Inmet Mining Corp : Inmet Announces First Quarter Earnings From Continuing Operations of $1.39 Per Share

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Download the PDF version. TORONTO, CANADA--(Marketwire - April 26, 2012) - 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 Çayeli, and the timing of shipments at Çayeli. 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 three months ended March 31 (thousands, except per share amounts)20122011change 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% 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% as at March 31 as at 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 (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 Çayeli 14 Las Cruces 16 Pyhäsalmi 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 three months ended March 31 (thousands, except per share amounts) 2012 2011 change EARNINGS FROM OPERATIONS (1) Çayeli $ 68,169 $ 51,473 +32 % Las Cruces 53,314 30,576 +74 % Pyhäsalmi 26,987 34,453 -22 % Other 2,837 - +100 % 151,307 116,502 +30 % DEVELOPMENT AND EXPLORATION Corporate development and exploration (9,090 ) (13,411 ) -32 % 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 % (46,080 ) (43,686 ) +5 % Net income from continuing operations 96,137 59,405 +62 % Income from discontinued operation (net of taxes) - 83,439 -100 % Net income attributable to Inmet shareholders $ 96,137 $ 142,844 -33 % Income from continuing operations per common share $ 1.39 $ 0.97 +43 % Diluted income from continuing operations per common share $ 1.38 $ 0.96 +44 % Basic net income per common share $ 1.39 $ 2.33 -40 % Diluted net income per common share $ 1.38 $ 2.31 -40 % Weighted average shares outstanding 69,349 61,549 +13 % (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 (millions) three months ended March 31 see page 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 ) Higher earnings from operations compared to 2011 35 CORPORATE COSTS Lower corporate development and exploration costs 4 11 Foreign exchange changes (2 ) 11 Higher net income from continuing operations compared to 2011 37 Lower income from discontinued operation - Ok Tedi (83 ) 12 Lower net income attributable to Inmet shareholders compared to 2011 $ (46 ) Understanding our performance Metal prices The table below shows the average metal prices we realized in US dollars and Canadian dollars (the prices we realize include finalization adjustments - see Gross sales on page 7). three months ended March 31 2012 2011 change US dollar metal prices Copper (per pound) US $3.87 US $4.29 -10 % Zinc (per pound) US $0.93 US $1.06 -12 % Canadian dollar metal prices Copper (per pound) C $3.88 C $4.23 -8 % Zinc (per pound) C $0.93 C $1.05 -11 % 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 $0.86 per pound and a 16 percent decrease from the first quarter of 2011. Exchange rates Exchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter compared to 2011. three months ended March 31 2012 2011 change Exchange rates 1 US$ 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 % 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 Çayeli'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. three months ended March 31 (US$) 2012 2011 change 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 % Price participation Copper (per pound) US $0.00 US $0.02 -100 % Zinc (per pound) US ($0.01 ) US $0.00 not meaningful 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 % Statutory tax rates The table below shows the statutory tax rates for each of our taxable operating mines. 2012 2011 change Statutory tax rates Çayeli 24 % 24 % - Las Cruces 30 % 30 % - Pyhäsalmi 24.5 % 26 % -1.5 % Earnings from operations three months ended March 31 (thousands) 2012 2011 change 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 % Earnings from operations $ 151,307 $ 116,502 +30 % Gross sales were significantly higher three months ended March 31 (thousands) 2012 2011 change Gross sales by operation Çayeli $ 127,423 $ 99,053 +29 % Las Cruces 114,007 90,826 +26 % Pyhäsalmi 53,474 64,398 -17 % $ 294,904 $ 254,277 +16 % Gross sales by metal Copper $ 243,985 $ 191,704 +27 % Zinc 29,582 44,871 -34 % Other 21,337 17,702 +21 % $ 294,904 $ 254,277 +16 % Key components of the change in gross sales: increasing sales volumes at Las Cruces, timing of shipments at Çayeli, lower realized copper prices (millions) three months ended March 31 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 Çayeli 34 Lower zinc sales volumes at Pyhäsalmi (12 ) Changes in