Inmet Announces First Quarter Earnings From Continuing Operations of $1.39 Per Share
TORONTO, CANADA -- (Marketwire) -- 04/26/12 -- All amounts in Canadian dollars unless indicated otherwise.
Inmet (TSX: IMN) announces first quarter earnings from continuing operations of $1.39 per share compared to $0.97 per share in the first quarter of 2011.
First quarter highlights
-- Strong earnings from operations
Earnings from operations were $151 million compared to $117 million in the first quarter of 2011. Significantly higher copper sales volumes increased operating earnings by $72 million - a result of higher production at Las Cruces and Cayeli, and the timing of shipments at Cayeli. This was somewhat offset by lower realized copper and zinc prices relative to the first quarter of 2011 that reduced operating earnings by $26 million.
-- Las Cruces production on target
Las Cruces produced 13,300 tonnes of copper cathode in the quarter compared to 8,100 tonnes produced during the same period of 2011. The plant achieved record production of 10,300 tonnes of copper cathode in the first two months of 2012. March production was not at the same level due to scheduled maintenance and a one-day national strike in Spain. In April, Las Cruces expects to achieve monthly production of 6,000 tonnes of copper cathode (design capacity) for the first time.
-- Korea Panama Mining Corporation exercises Cobre Panama option
On April 25, 2012, Korea Panama Mining Corporation (KPMC) completed its acquisition of a 20 percent interest in Minera Panama SA (Minera Panama), owner and developer of the Cobre Panama development project, for US $169 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to date, in accordance with the option agreement of 2009.
Key financial data
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three months ended March 31
(thousands, except per share amounts) 2012 2011 change
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FINANCIAL HIGHLIGHTS
Sales
Gross sales $ 294,904 $ 254,277 +16%
Net income
Net income from continuing operations $ 96,137 $ 59,405 +62%
Net income from continuing operations per
share $ 1.39 $ 0.97 +43%
Net income from discontinued operations - $ 83,439 -100%
Net income from discontinued operations
per share - $ 1.36 -100%
Net income attributable to Inmet
shareholders $ 96,137 $ 142,844 -33%
Net income per share $ 1.39 $ 2.33 -40%
Cash flow
Cash flow provided by operating
activities $ 118,276 $ 118,176 -
Cash flow provided by operating
activities per share (1) $ 1.71 $ 1.92 -11%
Capital spending (2) $ 85,321 $ 40,730 +109%
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OPERATING HIGHLIGHTS
Production
Copper (tonnes) 24,800 17,700 +40%
Zinc (tonnes) 15,100 21,200 -29%
Pyrite (tonnes) 211,300 186,100 +14%
Copper cash cost (US $ per pound) (3) $ 1.00 $ 0.95 +5%
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as at as at
March 31 December 31
FINANCIAL CONDITION 2012 2011
Current ratio 8.4 to 1 9.3 to 1
Gross debt to total equity - 1%
Net working capital balance (millions) $ 1,345 $ 1,304
Cash balance and long-term bonds (millions) $ 1,730 $ 1,706
Gross debt (millions) $ 17 $ 17
Shareholders' equity (millions) $ 3,506 $ 3,414
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(1) Cash flow provided by operating activities divided by average shares
outstanding for the period.
(2) The three months ended March 31, 2012 includes capital spending of $74
million at Cobre Panama. The three months ended March 31, 2011 includes
capital spending of $23 million at Cobre Panama and $15 million at Las
Cruces.
(3) Copper cash cost per pound is a non-GAAP financial measure - see
Supplementary financial information on pages 25 to 26.
First quarter press release
Where to find it
Our financial results 4
Key changes in 2011 4
Understanding our performance 5
Earnings from operations 7
Corporate costs 11
Results of our operations 13
Cayeli 14
Las Cruces 16
Pyhasalmi 18
Status of our development project 20
Cobre Panama 20
Managing our liquidity 21
Financial condition 24
Supplementary financial information 25
In this press release, Inmet means Inmet Mining Corporation and we, us and our mean Inmet and/or its subsidiaries and joint ventures. This quarter refers to the three months ended March 31, 2012. Revised objective is as of April 26, 2012.
Caution with respect to forward-looking statements and information
Securities regulators encourage companies to disclose forward-looking information to help investors understand a company's future prospects. This interim report contains statements about our business, results of operation and future financial condition.
These statements are "forward-looking" because we have used what we know and expect today to make a statement about the future. Forward-looking statements usually include words like may, expect, anticipate, believe or other similar words. Our objectives and outlook have been prepared based on our existing operations, expectations and circumstances. Actual events and results could be substantially different, however, because of the risks and uncertainties associated with our business or events that happen after the date of this interim report.
You should not place undue reliance on forward-looking statements. As a general policy, we do not update forward-looking statements except if there is an offering document or where securities legislation requires us to do so.
Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Also, many of the factors are beyond the control of Inmet. Accordingly, readers should not place undue reliance on forward-looking statements or information. Inmet undertakes no obligation to update forward-looking statements or information as a result of new information after the date of this interim report except as required by law. All forward-looking statements and information herein are qualified by this cautionary statement.
Our financial results
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three months ended March 31
(thousands, except per share amounts) 2012 2011 change
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EARNINGS FROM OPERATIONS (1)
Cayeli $ 68,169 $ 51,473 +32%
Las Cruces 53,314 30,576 +74%
Pyhasalmi 26,987 34,453 -22%
Other 2,837 - +100%
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151,307 116,502 +30%
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DEVELOPMENT AND EXPLORATION
Corporate development and exploration (9,090) (13,411) -32%
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CORPORATE COSTS
General and administration (10,065) (8,422) +20%
Investment and other income (6,469) (5,773) +12%
Finance costs (2,681) (2,331) +15%
Income and capital taxes (26,865) (27,160) -1%
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(46,080) (43,686) +5%
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Net income from continuing operations 96,137 59,405 +62%
Income from discontinued operation (net of
taxes) - 83,439 -100%
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Net income attributable to Inmet
shareholders $ 96,137 $ 142,844 -33%
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Income from continuing operations per
common share $ 1.39 $ 0.97 +43%
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Diluted income from continuing operations
per common share $ 1.38 $ 0.96 +44%
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Basic net income per common share $ 1.39 $ 2.33 -40%
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Diluted net income per common share $ 1.38 $ 2.31 -40%
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Weighted average shares outstanding 69,349 61,549 +13%
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(1) Gross sales less smelter processing charges and freight, cost of sales
including depreciation and provisions for mine reclamation at closed
properties.
Key changes in 2012
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three months
ended see
(millions) March 31 page
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EARNINGS FROM OPERATIONS
Sales
Lower copper prices denominated in Canadian dollars $ (22) 7
Lower zinc prices denominated in Canadian dollars (4) 7
Higher copper sales volumes 72 7
Lower zinc sales volume (8) 7
Higher other metal sales 5
Costs
Lower processing charges and freight 2 9
Higher operating costs (4) 10
Higher depreciation (4) 10
Other (2)
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Higher earnings from operations compared to 2011 35
CORPORATE COSTS
Lower corporate development and exploration costs 4 11
Foreign exchange changes (2) 11
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Higher net income from continuing operations compared to
2011 37
Lower income from discontinued operation - Ok Tedi (83) 12
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Lower net income attributable to Inmet shareholders
compared to 2011 $ (46)
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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).
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three months ended March 31
2012 2011 change
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US dollar metal prices
Copper (per pound) US $3.87 US $4.29 -10%
Zinc (per pound) US $0.93 US $1.06 -12%
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Canadian dollar metal prices
Copper (per pound) C $3.88 C $4.23 -8%
Zinc (per pound) C $0.93 C $1.05 -11%
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Copper
Copper prices on the London Metals Exchange (LME) averaged US $3.77 per pound this quarter, an increase of 11 percent from the fourth quarter of 2011 and a 14 percent decrease from the first quarter of 2011.
Zinc
Zinc prices on the LME averaged US $0.92 per pound this quarter, a 7 percent increase from last quarter's average price of US $0.86 per pound and a 16 percent decrease from the first quarter of 2011.
Exchange rates
Exchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter compared to 2011.
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three months ended March 31
2012 2011 change
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Exchange rates
1 US$ to C$ $ 1.00 $ 0.99 +1%
1 euro to C$ $ 1.31 $ 1.35 -3%
1 euro to US$ $ 1.31 $ 1.37 -4%
1 US$ to Turkish lira TL 1.79 TL 1.57 +14%
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Our sales are affected by the conversion of US dollar revenue to Canadian dollars. Compared to the same quarter last year, the value of the Canadian dollar depreciated 1 percent relative to the US dollar, and appreciated 3 percent relative to the euro.
Our earnings are affected by changes in foreign currency exchange rates when we:
-- translate the results of our operations from their functional currency
(US dollars or euros) to Canadian dollars,
-- translate Cayeli's Turkish lira denominated costs into its functional
currency (US dollars)
-- revalue US dollars that we hold in cash at our operations whose
functional currency is the euro, and
-- revalue US dollars and euros that we hold in cash and long-term bonds at
Corporate.
Treatment charges for copper increased
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. Zinc contracts for 2012 and 2011 were not finalized in the first quarter of the respective years and therefore the average charges represent the contract prices from the relevant prior year. Adjustments to contracts will be reflected in the second quarter.
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three months ended March 31
(US$) 2012 2011 change
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Treatment charges
Copper (per dry metric tonne of
concentrate) US $58 US $48 +21%
Zinc (per dry metric tonne of
concentrate) US $207 US $258 -20%
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Price participation
Copper (per pound) US $0.00 US $0.02 -100%
Zinc (per pound) US ($0.01) US $0.00 not meaningful
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Freight charges
Copper (per dry metric tonne of
concentrate) US $61 US $50 +22%
Zinc (per dry metric tonne of
concentrate) US $30 US $25 +20%
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Statutory tax rates
The table below shows the statutory tax rates for each of our taxable operating mines.
