,102 and non-controlling interest of $4,270. (3) Net of tax of $10,946 and non-controlling interest of $7,664. (4) Net of tax of $4,038 and non-controlling interest of $2,825. The table below shows the breakdown of the currency translation adjustment included in AOCI. --------------------------------------------------------------------- June 30 December 31 (thousands) 2009 2008 --------------------------------------------------------------------- Pyhasalmi (euro functional currency) $9,245 $17,480 Las Cruces (euro functional currency) 42,424 57,947 Cayeli (US dollar functional currency) 4,677 24,751 Ok Tedi (US dollar functional currency) (976) 6,224 Petaquilla (US dollar functional currency) 39,800 64,257 --------------------------------------------------------------------- $95,170 $170,659 --------------------------------------------------------------------- The US dollar to Canadian dollar exchange rate was $1.16 at June 30, 2009 and $1.22 at December 31, 2008. The euro to Canadian dollar exchange rate was $1.63 at June 30, 2009 and $1.70 at December 31, 2008. 14. Investment and other income --------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 (thousands) 2009 2008 2009 2008 --------------------------------------------------------------------- Interest income $701 $6,963 $2,743 $15,686 Dividend and royalty income 385 1,504 685 1,504 Foreign exchange gain (loss) 18,196 (18,573) 8,098 (11,715) Mark to market on Ok Tedi Copper forward contracts (1,007) (1,436) (2,426) (4,416) Other (1,809) 184 (3,837) 2,337 --------------------------------------------------------------------- $16,466 ($11,358) $5,263 $3,396 --------------------------------------------------------------------- Foreign exchange For transactions with foreign currencies we use the exchange rates in effect: - at period-end for monetary assets and liabilities - on the date of the transaction for non-monetary assets and liabilities - on the date of the transaction for income and expenses Foreign exchange gain (loss) is a result of: --------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 (thousands) 2009 2008 2009 2008 --------------------------------------------------------------------- Translation of Las Cruces' US dollar-denominated debt (note 13) 15,273 - 3,808 - Translation of other- monetary assets and liabilities (989) (3,703) 378 8,669 Reduction in our net investments 3,912 (14,870) 3,912 (20,384) --------------------------------------------------------------------- $18,196 $18,573 $8,098 $(11,715) --------------------------------------------------------------------- 15. Income tax expense The tables below show our current and future income tax expense. For the six months ended June 30, 2009 ------------------------------------------------------------------------- Las (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total ------------------------------------------------------------------------- Current income taxes $10,164 $10,606 $1,758 $9,095 $ - $31,623 Future income taxes 9,566 (8,975) 547 9,914 267 11,319 ------------------------------------------------------------------------- $19,730 $1,631 $2,305 $19,009 $267 $42,942 ------------------------------------------------------------------------- For the six months ended June 30, 2008 ------------------------------------------------------------------------- Las (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total ------------------------------------------------------------------------- Current income taxes $5,534 $28,472 $12,536 $46,591 $ - $93,133 Future income taxes - (693) (88) (3,441) 166 (4,056) ------------------------------------------------------------------------- $5,534 $27,779 $12,448 $43,150 $166 $89,077 ------------------------------------------------------------------------- For the three months ended June 30, 2009 ------------------------------------------------------------------------- Las (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total ------------------------------------------------------------------------- Current income taxes $2,509 $2,800 $1,330 $3,861 $ - $10,500 Future income taxes 690 (588) 540 8,608 4,302 13,552 ------------------------------------------------------------------------- $3,199 $2,212 $1,870 $12,469 $4,302 $24,052 ------------------------------------------------------------------------- For the three months ended June 30, 2008 ------------------------------------------------------------------------- Las (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total ------------------------------------------------------------------------- Current income taxes $5,534 $9,922 $6,564 $29,286 $ - $51,306 Future income taxes - (1,267) (139) (5,483) (84) (6,973) ------------------------------------------------------------------------- $5,534 $8,655 $6,425 $23,803 ($84) $44,333 ------------------------------------------------------------------------- 16. Net income per share The following tables show our calculation of basic and diluted net income per share. --------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 (thousands) 2009 2008 2009 2008 --------------------------------------------------------------------- Net income available to common shareholders $66,528 $67,705 $117,855 $174,379 --------------------------------------------------------------------- (thousands) --------------------------------------------------------------------- Weighted average common shares outstanding 48,712 48,282 48,498 48,282 Plus incremental shares from assumed conversions: Deferred share units 83 78 83 78 Long term incentive plan units 43 - 43 - --------------------------------------------------------------------- Diluted weighted average common shares outstanding 48,838 48,360 48,624 48,360 --------------------------------------------------------------------- (Canadian dollars per share) --------------------------------------------------------------------- Basic net income per common share $1.37 $1.40 $2.43 $3.61 Dilutive effect from assumed conversions of deferred share units and long term incentive plan units per common share ($0.01) - ($0.01) - --------------------------------------------------------------------- Diluted net income per common share $1.36 $1.40 $2.42 $3.61 --------------------------------------------------------------------- 17. Asset impairment We made a decision in 2008 not to proceed with the Cerattepe project and all work has ceased on the project. During the first quarter, we recognized an asset impairment charge of $6 million and an associated tax recovery of $6 million. 18. Income taxes recovery (expense) included in other comprehensive income --------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 (thousands) 2009 2008 2009 2008 --------------------------------------------------------------------- Changes in fair value of gold forward sales contracts $104 ($575) $331 ($284) Changes in fair value of interest rate swap contracts (1,233) (1,865) (1,893) (72) Changes in fair value of foreign exchange forward contracts - 341 - (4,319) Changes in fair value of investments (969) (878) (1,575) 435 --------------------------------------------------------------------- ($2,098) ($2,977) ($3,137) ($4,240) ---------------------------------------------------------------------

SOURCE Inmet Mining Corporation

Source: PR Newswire

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Inmet announces second quarter earnings of $1.37 per share compared with $1.40 per share in the second quarter of 2008

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