other metal sales 5 Other 3 Higher gross sales, compared to 2011 $ 41 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: (millions of pounds) copper zinc April 2012 15 14 May 2012 10 - Unsettled sales at March 31, 2012 25 14 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 Çayeli. Additionally, the timing of shipments resulted in copper sales volumes exceeding production volumes at Çayeli 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 Çayeli and Pyhäsalmi, consistent with our objectives for this year. Sales volumes three months ended March 31 2012 2011 change Copper contained in concentrate (tonnes) 15,000 10,900 +38 % Copper cathode (tonnes) 13,600 9,700 +40 % Total copper (tonnes) 28,600 20,600 +39 % Zinc (tonnes) 14,500 19,700 -26 % Pyrite (tonnes) 112,300 141,300 -21 % Production three months ended March 31 objective 2012 2011 change 2012 Copper (tonnes) Çayeli 8,100 6,000 +35 % 27,000 - 30,000 Las Cruces 13,300 8,100 +64 % 61,700 - 68,600 Pyhäsalmi 3,400 3,600 -6 % 11,300 - 12,600 24,800 17,700 +40 % 100,000 - 111,200 Zinc (tonnes) Çayeli 10,500 12,500 -16 % 36,000 - 39,800 Pyhäsalmi 4,600 8,700 -47 % 22,800 - 25,200 15,100 21,200 -29 % 58,800 - 65,000 Pyrite (tonnes) Pyhäsalmi 211,300 186,100 +14 % 800,000 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 three months ended March 31 (thousands) 2012 2011 change Smelter processing charges and freight by operation Çayeli $ 22,174 $ 17,894 +24 % Las Cruces 305 268 +14 % Pyhäsalmi 7,823 13,423 -42 % $ 30,302 $ 31,585 -4 % 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 % $ 30,302 $ 31,585 -4 % 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 % $ 30,302 $ 31,585 -4 % 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 Pyhäsalmi. 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 three months ended March 31 (thousands) 2012 2011 change Direct production costs by operation Çayeli $ 24,053 $ 23,378 +3 % Las Cruces 41,218 33,488 +23 % Pyhäsalmi 15,469 14,562 +6 % 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 % Total cost of sales (excluding depreciation) $ 82,240 $ 79,150 +4 % 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 Çayeli decreased at the end of this quarter, and at Çayeli 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 Çayeli and Pyhäsalmi will be similar to 2011. Certain variable costs may continue to affect our earnings, depending on metal prices: royalties at Çayeli are affected by its net income royalties at Las Cruces are affected by its net sales. The total amount we 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 three months ended March 31 (thousands) 2012 2011 change Depreciation by operation Çayeli $ 7,501 $ 5,226 +44 % Las Cruces 21,140 19,556 +8 % Pyhäsalmi 2,414 2,258 +7 % $ 31,055 $ 27,040 +15 % Depreciation was higher this quarter than in 2011 mainly because of higher copper sales volumes at Las Cruces and Çayeli. 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 three months ended March 31 (thousands) 2012 2011 Interest income $ 4,392 $ 2,772 Foreign exchange losses (12,468 ) (10,826 ) Dividend and royalty income 500 600 Other 1,107 1,681 $ (6,469 ) $ (5,773 ) 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: three months ended March 31 (thousands) 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 Çayeli (1,472 ) 545 Translation of other monetary assets and liabilities (1,243 ) (1,682 ) $ (12,468 ) $ (10,826 ) 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. Çayeli'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 (Çayeli'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 three months ended March 31 (thousands) 2012 2011 change Çayeli $ 9,791 $ 11,656 Las Cruces 11,581 7,497 Pyhäsalmi 5,353 7,803 Corporate and other 140 204 $ 26,865 $ 27,160 Consolidated effective tax rate 22 % 31 % -9 % 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 Çayeli's taxes were lower as it recognized a foreign exchange loss from its US dollar denominated cash (Çayeli's income taxes are denominated in Turkish lira). Additionally, there was a decrease in the statutory tax rate at Pyhäsalmi from 26 percent to 24.5 percent. 