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2012 2011 change
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Statutory tax rates
Cayeli 24% 24% -
Las Cruces 30% 30% -
Pyhasalmi 24.5% 26% -1.5%
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Earnings from operations
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three months ended March 31
(thousands) 2012 2011 change
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Gross sales $ 294,904 $ 254,277 +16%
Smelter processing charges and freight (30,302) (31,585) -4%
Cost of sales:
Direct production costs (80,740) (71,428) +13%
Inventory changes (5,428) (7,154) -24%
Other non-cash expenses 3,928 (568) -792%
Depreciation (31,055) (27,040) +15%
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Earnings from operations $ 151,307 $ 116,502 +30%
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Gross sales were significantly higher
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three months ended March 31
(thousands) 2012 2011 change
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Gross sales by operation
Cayeli $ 127,423 $ 99,053 +29%
Las Cruces 114,007 90,826 +26%
Pyhasalmi 53,474 64,398 -17%
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$ 294,904 $ 254,277 +16%
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Gross sales by metal
Copper $ 243,985 $ 191,704 +27%
Zinc 29,582 44,871 -34%
Other 21,337 17,702 +21%
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$ 294,904 $ 254,277 +16%
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Key components of the change in gross sales: increasing sales volumes at Las Cruces, timing of shipments at Cayeli, lower realized copper prices
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three months ended
(millions) March 31
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Lower copper prices, denominated in Canadian dollars $ (22)
Lower zinc prices, denominated in Canadian dollars (4)
Higher copper sales volumes at Las Cruces 37
Higher copper sales volumes at Cayeli 34
Lower zinc sales volumes at Pyhasalmi (12)
Changes in other metal sales 5
Other 3
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Higher gross sales, compared to 2011 $ 41
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We record sales that settle during the reporting period using the metal price on the day they settle. For sales that have not settled, we use an estimate based on the month we expect the sale to settle and the forward price of the metal at the end of the reporting period. We recognize the difference between our estimate and the final price by adjusting our gross sales in the period when we settle the sale (finalization adjustment).
This quarter, we recorded $5 million in positive finalization adjustments from fourth quarter 2011 sales.
At the end of this quarter, the following sales had not been settled:
-- 25 million pounds of copper provisionally priced at US $3.83 per pound
-- 14 million pounds of zinc provisionally priced at US $0.91 per pound.
The finalization adjustment we record for these sales will depend on the actual price we receive when they settle, which can be up to five months from the time we initially record the sales. We expect these sales to settle in the following months:
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(millions of pounds) copper zinc
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April 2012 15 14
May 2012 10 -
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Unsettled sales at March 31, 2012 25 14
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Higher copper sales volumes, lower zinc sales volumes
Our sales volumes are directly affected by the amount of production from our mines and our ability to ship to our customers.
-- Copper production and sales volumes were higher than the first quarter
of 2011 mainly because of Las Cruces production and the mining of
higher-grade stopes at Cayeli. Additionally, the timing of shipments
resulted in copper sales volumes exceeding production volumes at Cayeli
by 3,000 tonnes this quarter and 1,500 tonnes in the first quarter of
2011.
-- Zinc production and sales volumes were lower than the first quarter of
2011 due to lower zinc grades at Cayeli and Pyhasalmi, consistent with
our objectives for this year.
Sales volumes
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three months ended March 31
2012 2011 change
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Copper contained in concentrate (tonnes) 15,000 10,900 +38%
Copper cathode (tonnes) 13,600 9,700 +40%
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Total copper (tonnes) 28,600 20,600 +39%
Zinc (tonnes) 14,500 19,700 -26%
Pyrite (tonnes) 112,300 141,300 -21%
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Production
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three months ended March 31 objective
2012 2011 change 2012
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Copper (tonnes)
Cayeli 8,100 6,000 +35% 27,000 - 30,000
Las Cruces 13,300 8,100 +64% 61,700 - 68,600
Pyhasalmi 3,400 3,600 -6% 11,300 - 12,600
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24,800 17,700 +40% 100,000 - 111,200
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Zinc (tonnes)
Cayeli 10,500 12,500 -16% 36,000 - 39,800
Pyhasalmi 4,600 8,700 -47% 22,800 - 25,200
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15,100 21,200 -29% 58,800 - 65,000
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Pyrite (tonnes)
Pyhasalmi 211,300 186,100 +14% 800,000
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2012 outlook for sales
We use our production objectives to estimate our sales target. Our production guidance for copper and zinc remains as previously disclosed.
Our Canadian dollar sales revenues are affected by the US dollar denominated metal prices we receive and the exchange rate between the US dollar and Canadian dollar.
Zinc smelter processing charges down, copper charges up
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three months ended March 31
(thousands) 2012 2011 change
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Smelter processing charges and freight by
operation
Cayeli $ 22,174 $ 17,894 +24%
Las Cruces 305 268 +14%
Pyhasalmi 7,823 13,423 -42%
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$ 30,302 $ 31,585 -4%
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Smelter processing charges and freight by
metal
Copper $ 16,981 $ 11,201 +52%
Zinc 11,327 17,677 -36%
Other 1,994 2,707 -26%
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$ 30,302 $ 31,585 -4%
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Smelter processing charges by type and
freight
Copper treatment and refining charges $ 5,883 $ 3,381 +74%
Zinc treatment charges 5,947 9,762 -39%
Copper price participation - 386 -100%
Zinc price participation (259) (200) +30%
Content losses 10,902 11,621 -6%
Freight 7,411 6,307 +18%
Other 418 328 +27%
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$ 30,302 $ 31,585 -4%
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Our copper treatment and refining charges were higher than they were in the first quarter of 2011 because our terms with smelters were higher, as we expected, and because we sold more copper. This was offset by lower zinc treatment charges this quarter than last year due mainly to lower zinc sales volumes at Pyhasalmi.
2012 outlook for smelter processing charges and freight
We expect our costs for copper treatment and refining to be slightly higher in 2012 than in 2011 based on recently signed agreements with our customers. A tight concentrate supply is expected to keep the copper market in a deficit position in 2012. We do not expect to pay copper price participation.
We expect total zinc smelter processing charges, including price participation, to be lower than in 2011 and a continued deficit to exist in the zinc concentrate market in 2012.
Las Cruces sells its copper cathode production directly to buyers in the Spanish and Mediterranean markets and therefore does not incur smelting processing charges and has relatively low freight costs.
We expect our ocean freight costs to be similar to rates realized in 2011.
Higher direct production costs and cost of sales
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three months ended March 31
(thousands) 2012 2011 change
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Direct production costs by operation
Cayeli $ 24,053 $ 23,378 +3%
Las Cruces 41,218 33,488 +23%
Pyhasalmi 15,469 14,562 +6%
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Total direct production costs 80,740 71,428 +13%
Inventory changes 5,428 7,154 -24%
Charges for mine rehabilitation and other
non-cash charges (3,928) 568 -792%
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Total cost of sales (excluding
depreciation) $ 82,240 $ 79,150 +4%
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Direct production costs
Direct production costs were $9 million higher than in the first quarter of 2011, mainly because higher production at Las Cruces increased variable electricity and consumables costs, and from incremental costs associated with the nine day scheduled maintenance shutdown at this operation.
Inventory changes
Copper inventories at Cayeli decreased at the end of this quarter, and at Cayeli and Las Cruces in the first quarter of 2011, because of the timing of shipments.
Charges for mine rehabilitation and other non-cash charges
These charges include accruals for asset retirement obligations, provisions for severance and retirement and other non-cash expenses. We recorded a decrease of $3 million this quarter in post-closure liabilities at our closed properties. This decrease was a result of an increase in the discount rates we applied in determining the liabilities. Under International Financial Reporting Standards, we are required to revalue our asset retirement obligations for changes in market risk-free interest rates.
2012 outlook for cost of sales (excluding depreciation)
We expect consolidated direct production costs to be higher in 2012 because higher production at Las Cruces will increase total variable costs, primarily electricity and royalties.
Our budget for 2012 assumes our costs at Cayeli and Pyhasalmi will be similar to 2011.
Certain variable costs may continue to affect our earnings, depending on metal prices:
-- royalties at Cayeli are affected by its net income
-- royalties at Las Cruces are affected by its net sales.
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.
Additionally, changes in market risk-free interest rates could significantly increase or decrease our costs related to mine rehabilitation at our closed properties.
Higher depreciation
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three months ended March 31
(thousands) 2012 2011 change
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Depreciation by operation
Cayeli $ 7,501 $ 5,226 +44%
Las Cruces 21,140 19,556 +8%
Pyhasalmi 2,414 2,258 +7%
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$ 31,055 $ 27,040 +15%
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Depreciation was higher this quarter than in 2011 mainly because of higher copper sales volumes at Las Cruces and Cayeli.
2012 outlook for depreciation
We expect depreciation to be higher in 2012 because of higher sales volumes at Las Cruces.
Corporate costs
Corporate costs include corporate development and exploration, general and administration costs, taxes, interest and other income.
Corporate development and exploration
Costs this quarter were $4 million lower than the first quarter of 2011. We incurred approximately $6 million of expenses in the first quarter of 2011 from the work related to the arrangement agreement to merge with Lundin Mining Corporation, which Inmet and Lundin Mining Corporation agreed to mutually terminate on March 29, 2011.
Investment and other income
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three months ended March 31
(thousands) 2012 2011
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Interest income $ 4,392 $ 2,772
Foreign exchange losses (12,468) (10,826)
Dividend and royalty income 500 600
Other 1,107 1,681
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$ (6,469) $ (5,773)
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Interest income
Interest income was higher this quarter compared to the same period last year because our cash balances were higher.
Foreign exchange losses
We have foreign exchange gains or losses when we revalue certain foreign denominated assets and liabilities.
Our foreign exchange losses were from:
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three months ended March 31
(thousands) 2012 2011
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Translation of US dollar held-to-maturity
investments $ (5,094) $ (1,452)
Translation of US dollar cash (4,659) (8,237)
Translation of Turkish lira taxes payable at
Cayeli (1,472) 545
Translation of other monetary assets and
liabilities (1,243) (1,682)
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$ (12,468) $ (10,826)
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We continue to hold US dollar bonds in Canada, and plan to use this money to fund our US dollar denominated capital program at Cobre Panama. We recognized total foreign exchange losses of $5.1 million on these funds this quarter because the US dollar depreciated in value relative to the Canadian dollar.
In 2012, we started to hold our euro-based operations' excess cash in US dollars, and as a result recognized foreign exchange losses of $4.5 million this quarter on the revaluation of US-denominated cash balances to euros.
Cayeli's income taxes are denominated in Turkish lira. This operation recognized a foreign exchange loss of $1.5 million this quarter from the revaluation of its taxes payable due to the depreciation of the US dollar (Cayeli's functional currency) relative to the Turkish lira.
2012 outlook for investment and other income
Investment and other income is affected by our cash and held to maturity investment balances, and by interest rates and exchange rates. At March 31, 2012, we held US $278 million in cash and held to maturity investments subject to translation in our Canadian accounts and US $247 million in cash subject to translation in our euro accounts.
