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Inmet Mining Q2 numbers hit hard by forex losses, debt

Inmet Mining said copper and zinc production were higher during the second quarter although gold production dropped substantially at its Canadian gold mine, which is at the end of its mine life.

RENO, NV - 

Toronto's Inmet Mining reported Tuesday that its second-quarter net earnings dropped Cdn$39 million because of forex losses on repatriation of funds and long-term debt.

Nevertheless, the company predicted its copper sales will increase 33% because of incremental production at the Las Cruces copper mine in Andalucía Spain, which is now ramping up toward full production by the end of the year.

Zinc production is also expected to increase as the company plans to mine higher zinc grades at the Pyhäsalmi mine this year. Inmet also forecast that zinc processing charges will be lower this year.

Inmet saw its copper sales increase 18% to 43,400 tonnes during the first half of this year as zinc sales also climbed 11% to 37,800 tonnes. However, gold declined 37% to 83,400 ounces because of lower grades at the Troilus gold mine in northern Quebec and at Ok Tedi in Papua New Guinea because of lower grades and a labor disruption.

Ok Tedi production during the second quarter was interrupted by a work stoppage for the first 17 days of April. The mine's labor contract expires on August 31.

For the second quarter of 2010 Inmet reported a 19% increase to copper sales to 21,800 tonnes and a 16% increase in zinc sales to 21,600 tonnes. Gold production dropped 24% during the same quarter to 40,000 ounces mainly due to the fact Troilus mine life came to an end after 13 years of operation and 2 million ounces of gold production.

Inmet also produced 6,600 tonnes of copper cathode at Las Cruces during the quarter, although the target had been 12,400 tonnes. "We believe we have identified the key bottlenecks to production and we continue to take steps to significantly increase our operating reliability," the company said in its quarterly results. "We will continue with the rigorous implementation of the ramp up plan to achieve our goal of full production by the end of the year and we are encouraged by the capability that the plant has demonstrated in recent months."

FINANCIALS

Inmet reported forex losses of C$21 million during the second quarter on the repatriation of cash from its Turkish operations Çayeli and Pyhäsalmi. For the first half of this year, the company noted $23.15 million in forex losses.

For the first half of this year, Inmet reported a net income of $128.3 million or $2.29 per share, up 9% from the $117.5 million or $2.43 per share reported during the first half of 2009.

For the second-quarter 2010, Inmet reported a net income of $48.44 million or 86-cents per share, a drop of 27% from the $66.53 million or $1.37/sh reported during the same period a year ago.

The company expects capital spending to be $228 million this year including:

--$61 million at Las Cruces for a water treatment plant and other water management projects, mine development and plant improvements.

--$122 million on work for the development of the Cobre Panama copper-gold-moly project in Panama including basic engineering, advance payments for mill equipment, and other development costs.

--$10 million at OK Tedi for the construction of underwater storage pits for sulphur concentrate produced by the tailings management plant.