2012 outlook for income tax expense Other than the decrease in the statutory tax rate at Pyhäsalmi from 26 percent to 24.5 percent, we expect the statutory tax rates at our operations to remain the same in 2012 as they were in 2011. Discontinued operation - 2011 We sold our 18 percent equity interest in Ok Tedi in January 2011, and have reported our results relating to Ok Tedi in that year as discontinued operations. After-tax income of $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: 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 $1.30 Working capital Assume no changes for the year Çayeli three months ended March 31 2012 2011 change Tonnes of ore milled (000's) 299 293 +2 % Tonnes of ore milled per day 3,300 3,300 - Grades (percent) copper 3.4 2.9 +17 % zinc 5.4 6.3 -14 % Mill recoveries (percent) copper 79 71 +11 % zinc 65 68 -4 % Production (tonnes) copper 8,100 6,000 +35 % zinc 10,500 12,500 -16 % Cost per tonne of ore milled (C$) $ 80 $ 80 - 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, Çayeli'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 Çayeli 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 (millions of Canadian dollars unless three months ended March 31 revised objective otherwise stated) 2012 2011 2012 Sales analysis Copper sales (tonnes) 11,100 7,500 28,500 Zinc sales (tonnes) 10,300 10,000 37,900 Gross copper sales $ 97 $ 70 $ 243 Gross zinc sales 21 23 79 Other metal sales 9 6 18 Gross sales 127 99 340 Smelter processing charges and freight (22 ) (18 ) (66 ) Net sales $ 105 $ 81 $ 274 Cost analysis Tonnes of ore milled (thousands) 299 293 1,200 Direct production costs ($ per tonne) $ 80 $ 80 $ 80 Direct production costs $ 24 $ 23 $ 96 Change in inventory 5 1 - Depreciation and other non-cash costs 8 6 32 Operating costs $ 37 $ 30 $ 128 Operating earnings $ 68 $ 51 $ 146 Operating cash flow $ 31 $ 54 $ 137 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. (millions) three months ended March 31 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 ) 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 ) Lower operating cash flow, compared to 2011 $ (23 ) Capital spending three months ended March 31 objective (thousands) 2012 2011 change 2012 Capital spending $ 2,300 $ 2,400 -4 % $ 20,000 2012 outlook for capital spending We expect to spend $20 million on capital in 2012, including $7 million to upgrade our ore pass system to address deterioration that has accumulated over time from normal abrasion, and to extend the shotcrete slickline and replace certain mobile equipment. Las Cruces three months ended March 31 2012 2011 change Tonnes of ore processed (000's) 246 173 +42 % Copper grades (percent) 6.7 6.1 +10 % Plant recoveries (percent) 85 77 +10 % Cathode copper production (tonnes) 13,300 8,100 +64 % Cost per pound of cathode produced (C$) $ 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 otherwise stated) three months ended March 31 revised 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. (millions) three months ended 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 $48 million on capital projects in 2012. The largest expenditures will come in the areas of mine development, tailings facility expansion and land purchase. Pyhäsalmi three months ended March 31 2012 2011 change Tonnes of ore milled (000's) 342 335 +2 % Tonnes of ore milled per day 3,800 3,700 +3 % Grades (percent) copper 1.0 1.1 -9 % zinc 1.5 2.9 -48 % sulphur 43 42 +2 % Mill recoveries (percent) copper 96 96 - zinc 90 91 -1 % Production (tonnes) copper 3,400 3,600 -6 % zinc 4,600 8,700 -47 % pyrite 211,300 186,100 +14 % Cost per tonne of ore milled (C$) $ 45 $ 43 +5 % Lower zinc grades this quarter in line with plan Pyhäsalmi 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 Pyhäsalmi expects to mine 1.4 million tonnes of approximately 1 percent copper and 2 percent zinc in 2012, and produce between 11,300 tonnes and 12,600 tonnes of copper and 22,800 tonnes and 25,200 tonnes of zinc. Copper and zinc production should be lower than it was in 2011 as fewer higher grade stopes are available in the short-term mining sequence. Both copper and zinc grades should recover after 2012. Pyhäsalmi 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 March 31 revised 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. (millions) three months ended 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 Çayeli $ 31 $ 54 Las Cruces 80 58 Pyhäsalmi 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 (millions) three months ended 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 Çayeli 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) Çayeli $ 137 Las Cruces 381 Pyhäsalmi 89 $ 607 INVESTING AND FINANCING Capital spending three months ended March 31 (millions) 2012 2011 Çayeli $ 2 $ 2 Las Cruces 6 15 Pyhäsalmi 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 Pyhäsalmi. 