Income tax expense
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three months ended March 31
(thousands) 2012 2011 change
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Cayeli $ 9,791 $ 11,656
Las Cruces 11,581 7,497
Pyhasalmi 5,353 7,803
Corporate and other 140 204
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$ 26,865 $ 27,160
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Consolidated effective tax rate 22% 31% -9%
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Our tax expense changes as our earnings change.
The consolidated effective tax rate is lower this quarter compared to the same quarter of last year, mainly because Cayeli's taxes were lower as it recognized a foreign exchange loss from its US dollar denominated cash (Cayeli's income taxes are denominated in Turkish lira). Additionally, there was a decrease in the statutory tax rate at Pyhasalmi from 26 percent to 24.5 percent.
2012 outlook for income tax expense
Other than the decrease in the statutory tax rate at Pyhasalmi from 26 percent to 24.5 percent, we expect the statutory tax rates at our operations to remain the same in 2012 as they were in 2011.
Discontinued operation - 2011
We sold our 18 percent equity interest in Ok Tedi in January 2011, and have reported our results relating to Ok Tedi in that year as discontinued operations. After-tax income of $83 million in 2011 includes net earnings of $17 million in January 2011, before the sale, and a gain on sale of $66 million net of withholding taxes. We paid Papua New Guinea withholding taxes of $28 million on the sale.
Results of our operations
2012 estimates
Our financial review by operation includes estimates for our 2012 operating earnings and operating cash flows. We have based these estimates on our 2012 objectives for production (using the midpoints in our production volume ranges) and cost per tonne of ore milled (cost per pound of copper produced at Las Cruces), as well as the following assumptions for the remaining nine months of the year:
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Copper price US $3.80 per pound
Zinc price US $0.95 per pound
US $ to C$ exchange rate $1.00
euro to C$ exchange rate $1.30
Working capital Assume no changes for the year
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Cayeli
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three months ended March 31
2012 2011 change
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Tonnes of ore milled (000's) 299 293 +2%
Tonnes of ore milled per day 3,300 3,300 -
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Grades (percent)
copper 3.4 2.9 +17%
zinc 5.4 6.3 -14%
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Mill recoveries (percent)
copper 79 71 +11%
zinc 65 68 -4%
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Production (tonnes)
copper 8,100 6,000 +35%
zinc 10,500 12,500 -16%
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Cost per tonne of ore milled (C$) $ 80 $ 80 -
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Higher grades and recoveries increased copper production
Copper grades this quarter were higher than 2011, while zinc grades were lower, because we produced in different areas of the mine. This higher copper grade ore, and lower zinc grade ore, compared to last year led to higher copper recoveries and lower zinc recoveries respectively.
The result was higher copper production and lower zinc production compared to 2011. Due to the timing of shipments, Cayeli's copper sales volumes exceeded production volumes by approximately 3,000 tonnes this quarter and 1,500 tonnes in the first quarter of 2011.
Cost per tonne of ore milled this quarter was consistent with the same quarter last year and our target.
2012 outlook for production
In 2012, mill throughput should remain at approximately 1.2 million tonnes. We expect lower copper and zinc grades for the remainder of 2012 as we produce from lower grade areas of the mine. We continue to expect to produce between 27,000 tonnes and 30,000 tonnes of copper and between 36,000 and 39,800 tonnes of zinc. Zinc production at Cayeli from 2008 to 2011 benefitted from grades well above the average reserve grade of 4.3 percent. In 2012, lower zinc grades, as expected, account for the anticipated decline in zinc production. Both copper and zinc recoveries should remain near 2011 levels in 2012, reflecting the ongoing metallurgical challenges presented by the higher percentages of bornite containing ores and the decreasing zinc grade.
Financial review
Higher copper sales volumes due to higher copper production volumes and timing of shipments
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three months ended revised
(millions of Canadian dollars unless March 31 objective
otherwise stated) 2012 2011 2012
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Sales analysis
Copper sales (tonnes) 11,100 7,500 28,500
Zinc sales (tonnes) 10,300 10,000 37,900
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Gross copper sales $ 97 $ 70 $ 243
Gross zinc sales 21 23 79
Other metal sales 9 6 18
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Gross sales 127 99 340
Smelter processing charges and freight (22) (18) (66)
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Net sales $ 105 $ 81 $ 274
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Cost analysis
Tonnes of ore milled (thousands) 299 293 1,200
Direct production costs ($ per tonne) $ 80 $ 80 $ 80
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Direct production costs $ 24 $ 23 $ 96
Change in inventory 5 1 -
Depreciation and other non-cash costs 8 6 32
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Operating costs $ 37 $ 30 $ 128
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Operating earnings $ 68 $ 51 $ 146
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Operating cash flow $ 31 $ 54 $ 137
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The objective for 2012 uses the assumptions listed on page 13.
The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.
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three months
ended
(millions) March 31
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Lower copper prices, denominated in Canadian dollars $ (6)
Lower zinc prices (3)
Higher copper sales volumes 26
Higher other metal sales 3
Higher depreciation (2)
Other (1)
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Higher operating earnings, compared to 2011 17
Change in cash taxes 2
Changes in working capital (see note 12 on page 41) (43)
Change in depreciation 2
Other (1)
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Lower operating cash flow, compared to 2011 $ (23)
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Capital spending
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three months ended March 31 objective
(thousands) 2012 2011 change 2012
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Capital spending $ 2,300 $ 2,400 -4% $ 20,000
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2012 outlook for capital spending
We expect to spend $20 million on capital in 2012, including $7 million to upgrade our ore pass system to address deterioration that has accumulated over time from normal abrasion, and to extend the shotcrete slickline and replace certain mobile equipment.
Las Cruces
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three months ended March 31
2012 2011 change
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Tonnes of ore processed (000's) 246 173 +42%
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Copper grades (percent) 6.7 6.1 +10%
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Plant recoveries (percent) 85 77 +10%
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Cathode copper production (tonnes) 13,300 8,100 +64%
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Cost per pound of cathode produced (C$) $ 1.40 $ 1.88 -26%
----------------------------------------------------------------------------
Higher copper production
Las Cruces production this quarter was significantly higher than the first quarter of 2011, increasing to 13,300 tonnes of copper cathode from 8,100 tonnes. The plant achieved record production of 10,300 tonnes of copper cathode in the first two months of 2012. March production was lower due to a nine-day planned maintenance shutdown, a one-day national strike, and the time required for overall process stabilization following each of these stoppages. This represents the majority of scheduled shutdown time this year. We achieved recoveries of 85 percent in the quarter, a significant increase over the first quarter of last year when recoveries were affected by an oxygen supply failure.
A drier than normal rainy season has allowed the water level in the pit to remain low and all pond levels are within expected limits.
Cost per pound of copper produced this quarter was significantly lower than the same quarter of 2011 due to higher production volumes; however it was higher than our overall objective for this year due to lower production volumes to accommodate the plant shutdown in March and incremental shutdown costs of approximately $3 million.
2012 outlook for production
For 2012, we continue to expect to produce between 61,700 and 68,600 tonnes of copper cathode, or approximately 90 percent of design capacity. No major construction projects or major shutdowns are planned for the remainder of the year. In total, we expect a minimum of 90 percent operating time throughout 2012.
Las Cruces' unit operating costs should continue to decrease as production volumes increase and we have not made any adjustment to previous cost guidance.
Financial review
Higher sales volumes due to higher production
----------------------------------------------------------------------------
(millions of Canadian dollars unless three months ended revised
otherwise stated) March 31 objective
----------------------------------
2012 2011 2012
----------------------------------
Sales analysis
Copper sales (tonnes) 13,600 9,700 65,200
----------------------------------
Gross copper sales $ 114 $ 91 $ 549
Freight - - (3)
----------------------------------------------------------------------------
Net sales $ 114 $ 91 $ 546
----------------------------------------------------------------------------
Cost analysis
Pounds of copper produced (millions) 29 18 144
Direct production costs ($ per pound) $ 1.40 $ 1.88 $ 1.14
----------------------------------------------------------------------------
Direct production costs $ 41 $ 33 $ 164
Change in inventory - 7 -
Depreciation and other non-cash costs 20 20 97
----------------------------------------------------------------------------
Operating costs $ 61 $ 60 $ 261
----------------------------------------------------------------------------
Operating earnings $ 53 $ 31 $ 285
----------------------------------------------------------------------------
Operating cash flow $ 80 $ 58 $ 381
----------------------------------------------------------------------------
The objective for 2012 uses the assumptions listed on page 13.
The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.
----------------------------------------------------------------------------
three months
ended
(millions) March 31
----------------------------------------------------------------------------
Lower copper prices, denominated in Canadian dollars $ (14)
Higher copper sales volume 43
Higher production costs (8)
Other 1
----------------------------------------------------------------------------
Higher operating earnings, compared to 2011 22
Changes in working capital (see note 12 on page 41) 1
Other (1)
----------------------------------------------------------------------------
Higher operating cash flow, compared to 2011 $ 22
----------------------------------------------------------------------------
Capital spending
----------------------------------------------------------------------------
three months ended March 31 objective
(thousands) 2012 2011 change 2012
----------------------------------------------------------------------------
Capital spending $ 6,200 $ 14,800 -58% $ 48,000
----------------------------------------------------------------------------
2012 outlook for capital spending
We expect to spend $48 million on capital projects in 2012. The largest expenditures will come in the areas of mine development, tailings facility expansion and land purchase.
Pyhasalmi
----------------------------------------------------------------------------
three months ended March 31
2012 2011 change
----------------------------------------------------------------------------
Tonnes of ore milled (000's) 342 335 +2%
Tonnes of ore milled per day 3,800 3,700 +3%
----------------------------------------------------------------------------
Grades (percent)
copper 1.0 1.1 -9%
zinc 1.5 2.9 -48%
sulphur 43 42 +2%
----------------------------------------------------------------------------
Mill recoveries (percent)
copper 96 96 -
zinc 90 91 -1%
----------------------------------------------------------------------------
Production (tonnes)
copper 3,400 3,600 -6%
zinc 4,600 8,700 -47%
pyrite 211,300 186,100 +14%
----------------------------------------------------------------------------
Cost per tonne of ore milled (C$) $ 45 $ 43 +5%
----------------------------------------------------------------------------
Lower zinc grades this quarter in line with plan
Pyhasalmi maintained its strong performance in the first quarter of 2012, processing at an annualized rate in-line with its annual objective and achieving copper recoveries of 96 percent and zinc recoveries of 90 percent. Copper grades this quarter were slightly lower than the first quarter of 2011. Zinc grades this quarter were lower than the first quarter of 2011 and consistent with our plan, due to the availability of fewer zinc-rich stopes this year. Copper and zinc production this quarter were therefore lower than the first quarter of 2011.
Operating costs were higher this quarter primarily from labour and materials costs.
2012 outlook for production
Pyhasalmi expects to mine 1.4 million tonnes of approximately 1 percent copper and 2 percent zinc in 2012, and produce between 11,300 tonnes and 12,600 tonnes of copper and 22,800 tonnes and 25,200 tonnes of zinc. Copper and zinc production should be lower than it was in 2011 as fewer higher grade stopes are available in the short-term mining sequence. Both copper and zinc grades should recover after 2012.
Pyhasalmi expects to produce 800,000 tonnes of pyrite in 2012 and expects to sell 915,000 tonnes of pyrite, an increase of 115,000 tonnes from our original objective, due to stronger demand from Asian customers.
Financial review
Lower earnings because of lower zinc sales volumes
----------------------------------------------------------------------------
three months ended revised
March 31 objective
(millions of Canadian dollars unless
otherwise stated) 2012 2011 2012
----------------------------------------------------------------------------
Sales analysis
Copper sales (tonnes) 3,900 3,500 11,900
Zinc sales (tonnes) 4,200 9,700 24,000
Pyrite sales (tonnes) 112,300 141,300 915,000
------------------------------------
Gross copper sales $ 33 $ 31 $ 99
Gross zinc sales 9 22 50
Other metal sales 11 11 81
------------------------------------
Gross sales 53 64 230
Smelter processing charges and freight (8) (13) (55)
----------------------------------------------------------------------------
Net sales $ 45 $ 51 $ 175
----------------------------------------------------------------------------
Cost analysis
Tonnes of ore milled (thousands) 342 335 1,370
Direct production costs ($ per tonne) $ 45 $ 43 $ 43
----------------------------------------------------------------------------
Direct production costs $ 15 $ 15 $ 58
Change in inventory 1 - -
Depreciation and other non-cash costs 2 2 11
----------------------------------------------------------------------------
Operating costs $ 18 $ 17 $ 69
----------------------------------------------------------------------------
Operating earnings $ 27 $ 34 $ 106
----------------------------------------------------------------------------
Operating cash flow $ 27 $ 40 $ 89
----------------------------------------------------------------------------
The objective for 2012 uses the assumptions listed on page 13.
The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.
----------------------------------------------------------------------------
three months
ended
(millions) March 31
----------------------------------------------------------------------------
Lower copper and zinc prices, denominated in Canadian
dollars $ (4)
Lower zinc sales volumes (7)
Higher other metal sales 2
Other 2
----------------------------------------------------------------------------
Lower operating earnings, compared to 2011 (7)
Change in cash taxes 2
Changes in working capital (see note 12 on page 41) (8)
----------------------------------------------------------------------------
Lower operating cash flow, compared to 2011 $ (13)
----------------------------------------------------------------------------
Capital spending
----------------------------------------------------------------------------
three months ended March 31 objective
(thousands) 2012 2011 change 2012
----------------------------------------------------------------------------
Capital spending $ 2,500 $ 300 +733% $ 10,000
----------------------------------------------------------------------------
2012 outlook for capital spending
Capital spending of $10 million in 2012 will primarily be to replace underground mobile equipment, improve the tailings impoundment area, and upgrade the satellite ore grinding circuit and zinc cleaner cells.
Status of our development project
Cobre Panama
Basic engineering progressed this quarter and is currently under independent review. We continue to expect to conclude and report on basic engineering in the second quarter of 2012 and we continue to advance a range of financing options to provide us with the financial capacity to proceed with the project.
We made progress with several early works projects this quarter in preparation to proceed with construction, including further work on a pioneer road and other road by-passes and upgrades and the initiation of several permits required for additional work. We also continued with basic engineering of the power plant.
On April 25, 2012, KPMC completed its acquisition of a 20 percent interest in Minera Panama, owner and developer of Cobre Panama. KPMC acquired its interest for US $169 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to date.
2012 outlook for development
We plan to:
-- continue to build our privilege to operate through intensive dialogue
with stakeholders at the community, regional and national levels, to
increase their understanding of the project and its benefits to Panama,
and our understanding of their potential concerns
-- continue to improve site access and infrastructure, including the
completion of early works projects that will facilitate contractors'
mobilization for site capture
-- complete additional work on resource definition, metallurgical
recoveries, pit design and other engineering to allow us to include the
Balboa and Brazo mineralization in our mine plan for Cobre Panama
-- complete basic engineering, review readiness plans and prepare to
initiate site capture upon receipt of the main permits
-- continue to work with SK Engineering and Construction to complete basic
engineering for the coal-fired power plant and begin detailed
engineering and procurement
-- update the capital and operating expenditure estimates for the
development project at the conclusion of basic engineering
-- develop and implement, with the assistance of our EP+CM contractors,
project specific Health & Safety and Environmental and Social mitigation
plans that are consistent with the ESIA and Inmet's Corporate
Responsibility Standards
-- continue to grow the strength of our management team and human resources
dedicated to the project.
Capital expenditure guidance for the remainder of 2012 will be provided in the second quarter after basic engineering is concluded and with consideration of a final decision to proceed with full-scale construction of the project.
Managing our liquidity
We develop our financing strategy by looking at our long-term capital requirements and deciding on the optimal mix of cash, future operating cash flow, credit facilities and project financing.
Our capital structure includes a liquidity cushion that gives us the flexibility to deal with operational disruptions or general market downturns.
----------------------------------------------------------------------------
three months ended March
31
(millions) 2012 2011
----------------------------------------------------------------------------
CASH FROM OPERATING ACTIVITIES
Cayeli $ 31 $ 54
Las Cruces 80 58
Pyhasalmi 27 40
Corporate development and exploration not incurred
by operations (6) (12)
General and administration (10) (8)
Foreign exchange losses on US dollar denominated
cash (5) (8)
Other 1 (6)
----------------------------------------------------------------------------
118 118
----------------------------------------------------------------------------
CASH FROM INVESTING AND FINANCING
Purchase of property, plant and equipment (85) (41)
Purchase and maturity of long-term investments,
net 48 (267)
Foreign exchange on cash held in foreign currency 1 3
Other (6) (2)
----------------------------------------------------------------------------
(42) (307)
----------------------------------------------------------------------------
CASH FROM DISCONTINUED OPERATION (OK TEDI) - 307
----------------------------------------------------------------------------
Increase in cash 76 118
Cash and short-term investments
Beginning of period 1,083 326
----------------------------------------------------------------------------
End of period $ 1,159 $ 444
----------------------------------------------------------------------------
Our available liquidity also includes $571 million of held to maturity investments ($623 million at December 31, 2011), providing a total of $1,730 million in capital available to finance our growth strategy as at March 31, 2012.
OPERATING ACTIVITIES
Key components of the change in operating cash flows
----------------------------------------------------------------------------
three months
ended
(millions) March 31
----------------------------------------------------------------------------
Higher earnings from operations (see page 4) $ 35
Add back higher depreciation included in earnings from
operations 4
Lower tax expense 4
Changes in working capital (see note 12 on page 41) (49)
Lower realized foreign exchange loss on cash 4
Lower corporate development and exploration 4
Other (2)
----------------------------------------------------------------------------
Change in operating cash flow, compared to 2011 $ -
----------------------------------------------------------------------------
Operating cash flows this quarter were consistent with the first quarter of 2011. While operating earnings before depreciation were higher than 2011 by $39 million, net working capital this quarter end was significantly higher mainly reflecting higher accounts receivable at Cayeli due to higher sales volumes and the timing of collections from customers.
2012 outlook for cash from operating activities
The table below shows expected operating cash flow from our operations, based on our outlook for metal prices and production (see page 13), and the assumptions in Results of our operations (starting on page 13).
2012 estimated operating cash flow by operation
----------------------------------------------------------------------------
(millions)
----------------------------------------------------------------------------
Cayeli $ 137
Las Cruces 381
Pyhasalmi 89
----------------------------------------------------------------------------
$ 607
----------------------------------------------------------------------------
INVESTING AND FINANCING
Capital spending
----------------------------------------------------------------------------
three months ended March 31
(millions) 2012 2011
----------------------------------------------------------------------------
Cayeli $ 2 $ 2
Las Cruces 6 15
Pyhasalmi 2 -
Cobre Panama 75 24
----------------------------------------------------------------------------
$ 85 $ 41
----------------------------------------------------------------------------
Please see Results of our operations and Status of our development project for a discussion of actual results and our 2012 objectives. Capital spending this quarter was mainly for Cobre Panama.
Cash from discontinued operation - 2011
In January 2011, we sold our 18 percent equity interest in Ok Tedi for net proceeds of $307 million (after Papua New Guinea withholding taxes).
Purchase and maturing of long-term investments
This quarter, $49 million of our bond portfolio matured and was converted into cash. In the first quarter of 2011, we used most of the US dollar proceeds from the sale of Ok Tedi to purchase US Treasury bonds with AA credit ratings.
2012 outlook for investing and financing
Capital spending
At our operating mines, we expect capital spending to be $78 million in 2012, most significantly $48 million at Las Cruces, including $22 million for mine development, as well as several smaller expenditures including a tailings facility expansion, land purchase and certain plant improvements. We will provide capital spending guidance for Cobre Panama for 2012 in the second quarter after basic engineering is finalized and released.
On April 25, 2012, KPMC completed its acquisition of a 20 percent interest in Minera Panama, owner and developer of Cobre Panama. KPMC acquired its interest for US $169 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to date.
Financial condition
Our strategy is to make sure we have sufficient liquidity (including cash and committed credit facilities) to finance our operating requirements as well as our growth projects. At March 31, 2012, we had $1,730 million in total funds, including $1,159 million of cash and short-term investments and $571 million invested in long-term bonds.
Cash
At March 31, 2012 our cash and short-term investments of $1,159 million included cash and money market instruments that mature in 90 days or less.
Our policy is to invest excess cash in highly liquid investments of the highest credit quality, and to limit our exposure to individual counterparties to minimize the risk associated with these investments. We base our decisions about the length of maturities on our cash flow requirements, rates of return and other factors.
At March 31, 2012, we held cash and short-term investments in the following:
-- A to AAA rated treasury funds and money market funds managed by leading
international fund managers, who are investing in money market and
short-term debt securities and fixed income securities issued by leading
international financial institutions and their sponsored securitization
vehicles.
-- Cash, term and overnight deposits with leading Canadian and
international financial institutions.
See note 3 on page 36 in the consolidated financial statements for more details about where our cash is invested.