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: Çayeli (Turkey), Las Cruces (Spain) and Pyhäsalmi (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 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 ÇAYELI LAS CRUCES PYHÄSALMI 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 ÇAYELI LAS CRUCES PYHÄSALMI 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) ÇAYELI LAS CRUCES PYHÄSALMI 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) ÇAYELI LAS CRUCES PYHÄSALMI 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 dollars, except per share amounts) 2012 First quarter 2011 Fourth quarter 2011 Third quarter 2011 Second 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 dollars, except per share amounts) 2011 First quarter 2010(1) Fourth quarter 2010(1) Third quarter 2010(1) Second 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 (thousands of Canadian dollars) Note reference March 31, 2012 December 31, 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 (unaudited) CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE 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 December 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE 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 (thousands of Canadian dollars) Share Capital Retained earnings Contributed surplus Share based compensation Accumulated other comprehensive income (loss) Total Balance as at December 31, 2010 $ 1,089,576 $ 1,577,507 $ 66,131 $ 6,542 $ (185,217 ) $ 2,554,539 Comprehensive income - 142,844 - - 33,868 176,712 Equity settled share-based compensation plans - - 151 1,041 - 1,192 Balance as at March 31, 2011 $ 1,089,576 $ 1,720,351 $ 66,282 $ 7,583 $ (151,349 ) $ 2,732,443 Comprehensive income - 205,327 - - (13,435 ) 191,892 Equity settled share-based compensation plans 204 - 470 944 - 1,618 Dividends - (13,873 ) - - - (13,873 ) Issuance of share capital 502,168 - - - - 502,168 Balance as at December 31, 2011 $ 1,591,948 $ 1,911,805 $ 66,752 $ 8,527 $ (164,784 ) $ 3,414,248 Comprehensive income (loss) - 96,137 - - (6,822 ) 89,315 Equity settled share-based compensation plans 464 - 49 1,504 - 2,017 Balance as at March 31, 2012 $ 1,592,412 $ 2,007,942 $ 66,801 $ 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 per share amounts) Note 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 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMA DISCONTINUED OPERATIONS - OK TEDI TOTAL (thousands of Canadian dollars) (Turkey ) (Spain ) (Finland ) (Panama ) (Papua New Guinea ) Gross sales $ - $ 127,423 $ 114,007 $ 53,474 $ - $ - $ 294,904 Smelter processing charges and freight - (22,174 ) (305 ) (7,823 ) - - (30,302 ) Cost of sales (excluding depreciation) 2,837 (29,579 ) (39,248 ) (16,250 ) - - (82,240 ) Depreciation - (7,501 ) (21,140 ) (2,414 ) - - (31,055 ) Earnings from operations 2,837 68,169 53,314 26,987 - - 151,307 Corporate development and exploration (5,702 ) (394 ) (948 ) (800 ) (1,246 ) - (9,090 ) General and administration (10,065 ) - - - - - (10,065 ) Investment and other income (4,275 ) (1,914 ) (112 ) (168 ) - - (6,469 ) Finance costs (841 ) (348 ) (1,304 ) (188 ) - - (2,681 ) Income tax expense (140 ) (9,791 ) (11,581 ) (5,353 ) - - (26,865 ) Net income $ (18,186 ) $ 55,722 $ 39,369 $ 20,478 $ (1,246 ) $ - $ 96,137 2011 For the three months ended March 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMA DISCONTINUED OPERATIONS - OK TEDI TOTAL (thousands of Canadian dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea) Gross sales $ - $ 99,053 $ 90,826 $ 64,398 $ - $ - $ 254,277 Smelter processing charges and freight - (17,894 ) (268 ) (13,423 ) - - (31,585 ) Cost of sales (excluding depreciation) - (24,460 ) (40,426 ) (14,264 ) - - (79,150 ) Depreciation - (5,226 ) (19,556 ) (2,258 ) - - (27,040 ) Earnings from operations - 51,473 30,576 34,453 - - 116,502 Corporate development and exploration (9,969 ) (478 ) (5 ) (730 ) (2,229 ) - (13,411 ) General and administration (8,422 ) - - - - - (8,422 ) Investment and other income (6,995 ) 850 248 124 - - (5,773 ) Finance costs (941 ) (147 ) (1,024 ) (219 ) - - (2,331 ) Income tax expense (204 ) (11,656 ) (7,497 ) (7,803 ) - - (27,160 ) Net income from continuing operations $ (26,531 ) $ 40,042 $ 22,298 $ 25,825 $ (2,229 ) $ - $ 59,405 Income from discontinued operation (net of taxes) - - - - - 83,439 83,439 Net income $ (26,531 ) $ 40,042 $ 22,298 $ 25,825 $ (2,229 ) $ 83,439 $ 142,844 INMET MINING CORPORATION Consolidated statements of comprehensive income (unaudited) Three Months Ended March 31 (thousands of Canadian dollars) Note 