Long-term bonds
We hold a bond portfolio to provide better yields while minimizing our investment risk. As at March 31, 2012, the portfolio was $571 million and included:
-- 58 percent US Treasury bonds
-- 4 percent Government of Canada bonds
-- 33 percent Canadian Provincial Government bonds
-- 5 percent corporate bonds.
The bonds mature between April 2012 and August 2016. Although our intention is to hold these investments to maturity, there is a liquid market for them and they are available to us at any time.
Restricted cash
Our restricted cash balance of $78 million as at March 31, 2012 included:
-- $19 million in cash collateralized letters of credit for Inmet
-- $57 million at Las Cruces related to a reclamation bond, issuing letters
of credit to suppliers and the local water authority and for its labour
bond to the government
-- $2 million for future reclamation at Pyhasalmi.
COMMON SHARES
----------------------------------------------------------------------------
Common shares outstanding as of March 31, 2012 69,365,748
----------------------------------------------------------------------------
Deferred share units outstanding as of March 31, 2012
(redeemable on a one-for-one basis for common shares) 91,772
----------------------------------------------------------------------------
Dividend declaration
The board of directors has declared an eligible dividend of $0.10 per common share payable on June 15, 2012 to common shareholders of record as at May 31, 2012.
Supplementary financial information
Page 26 includes supplementary financial information about cash costs. These measures do not fall into the category of International Financial Reporting Standards.
We use unit cash cost information as a key performance indicator, both on a segmented and consolidated basis. We have included cash costs as supplementary information because we believe our key stakeholders use these measures as a financial indicator of our profitability and cash flows before the effects of capital investment and financing costs, such as interest.
Since cash costs are not recognized financial measures under International Financial Reporting Standards, they should not be considered in isolation of earnings or cash flows. There is also no standard way to calculate cash costs, so they are not a reliable way to compare us to other companies.
About Inmet
Inmet is a Canadian-based global mining company that produces copper and zinc. We have three wholly-owned mining operations: Cayeli (Turkey), Las Cruces (Spain) and Pyhasalmi (Finland). Following KPMC's acquisition of a 20 percent interest in Minera Panama, we have an 80 percent interest in Cobre Panama, a development property in Panama.
This press release is also available at www.inmetmining.com.
First quarter conference call
Will be held on
-- Friday, April 27, 2012
-- 8:30 a.m. Eastern Time
-- webcast available at
http://events.digitalmedia.telus.com/inmet/042712q/index.php or
www.inmetmining.com
You can also dial in by calling
-- Local or international: +1.416.695.6616
-- Toll-free within North America: +1.800.952.6845
Starting at approximately 10:30 a.m. (ET) Friday, April 27, 2012, a conference call replay will be available
-- Local or international: +1.905.694.9451 passcode 7808342
-- Toll-free within North America: +1.800.408.3053 passcode 7808342
INMET MINING CORPORATION
Supplementary financial information
Cash costs
2012 For the three months ended March 31
per pound of copper
-----------------------------------------------
CAYELI LAS CRUCES PYHASALMI TOTAL
----------------------------------------------------------------------------
(US dollars)
Direct production costs $ 1.23 $ 1.34 $ 2.11 $ 1.41
Royalties and variable
compensation 0.12 0.07 - 0.08
Smelter processing charges
and freight 1.03 0.01 0.79 0.45
Metal credits (1.59) - (3.09) (0.94)
-----------------------------------------------
Cash cost $ 0.79 $ 1.42 $ (0.19) $ 1.00
-----------------------------------------------
-----------------------------------------------
2011 For the three months ended March 31
per pound of copper
-----------------------------------------------
CAYELI LAS CRUCES PYHASALMI TOTAL
----------------------------------------------------------------------------
(US dollars)
Direct production costs $ 1.62 $ 1.83 $ 1.87 $ 1.77
Royalties and variable
compensation 0.18 0.09 - 0.10
Smelter processing charges
and freight 1.83 0.01 1.30 0.89
Metal credits (3.02) - (3.86) (1.81)
-----------------------------------------------
Cash cost $ 0.61 $ 1.93 $ (0.69) $ 0.95
-----------------------------------------------
-----------------------------------------------
----------------------------------------------------------------------------
Reconciliation of cash costs to statements of earnings
2012 For the three months ended March 31
per pound of copper
-----------------------------------------------
(millions of Canadian
dollars, except where
otherwise noted) CAYELI LAS CRUCES PYHASALMI TOTAL
----------------------------------------------------------------------------
GAAP reference page 15 page 17 page 19
Direct production costs $ 24 $ 41 $ 15 $ 80
Smelter processing charges
and freight 22 - 8 30
By product sales (30) - (20) (50)
Adjust smelter processing and
freight, and sales to
production basis (2) - (4) (6)
-----------------------------------------------
Operating costs net of metal
credits $ 14 $ 41 $ (1) $ 54
US $ to C$ exchange rate $ 1.00 $ 1.00 $ 1.00 $ 1.00
Inmet's share of production
(000's) 17,800 29,400 7,500 54,700
-----------------------------------------------
Cash cost (US dollars) $ 0.79 $ 1.42 $ (0.19) $ 1.00
-----------------------------------------------
-----------------------------------------------
2011 For the three months ended March 31
per pound of copper
-----------------------------------------------
(millions of Canadian
dollars, except where
otherwise noted) CAYELI LAS CRUCES PYHASALMI TOTAL
----------------------------------------------------------------------------
GAAP reference page 15 page 17 page 19
Direct production costs $ 23 $ 33 $ 15 $ 71
Smelter processing charges
and freight 18 - 13 31
By product sales (30) - (33) (63)
Adjust smelter processing and
freight, and sales to
production basis (3) - - (3)
-----------------------------------------------
Operating costs net of metal
credits $ 8 $ 33 $ (5) $ 36
US $ to C$ exchange rate $ 0.99 $ 0.99 $ 0.99 $ 0.99
Inmet's share of production
(000's) 13,200 17,800 8,000 39,000
-----------------------------------------------
Cash cost (US dollars) $ 0.61 $ 1.93 $ (0.69) $ 0.95
-----------------------------------------------
-----------------------------------------------
INMET MINING CORPORATION
Quarterly review
(unaudited)
Latest Four Quarters
----------------------------------------------------------------------------
(thousands of Canadian 2012 2011 2011 2011
dollars, except per share First Fourth Third Second
amounts) quarter quarter quarter quarter
----------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $ 294,904 $ 241,059 $ 261,757 $ 221,952
Smelter processing charges
and freight (30,302) (28,228) (37,043) (33,870)
Cost of sales (excluding
depreciation) (82,240) (93,138) (81,144) (73,644)
Depreciation (31,055) (27,716) (27,321) (26,649)
------------------------------------------------
151,307 91,977 116,249 87,789
Corporate development and
exploration (9,090) (6,541) (4,688) (4,562)
General and administration (10,065) (7,734) (9,987) (8,258)
Investment and other income (6,469) (4,011) 35,778 4,731
Finance costs (2,681) (2,390) (2,377) (2,386)
Income tax expense (26,865) (23,229) (33,770) (21,264)
------------------------------------------------
Net income attributable to
Inmet equity holders $ 96,137 $ 48,072 $ 101,205 $ 56,050
------------------------------------------------
Net Income per share
Basic $ 1.39 $ 0.69 $ 1.46 $ 0.86
Diluted $ 1.38 $ 0.69 $ 1.46 $ 0.86
Previous Four Quarters
----------------------------------------------------------------------------
(thousands of Canadian 2011 2010(1) 2010(1) 2010(1)
dollars, except per share First Fourth Third Second
amounts) quarter quarter quarter quarter
----------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $ 254,277 $ 230,269 $ 225,960 $ 161,165
Smelter processing charges
and freight (31,585) (35,733) (34,358) (35,272)
Cost of sales (excluding
depreciation) (79,150) (82,967) (70,503) (48,123)
Depreciation (27,040) (18,882) (19,062) (10,328)
------------------------------------------------
116,502 92,687 102,037 67,442
Corporate development and
exploration (13,411) (5,434) (2,758) (2,524)
General and administration (8,422) (4,758) (3,985) (6,200)
Investment and other income (5,773) 50,622 3,197 3,321
Finance costs (2,331) (4,294) (5,239) (1,770)
Income tax expense (27,160) (31,960) (25,266) (8,775)
------------------------------------------------
Income from continuing
operations 59,405 96,863 67,986 51,494
Income from discontinued
operation (net of taxes) 83,439 47,993 33,569 12,475
------------------------------------------------
$ 142,844 $ 144,856 $ 101,555 $ 63,969
------------------------------------------------
Net income attributable to:
Inmet equity holders $ 142,844 $ 146,932 $ 91,678 $ 68,495
Non-controlling interest - (2,076) 9,877 (4,526)
------------------------------------------------
$ 142,844 $ 144,856 $ 101,555 $ 63,969
------------------------------------------------
Income from continuing
operations per share
Basic $ 0.97 $ 1.73 $ 1.04 $ 1.00
Diluted $ 0.96 $ 1.73 $ 1.04 $ 1.00
Income from discontinuing
operations per share
Basic $ 1.36 $ 0.84 $ 0.60 $ 0.22
Diluted $ 1.35 $ 0.84 $ 0.60 $ 0.22
Net Income per share
Basic $ 2.33 $ 2.57 $ 1.64 $ 1.22
Diluted $ 2.31 $ 2.57 $ 1.64 $ 1.22
(1) Information from 2010 restated in accordance with IFRS, including
presentation of our share of Ok Tedi as discontinued operations.
Consolidated financial statements
INMET MINING CORPORATION
Consolidated statements of financial position
Note March 31, December 31,
(thousands of Canadian dollars) reference 2012 2011
----------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash and short term investments 3 $ 1,159,388 $ 1,082,893
Restricted cash 4 955 810
Accounts receivable 130,245 105,213
Inventories 84,336 90,533
Current portion of held to
maturity investments 150,750 181,699
-----------------------------
1,525,674 1,461,148
Restricted cash 4 77,249 71,822
Property, plant and equipment 1,913,642 1,830,992
Investments in equity securities 3,272 3,161
Held to maturity investments 419,815 441,775
Deferred income tax assets 58 327
Other assets 1,468 1,425
-----------------------------
Total assets $ 3,941,178 $ 3,810,650
----------------------------------------------------------------------------
Liabilities
Current liabilities:
Accounts payable and accrued
liabilities $ 167,203 $ 143,149
Provisions 13,357 13,517
-----------------------------
180,560 156,666
Long-term debt 17,446 17,126
Provisions 178,176 175,609
Other liabilities 17,595 17,719
Deferred income tax liabilities 41,821 29,282
-----------------------------
Total liabilities 435,598 396,402
-----------------------------
Commitments and contingencies 13
Equity
Share capital 1,592,412 1,591,948
Contributed surplus 66,801 66,752
Share based compensation 5 10,031 8,527
Retained earnings 2,007,942 1,911,805
Accumulated other comprehensive loss 6 (171,606) (164,784)
-----------------------------
Total equity 3,505,580 3,414,248
-----------------------------
Total liabilities and equity $ 3,941,178 $ 3,810,650
----------------------------------------------------------------------------
(See accompanying notes)
INMET MINING CORPORATION
Segmented statements of financial position
2012 As at
March 31 CORPORATE LAS COBRE
(unaudited) & OTHER CAYELI CRUCES PYHASALMI PANAMA TOTAL
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland) (Panama)
Assets
Cash and short-
term
investments $ 761,538 $163,291 $ 102,594 $ 68,736 $ 63,229 $1,159,388
Other current
assets 156,982 75,354 82,112 49,914 1,924 366,286
Restricted cash 19,549 - 56,070 1,630 - 77,249
Property, plant
and equipment 1,646 135,813 894,868 68,896 812,419 1,913,642
Investments in
equity
securities 3,272 - - - - 3,272
Held to
maturity
investments 338,667 81,148 - - - 419,815
Other non-
current assets 1,354 172 - - - 1,526
-------------------------------------------------------------
$1,283,008 $455,778 $1,135,644 $ 189,176 $877,572 $3,941,178
-------------------------------------------------------------
Liabilities
Current
liabilities $ 17,000 $ 39,198 $ 58,074 $ 16,793 $ 49,495 $ 180,560
Long-term debt 17,446 - - - - 17,446
Provisions 67,987 18,505 60,357 31,327 - 178,176
Other
liabilities 676 - 16,919 - - 17,595
Deferred income
tax
liabilities - 585 29,600 11,636 - 41,821
-------------------------------------------------------------
$ 103,109 $ 58,288 $ 164,950 $ 59,756 $ 49,495 $ 435,598
-------------------------------------------------------------
2011 As at CORPORATE LAS COBRE
December 31 & OTHER CAYELI CRUCES PYHASALMI PANAMA TOTAL
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland) (Panama)
Assets
Cash and short-
term
investments $ 734,794 $137,590 $ 136,128 $ 47,623 $ 26,758 $1,082,893
Other current
assets 189,749 46,197 86,683 53,597 2,029 378,255
Restricted cash 16,842 - 53,364 1,616 - 71,822
Property, plant
and equipment 1,236 142,260 897,860 68,274 721,362 1,830,992
Investments in
equity
securities 3,161 - - - - 3,161
Held to
maturity
investments 359,452 82,323 - - - 441,775
Other non-
current assets 1,303 449 - - - 1,752
-------------------------------------------------------------
$1,306,537 $408,819 $1,174,035 $ 171,110 $750,149 $3,810,650
-------------------------------------------------------------
Liabilities
Current
liabilities $ 22,006 $ 42,822 $ 54,898 $ 16,957 $ 19,983 $ 156,666
Long-term debt 17,126 - - - - 17,126
Provisions 71,083 18,023 55,626 30,877 - 175,609
Other
liabilities 676 - 17,043 - - 17,719
Deferred income
tax
liabilities - - 17,656 11,626 - 29,282
-------------------------------------------------------------
$ 110,891 $ 60,845 $ 145,223 $ 59,460 $ 19,983 $ 396,402
-------------------------------------------------------------
INMET MINING CORPORATION
Consolidated statements of changes in equity
(unaudited)
----------------------------------------------------------------------------
Attributable to Inmet equity holders
----------------------------------------------------------------------------
Share Retained Contributed
(thousands of Canadian dollars) Capital earnings surplus
----------------------------------------------------------------------------
Balance as at December 31, 2010 $ 1,089,576 $ 1,577,507 $ 66,131
Comprehensive income - 142,844 -
Equity settled share-based
compensation plans - - 151
--------------------------------------------
Balance as at March 31, 2011 $ 1,089,576 $ 1,720,351 $ 66,282
--------------------------------------------
Comprehensive income - 205,327 -
Equity settled share-based
compensation plans 204 - 470
Dividends - (13,873) -
Issuance of share capital 502,168 - -
--------------------------------------------
Balance as at December 31, 2011 $ 1,591,948 $ 1,911,805 $ 66,752
--------------------------------------------
Comprehensive income (loss) - 96,137 -
Equity settled share-based
compensation plans 464 - 49
--------------------------------------------
Balance as at March 31, 2012 $ 1,592,412 $ 2,007,942 $ 66,801
--------------------------------------------
----------------------------------------------------------------------------
Attributable to Inmet equity holders
----------------------------------------------------------------------------
Accumulated
other
Share based comprehensive
(thousands of Canadian dollars) compensation income (loss) Total
----------------------------------------------------------------------------
Balance as at December 31, 2010 $ 6,542 $ (185,217) $ 2,554,539
Comprehensive income - 33,868 176,712
Equity settled share-based
compensation plans 1,041 - 1,192
--------------------------------------------
Balance as at March 31, 2011 $ 7,583 $ (151,349) $ 2,732,443
--------------------------------------------
Comprehensive income - (13,435) 191,892
Equity settled share-based
compensation plans 944 - 1,618
Dividends - - (13,873)
Issuance of share capital - - 502,168
--------------------------------------------
Balance as at December 31, 2011 $ 8,527 $ (164,784) $ 3,414,248
--------------------------------------------
Comprehensive income (loss) - (6,822) 89,315
Equity settled share-based
compensation plans 1,504 - 2,017
--------------------------------------------
Balance as at March 31, 2012 $ 10,031 $ (171,606) $ 3,505,580
--------------------------------------------
INMET MINING CORPORATION
Consolidated statements of earnings
(unaudited)
Three Months Ended March 31
(thousands of Canadian dollars except Note
per share amounts) reference 2012 2011
----------------------------------------------------------------------------
Gross sales $ 294,904 $ 254,277
Smelter processing charges and
freight (30,302) (31,585)
Cost of sales (excluding
depreciation) (82,240) (79,150)
Depreciation (31,055) (27,040)
----------------------------------------------------------------------------
Earnings from operations 151,307 116,502
Corporate development and exploration (9,090) (13,411)
General and administration (10,065) (8,422)
Investment and other income 7 (6,469) (5,773)
Finance costs 8 (2,681) (2,331)
----------------------------------------------------------------------------
Income before taxation 123,002 86,565
Income tax expense 9 (26,865) (27,160)
----------------------------------------------------------------------------
Income from continuing operations 96,137 $ 59,405
Income from discontinued operation
(net of taxes) 10 - 83,439
----------------------------------------------------------------------------
Net income 96,137 $ 142,844
----------------------------------------------------------------------------
Earnings per common share 11
Income from continuing operations
Basic $ 1.39 $ 0.97
Diluted $ 1.38 $ 0.96
----------------------------------------------------------------------------
Income from discontinued operation
Basic $ - $ 1.36
Diluted $ - $ 1.35
----------------------------------------------------------------------------
Net income
Basic $ 1.39 $ 2.33
Diluted $ 1.38 $ 2.31
----------------------------------------------------------------------------
(See accompanying notes)
INMET MINING CORPORATION
Segmented statements of earnings
(unaudited)
2012 For the three
months ended March CORPORATE LAS
31 & OTHER CAYELI CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian dollars) (Turkey) (Spain) (Finland)
Gross sales $ - $ 127,423 $ 114,007 $ 53,474
Smelter processing
charges and freight - (22,174) (305) (7,823)
Cost of sales
(excluding
depreciation) 2,837 (29,579) (39,248) (16,250)
Depreciation - (7,501) (21,140) (2,414)
--------------------------------------------------------
Earnings from
operations 2,837 68,169 53,314 26,987
Corporate
development and
exploration (5,702) (394) (948) (800)
General and
administration (10,065) - - -
Investment and other
income (4,275) (1,914) (112) (168)
Finance costs (841) (348) (1,304) (188)
Income tax expense (140) (9,791) (11,581) (5,353)
--------------------------------------------------------
Net income $ (18,186) $ 55,722 $ 39,369 $ 20,478
--------------------------------------------------------
2011 For the three
months ended March CORPORATE LAS
31 & OTHER CAYELI CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian dollars) (Turkey) (Spain) (Finland)
Gross sales $ - $ 99,053 $ 90,826 $ 64,398
Smelter processing
charges and freight - (17,894) (268) (13,423)
Cost of sales
(excluding
depreciation) - (24,460) (40,426) (14,264)
Depreciation - (5,226) (19,556) (2,258)
--------------------------------------------------------
Earnings from
operations - 51,473 30,576 34,453
Corporate
development and
exploration (9,969) (478) (5) (730)
General and
administration (8,422) - - -
Investment and other
income (6,995) 850 248 124
Finance costs (941) (147) (1,024) (219)
Income tax expense (204) (11,656) (7,497) (7,803)
--------------------------------------------------------
Net income from
continuing
operations $ (26,531) $ 40,042 $ 22,298 $ 25,825
Income from
discontinued
operation (net of
taxes) - - - -
--------------------------------------------------------
Net income $ (26,531) $ 40,042 $ 22,298 $ 25,825
--------------------------------------------------------
2012 For the three DISCONTINUED
months ended March COBRE OPERATIONS -
31 PANAMA OK TEDI TOTAL
--------------------------------------------------------------
(thousands of (Papua
Canadian dollars) (Panama) New Guinea)
Gross sales $ - $ - $ 294,904
Smelter processing
charges and freight - - (30,302)
Cost of sales
(excluding
depreciation) - - (82,240)
Depreciation - - (31,055)
------------------------------------------
Earnings from
operations - - 151,307
Corporate
development and
exploration (1,246) - (9,090)
General and
administration - - (10,065)
Investment and other
income - - (6,469)
Finance costs - - (2,681)
Income tax expense - - (26,865)
------------------------------------------
Net income $ (1,246) $ - $ 96,137
------------------------------------------
2011 For the three DISCONTINUED
months ended March COBRE OPERATIONS -
31 PANAMA OK TEDI TOTAL
--------------------------------------------------------------
(thousands of (Papua
Canadian dollars) (Panama) New Guinea)
Gross sales $ - $ - $ 254,277
Smelter processing
charges and freight - - (31,585)
Cost of sales
(excluding
depreciation) - - (79,150)
Depreciation - - (27,040)
------------------------------------------
Earnings from
operations - - 116,502
Corporate
development and
exploration (2,229) - (13,411)
General and
administration - - (8,422)
Investment and other
income - - (5,773)
Finance costs - - (2,331)
Income tax expense - - (27,160)
------------------------------------------