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 (thousands of Canadian dollars) Note 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 ended March 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMA DISCONTINUED OPERATIONS - OK TEDI TOTAL (thousands of Canadian dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea) Cash provided by (used in) operating activities Before net change in non-cash working capital $ (13,829 ) $ 67,197 $ 73,648 $ 23,165 $ (2,537 ) $ - $ 147,644 Net change in non-cash working capital (3,158 ) (36,373 ) 6,386 3,777 - - (29,368 ) (16,987 ) 30,824 80,034 26,942 (2,537 ) - 118,276 Cash provided by (used in) investing activities Purchase of property, plant and equipment (587 ) (2,324 ) (6,182 ) (2,462 ) (73,766 ) - (85,321 ) Acquisition of held to maturity investments (702 ) (459 ) - - - - (1,161 ) Maturity of held-to-maturity investments 48,932 - - - - - 48,932 Sale of short-term investments 266,948 - - - - - 266,948 314,591 (2,783 ) (6,182 ) (2,462 ) (73,766 ) - 229,398 Cash provided by (used in) financing activities (2,751 ) - (2,811 ) - - - (5,562 ) Foreign exchange on cash held in foreign currencies 2,240 (2,457 ) 692 725 131 - 1,331 Intergroup funding (distributions) (3,401 ) 117 (105,267 ) (4,092 ) 112,643 - - Increase (decrease) in cash 293,692 25,701 (33,534 ) 21,113 36,471 - 343,443 Cash: Beginning of year 467,846 137,590 136,128 47,623 26,758 - 815,945 End of period 761,538 163,291 102,594 68,736 63,229 - 1,159,388 Short term investments - - - - - - - Cash and short-term investments $ 761,538 $ 163,291 $ 102,594 $ 68,736 $ 63,229 $ - $ 1,159,388 2011 For the three months ended March 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMA DISCONTINUED OPERATIONS - OK TEDI TOTAL (thousands of Canadian dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea) Cash provided by (used in) operating activities Before net change in non-cash working capital $ (26,380 ) $ 46,882 $ 52,264 $ 28,329 $ (2,229 ) $ - $ 98,866 Net change in non-cash working capital (4,841 ) 7,115 5,426 11,610 - - 19,310 (31,221 ) 53,997 57,690 39,939 (2,229 ) - 118,176 Cash provided by (used in) investing activities Purchase of property, plant and equipment (182 ) (2,416 ) (14,834 ) (326 ) (22,972 ) - (40,730 ) Acquisition of held to maturity investments (274,979 ) (477 ) - - - - (275,456 ) Maturing of held to maturity investments 8,000 - - - - - 8,000 Funding received under Cobre Panama option agreement - - - - 3,944 - 3,944 Purchase of equity investments (3,493 ) - - - - - (3,493 ) Sale of short-term investments - - 7,278 - - - 7,278 Other 126 - - - - - 126 (270,528 ) (2,893 ) (7,556 ) (326 ) (19,028 ) - (300,331 ) Cash provided by (used in) financing activities 139 - (2,975 ) - - - (2,836 ) Foreign exchange on cash held in foreign currencies - (3,520 ) 2,433 4,320 (93 ) - 3,140 Cash provided by discontinued operation - - - - - 306,982 306,982 Intergroup funding (distributions) 302,598 (79 ) (14,590 ) 1,910 17,143 (306,982 ) - Increase (decrease) in cash 988 47,505 35,002 45,843 (4,207 ) - 125,131 Cash: Beginning of year 53,184 107,750 52,570 97,056 8,569 - 319,129 End of period 54,172 155,255 87,572 142,899 4,362 - 444,260 Short term investments - - - - - - - Cash and short-term investments $ 54,172 $ 155,255 $ 87,572 $ 142,899 $ 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, 2012 December 31, 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, 2012 December 31, 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 Pyhäsalmi 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, 2012 December 31, 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, 2012 December 31, 2011 Pyhäsalmi (euro functional currency) $ (26,354 ) $ (28,277 ) Las Cruces (euro functional currency) (97,271 ) (106,456 ) Çayeli (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 Çayeli (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 and other Çayeli (Turkey) Las Cruces (Spain) Pyhäsalmi (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 and other Çayeli (Turkey) Las Cruces (Spain) Pyhäsalmi (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 and other Çayeli (Turkey) Las Cruces (Spain) Pyhäsalmi (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 and other Çayeli (Turkey) Las Cruces (Spain) Pyhäsalmi (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 ) $ (4,841 ) $ 7,115 $ 5,426 $ 11,610 $ 19,310 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. For Additional Information, Please Contact: 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