Net income from
continuing
operations $ (2,229) $ - $ 59,405
Income from
discontinued
operation (net of
taxes) - 83,439 83,439
------------------------------------------
Net income $ (2,229) $ 83,439 $ 142,844
------------------------------------------
INMET MINING CORPORATION
Consolidated statements of comprehensive income
(unaudited)
Three Months Ended
March 31
Note
(thousands of Canadian dollars) reference 2012 2011
----------------------------------------------------------------------------
Net income $ 96,137 $ 142,844
--------------------------
Other comprehensive income for the
period:
Continuing operations
Changes in fair value of investments 103 (540)
Currency translation adjustments (6,927) 17,956
Income tax recovery related to
investments - other comprehensive
income 2 77
--------------------------
(6,822) 17,493
--------------------------
Other comprehensive income from
discontinued operation (net of taxes) - 16,375
--------------------------
Comprehensive income $ 89,315 $ 176,712
----------------------------------------------------------------------------
(See accompanying notes)
INMET MINING CORPORATION
Consolidated statements of cash flows
(unaudited)
Three Months Ended
March 31
Note
(thousands of Canadian dollars) reference 2012 2011
----------------------------------------------------------------------------
Cash provided by (used in) operating
activities(1)
Net income from continuing operations $ 96,137 $ 59,405
Add (deduct) items not affecting cash:
Depreciation 31,055 27,040
Deferred income taxes 12,346 8,389
Accretion expense on provisions and
capital leases 2,234 1,891
Change in asset retirement obligations
at closed sites (2,837) -
Foreign exchange loss 7,643 4,225
Other 1,977 (418)
Settlement of asset retirement
obligations (911) (1,666)
Net change in non-cash working capital 12 (29,368) 19,310
--------------------------
118,276 118,176
--------------------------
Cash provided by (used in) investing
activities
Purchase of property, plant and
equipment (85,321) (40,730)
Acquisition of held to maturity
investments (1,161) (275,456)
Maturing of held to maturity investments 48,932 8,000
Funding received under Cobre Panama
option agreement - 3,944
Purchase of equity securities - (3,493)
Sale of short-term investments 266,948 7,278
Other - 126
--------------------------
229,398 (300,331)
--------------------------
Cash provided by (used in) financing
activities
Financial assurance payments (5,070) (1,952)
Other (492) (884)
--------------------------
(5,562) (2,836)
--------------------------
Foreign exchange on cash held in foreign
currencies 1,331 3,140
--------------------------
Cash provided by discontinued operation 10 - 306,982
--------------------------
Increase in cash: 343,443 125,131
Cash:
Beginning of period 815,945 319,129
--------------------------
End of period $ 1,159,388 $ 444,260
Short term investments - -
--------------------------
Cash and short-term investments $ 1,159,388 $ 444,260
----------------------------------------------------------------------------
(See accompanying notes)
(1)Supplementary cash flow information:
Cash interest paid $ 549 $ 562
Cash taxes paid $ 13,765 $ 17,509
----------------------------------------------------------------------------
INMET MINING CORPORATION
Segmented statements of cash flows
(unaudited)
2012 For the
three months CORPORATE LAS
ended March 31 & OTHER CAYELI CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland)
Cash provided by
(used in)
operating
activities
Before net
change in non-
cash working
capital $ (13,829) $ 67,197 $ 73,648 $ 23,165
Net change in
non-cash
working capital (3,158) (36,373) 6,386 3,777
------------------------------------------------------------
(16,987) 30,824 80,034 26,942
------------------------------------------------------------
Cash provided by
(used in)
investing
activities
Purchase of
property, plant
and equipment (587) (2,324) (6,182) (2,462)
Acquisition of
held to
maturity
investments (702) (459) - -
Maturity of
held-to-
maturity
investments 48,932 - - -
Sale of short-
term
investments 266,948 - - -
------------------------------------------------------------
314,591 (2,783) (6,182) (2,462)
------------------------------------------------------------
------------------------------------------------------------
Cash provided by
(used in)
financing
activities (2,751) - (2,811) -
------------------------------------------------------------
Foreign exchange
on cash held in
foreign
currencies 2,240 (2,457) 692 725
------------------------------------------------------------
Intergroup
funding
(distributions) (3,401) 117 (105,267) (4,092)
------------------------------------------------------------
Increase
(decrease) in
cash 293,692 25,701 (33,534) 21,113
Cash:
Beginning of
year 467,846 137,590 136,128 47,623
------------------------------------------------------------
End of period 761,538 163,291 102,594 68,736
Short term
investments - - - -
------------------------------------------------------------
Cash and short-
term
investments $ 761,538 $ 163,291 $ 102,594 $ 68,736
------------------------------------------------------------
------------------------------------------------------------
2011 For the
three months CORPORATE LAS
ended March 31 & OTHER CAYELI CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland)
Cash provided by
(used in)
operating
activities
Before net
change in non-
cash working
capital $ (26,380) $ 46,882 $ 52,264 $ 28,329
Net change in
non-cash
working capital (4,841) 7,115 5,426 11,610
------------------------------------------------------------
(31,221) 53,997 57,690 39,939
------------------------------------------------------------
Cash provided by
(used in)
investing
activities
Purchase of
property, plant
and equipment (182) (2,416) (14,834) (326)
Acquisition of
held to
maturity
investments (274,979) (477) - -
Maturing of held
to maturity
investments 8,000 - - -
Funding received
under Cobre
Panama option
agreement - - - -
Purchase of
equity
investments (3,493) - - -
Sale of short-
term
investments - - 7,278 -
Other 126 - - -
------------------------------------------------------------
(270,528) (2,893) (7,556) (326)
------------------------------------------------------------
------------------------------------------------------------
Cash provided by
(used in)
financing
activities 139 - (2,975) -
------------------------------------------------------------
Foreign exchange
on cash held in
foreign
currencies - (3,520) 2,433 4,320
------------------------------------------------------------
Cash provided by
discontinued
operation - - - -
------------------------------------------------------------
Intergroup
funding
(distributions) 302,598 (79) (14,590) 1,910
------------------------------------------------------------
Increase
(decrease) in
cash 988 47,505 35,002 45,843
Cash:
Beginning of
year 53,184 107,750 52,570 97,056
------------------------------------------------------------
End of period 54,172 155,255 87,572 142,899
Short term
investments - - - -
------------------------------------------------------------
Cash and short-
term
investments $ 54,172 $ 155,255 $ 87,572 $ 142,899
------------------------------------------------------------
------------------------------------------------------------
2012 For the DISCONTINUED
three months COBRE OPERATIONS -
ended March 31 PANAMA OK TEDI TOTAL
-------------------------------------------------------------
(thousands of
Canadian (Papua
dollars) (Panama) New Guinea)
Cash provided by
(used in)
operating
activities
Before net
change in non-
cash working
capital $ (2,537) $ - $ 147,644
Net change in
non-cash
working capital - - (29,368)
---------------------------------------------
(2,537) - 118,276
---------------------------------------------
Cash provided by
(used in)
investing
activities
Purchase of
property, plant
and equipment (73,766) - (85,321)
Acquisition of
held to
maturity
investments - - (1,161)
Maturity of
held-to-
maturity
investments - - 48,932
Sale of short-
term
investments - - 266,948
---------------------------------------------
(73,766) - 229,398
---------------------------------------------
---------------------------------------------
Cash provided by
(used in)
financing
activities - - (5,562)
---------------------------------------------
Foreign exchange
on cash held in
foreign
currencies 131 - 1,331
---------------------------------------------
Intergroup
funding
(distributions) 112,643 - -
---------------------------------------------
Increase
(decrease) in
cash 36,471 - 343,443
Cash:
Beginning of
year 26,758 - 815,945
---------------------------------------------
End of period 63,229 - 1,159,388
Short term
investments - - -
---------------------------------------------
Cash and short-
term
investments $ 63,229 $ - $ 1,159,388
---------------------------------------------
---------------------------------------------
2011 For the DISCONTINUED
three months COBRE OPERATIONS -
ended March 31 PANAMA OK TEDI TOTAL
-------------------------------------------------------------
(thousands of
Canadian (Papua
dollars) (Panama) New Guinea)
Cash provided by
(used in)
operating
activities
Before net
change in non-
cash working
capital $ (2,229) $ - $ 98,866
Net change in
non-cash
working capital - - 19,310
---------------------------------------------
(2,229) - 118,176
---------------------------------------------
Cash provided by
(used in)
investing
activities
Purchase of
property, plant
and equipment (22,972) - (40,730)
Acquisition of
held to
maturity
investments - - (275,456)
Maturing of held
to maturity
investments - - 8,000
Funding received
under Cobre
Panama option
agreement 3,944 - 3,944
Purchase of
equity
investments - - (3,493)
Sale of short-
term
investments - - 7,278
Other - - 126
---------------------------------------------
(19,028) - (300,331)
---------------------------------------------
---------------------------------------------
Cash provided by
(used in)
financing
activities - - (2,836)
---------------------------------------------
Foreign exchange
on cash held in
foreign
currencies (93) - 3,140
---------------------------------------------
Cash provided by
discontinued
operation - 306,982 306,982
---------------------------------------------
Intergroup
funding
(distributions) 17,143 (306,982) -
---------------------------------------------
Increase
(decrease) in
cash (4,207) - 125,131
Cash:
Beginning of
year 8,569 - 319,129
---------------------------------------------
End of period 4,362 - 444,260
Short term
investments - - -
---------------------------------------------
Cash and short-
term
investments $ 4,362 $ - $ 444,260
---------------------------------------------
---------------------------------------------
Notes to the consolidated financial statements
1. Corporate information
Inmet Mining Corporation is a publicly traded corporation listed on the Toronto Stock Exchange. Our registered and head office is 330 Bay Street, Suite 1000, Toronto, Canada. Our principal activities are the exploration, development and mining of base metals.
2. Basis of presentation and statement of compliance
We prepared these interim consolidated financial statements using the same accounting policies and methods as those described in our consolidated financial statements for the year ended December 31, 2011. These interim financial statements are in compliance with International Accounting Standard 34, Interim Financial Reporting (IAS 34). Accordingly, certain information and disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards have been omitted or condensed. The preparation of financial statements in accordance with IAS 34 requires us to use certain critical accounting estimates and requires us to exercise judgement in applying our accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, have been set out in note 4 to our consolidated financial statements for the year ended December 31, 2011. These interim financial statements should be read in conjunction with our consolidated financial statements for the year ended December 31, 2011, which are included in our 2011 annual report.
3. Cash and short-term investments
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, December 31,
2012 2011
----------------------------------------------------------------------------
Cash and cash equivalents:
Liquidity funds $ 493,311 $ 387,857
Term deposits 22,638 6,763
Overnight deposits 20,153 72,701
Bankers acceptances 25,208 920
Money market funds 80,639 130,485
Corporate 56,475 11,974
Bank deposits 123,144 32,764
Provincial short-term notes 337,820 172,481
----------------------------------------------------------------------------
1,159,388 815,945
----------------------------------------------------------------------------
Short-term investments:
Corporate - 50,184
Provincial short term notes - 193,339
Bankers acceptances - 23,425
----------------------------------------------------------------------------
- 266,948
----------------------------------------------------------------------------
Total cash and short-term instruments $ 1,159,388 $ 1,082,893
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4. Restricted cash
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, December 31,
2012 2011
----------------------------------------------------------------------------
Collateralized cash for letter of credit
facility - Inmet Mining $ 19,549 $ 16,842
Collateralized cash for letters of credit - Las
Cruces 57,025 54,174
Collateralized cash for Pyhasalmi reclamation 1,630 1,616
----------------------------
78,204 72,632
Less current portion:
Collateralized cash for letters of credit -
Las Cruces (955) (810)
----------------------------------------------------------------------------
$ 77,249 $ 71,822
----------------------------------------------------------------------------
5. Stock-based compensation
During the first quarter of 2012, the following issuances were made under our equity-based compensation plans:
Stock option plan
On February 22, 2012, a grant of 83,084 options was made to senior management, with an exercise price of $64.17, graded vesting and an expiry date of February 22, 2019. We calculated the compensation expense for these options using the Black Scholes valuation model and assuming the following weighted average parameters, resulting in a weighted average fair value of $29.23 per option: 5 year expected life, 50 percent expected volatility, expected dividend rate of 0.3 percent annually and a risk free interest rate of 1.5 percent.
Performance share unit (PSU) plan
On February 22, 2012, the Board granted 36,580 PSUs to senior executives based on a 5 day VWAP prior to the grant date of $64.17 and a 3 year vesting period from January 1, 2012 to December 31, 2014.
We used a Monte Carlo simulation model to calculate the compensation expense for the PSUs assuming no forfeitures, 3 year historical average volatilities and a 3-year risk free interest rate of 1.33%, resulting in a March 31, 2012 fair value per PSU of $66.71.
We recognized the following share-based compensation expense in general and administration relating to all outstanding equity-based awards:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
three months ended March 31
2012 2011
----------------------------------------------------------------------------
Stock option plan $ 1,744 $ -
Performance share unit plan 253 -
Long-term incentive plan - 759
Deferred share unit plan 224 282
Share award plan 49 151
----------------------------------------------------------------------------
$ 2,270 $ 1,192
----------------------------------------------------------------------------
6. Accumulated other comprehensive loss
Accumulated other comprehensive loss includes:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, December 31,
2012 2011
----------------------------------------------------------------------------
Unrealized gains (losses) on investments (net of
tax of $96) (December 31, 2011 - $94) $ (447) $ (552)
Currency translation adjustment (171,159) (164,232)
----------------------------------------------------------------------------
Accumulated other comprehensive loss $ (171,606) $ (164,784)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Currency translation adjustments
The table below is breakdown of our currency translation adjustments.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, December 31,
2012 2011
----------------------------------------------------------------------------
Pyhasalmi (euro functional currency) $ (26,354) $ (28,277)
Las Cruces (euro functional currency) (97,271) (106,456)
Cayeli (US dollar functional currency) (21,807) (15,563)
Cobre Panama (US dollar functional currency) (25,727) (13,936)
----------------------------------------------------------------------------
$ (171,159) $ (164,232)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Canadian dollar to US dollar exchange rate was $1.00 at March 31, 2012 and $1.02 at December 31, 2011. The Canadian dollar to euro exchange rate was $1.33 at March 31, 2012 and $1.32 at December 31, 2011.
7. Investment and other income
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended March 31
2012 2011
----------------------------------------------------------------------------
Interest income $ 4,392 $ 2,772
Dividend and royalty income 500 600
Foreign exchange loss (12,468) (10,826)
Other 1,107 1,681
----------------------------------------------------------------------------
$ (6,469) $ (5,773)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Foreign exchange loss is a result of:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended March 31
2012 2011
----------------------------------------------------------------------------
Translation of US dollar held-to-maturity
investments $ (5,094) $ (1,452)
Translation of US dollar cash (4,659) (8,237)
Translation of Turkish lira taxes payable at
Cayeli (1,472) 545
Translation of other monetary assets and
liabilities (1,243) (1,682)
----------------------------------------------------------------------------
$ (12,468) $ (10,826)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
8. Finance costs
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended March 31
2012 2011
----------------------------------------------------------------------------
Interest on note payable $ 274 $ 279
Accretion on note payable 173 161
Accretion on provisions and capital lease
obligations 2,234 1,891
----------------------------------------------------------------------------
$ 2,681 $ 2,331
----------------------------------------------------------------------------
----------------------------------------------------------------------------
9. Income tax
For the three months ended March 31, 2012:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate Cayeli Las Cruces Pyhasalmi
and other (Turkey) (Spain) (Finland) Total
----------------------------------------------------------------------------
Current income
taxes $ 145 $ 8,933 $ - $ 5,441 $ 14,519
Deferred income
taxes (5) 858 11,581 (88) 12,346
----------------------------------------------------------------------------
Income tax expense $ 140 $ 9,791 $ 11,581 $ 5,353 $ 26,865
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the three months ended March 31, 2010:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate Cayeli Las Cruces Pyhasalmi
and other (Turkey) (Spain) (Finland) Total
----------------------------------------------------------------------------
Current income
taxes $ 249 $ 10,590 $ - $ 7,932 $ 18,771
Deferred income
taxes (45) 1,066 7,497 (129) 8,389
----------------------------------------------------------------------------
Income tax expense $ 204 $ 11,656 $ 7,497 $ 7,803 $ 27,160
----------------------------------------------------------------------------
----------------------------------------------------------------------------
10. Sale of our interest in Ok Tedi
On January 29, 2011, Ok Tedi Mining Limited repurchased our 18 percent equity interest in Ok Tedi for US $335 million. Our interest in Ok Tedi met the criteria of an asset held for sale, so we presented our share of the results of operations of Ok Tedi as discontinued operations in the consolidated statements of earnings and the consolidated statements of cash flow retroactively. In 2011, after-tax income of $83 million from this discontinued operation includes net earnings of $17 million in January, before the sale, and a gain on sale of $66 million net of withholding taxes. Papua New Guinea withholding taxes of $28 million were paid on the sale and no Canadian taxes were payable because we utilized our Canadian tax attributes.
The following tables provide a breakdown of our share of the earnings at Ok Tedi for the three months ended March 31, 2011.
Statements of earnings
----------------------------------------------------------------------------
----------------------------------------------------------------------------
three months ended
March 31, 2011
----------------------------------------------------------------------------
Gross sales $ 44,865
Smelter processing charges and freight (4,051)
Cost of sales (excluding depreciation) (12,116)
Depreciation (2,272)
---------------------
26,426
Investment and other income (80)
Finance costs (33)
Income tax expense (9,670)
---------------------
16,643
Gain on sale of our interest 79,029
Income tax expense on sale of our interest (12,233)
----------------------------------------------------------------------------
Net income from discontinued operation $ 83,439
----------------------------------------------------------------------------
11. Net income per share
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2012 2011
----------------------------------------------------------------------------
Income from continuing operations available to
common shareholders $ 96,137 $ 59,405
Income from discontinued operations available to
common shareholders - 83,439
Net income available to common shareholders $ 96,137 $ 142,844
----------------------------------------------------------------------------
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2012 2011
----------------------------------------------------------------------------
Weighted average common shares outstanding 69,349 61,549
Plus incremental shares from assumed
conversions:
Deferred share units 92 112
Long term incentive plan units - 52
----------------------------------------------------------------------------
Diluted weighted average common shares
outstanding 69,441 61,713
----------------------------------------------------------------------------
The table below shows our earnings per common share for the three months ended March 31.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
three months ended March 31
(Canadian dollars per share) 2012 2011
----------------------------------------------------------------------------
Basic Diluted Basic Diluted
Net income from continuing
operations per share $ 1.39 $ 1.38 $ 0.97 $ 0.96
Income from discontinued
operations per share - - 1.36 1.35
----------------------------------------------------------------------------
Net income per share $ 1.39 $ 1.38 $ 2.33 $ 2.31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
12. Statements of cash flows
The tables below show the components of our net change in non-cash working capital by segment.
For the three months ended March 31, 2012:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate Cayeli Las Cruces Pyhasalmi
and other (Turkey) (Spain) (Finland) Total
----------------------------------------------------------------------------
Accounts
receivable $ 1,139 $ (35,676) $ 5,949 $ 3,617 $ (24,971)
Inventories - 4,464 (2,007) 1,264 3,721
Accounts payable
and accrued
liabilities (4,689) (6,924) 2,444 (365) (9,534)
Taxes payable 686 1,765 - (739) 1,712
Other (294) (2) - - (296)
----------------------------------------------------------------------------
$ (3,158) $ (36,373) $ 6,386 $ 3,777 $ (29,368)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the three months ended March 31, 2011:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate Cayeli Las Cruces Pyhasalmi
and other (Turkey) (Spain) (Finland) Total
----------------------------------------------------------------------------
Accounts
receivable $ (760) $ 7,585 $ (5,246) $ 9,077 $ 10,656
Inventories - 711 5,971 (66) 6,616
Accounts payable
and accrued
liabilities (2,169) 812 4,701 (2,400) 944
Taxes payable (1,402) (1,990) - 4,999 1,607
Other (510) (3) - - (513)
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$ (4,841) $ 7,115 $ 5,426 $ 11,610 $ 19,310
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13. Capital commitments
As at March 31, 2012, Cobre Panama had committed $149.1 million for the design and supply of two SAG mills, four ball mills and the related gearless drives, engineering, and early works.
14. Event after balance sheet date
On April 25, 2012, Korea Panama Mining Corporation completed its acquisition of a 20 percent interest in Minera Panama, SA, owner and developer of Cobre Panama, for US $169 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to date.
Contacts:
Inmet Mining Corporation
Jochen Tilk
President and Chief Executive Officer
+1.416.860.3972
Inmet Mining Corporation
Flora Wood
Director, Investor Relations
+1.416.361.4808
www.inmetmining.com
