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Inmet Mining Corporation

TSX : IMN


Inmet Mining Corporation

February 21, 2013 17:19 ET

Inmet Announces Fourth Quarter Earnings from Operations of $112 Million Compared to $89 Million in the Fourth Quarter of 2011

TORONTO, CANADA--(Marketwire - Feb. 21, 2013) - Inmet Mining Corporation (TSX:IMN) -

All amounts in US dollars unless indicated otherwise

Fourth quarter highlights

  • Strong earnings from operations
    Earnings from operations were $112 million compared to $89 million in the fourth quarter of 2011. This increase is due to the strong performance of our operations. Earnings were negatively affected by the timing of shipments at Çayeli and finalization adjustments, together totalling $11 million for the quarter or $0.15 per share.
  • Copper and zinc production exceeded expectations
    Our operations produced 111,700 tonnes of copper and 66,300 tonnes of zinc in 2012, exceeding our target ranges for the year. Las Cruces has consistently achieved monthly design capacity of 6,000 tonnes of copper cathode since first crossing this threshold in April 2012.
  • Increase in closure liabilities for closed properties
    We recognized a charge of $10 million in earnings from operations, or $0.14 per share, for an increase in estimated costs for post-closure obligations at our closed properties this quarter. This compares to a charge of $16 million recognized in the fourth quarter of 2011 primarily as a result of a decrease in the discount rates we applied in determining the liabilities at period end.
  • Net income reduced by foreign exchange losses
    Net income of $38 million this quarter reflects after-tax foreign exchange losses of $19 million, or $0.27 per share, mainly on US dollar cash held in our euro-based entities. Our excess cash balances are held in US dollar funds as we plan to use these funds for the construction of Cobre Panama.
  • Construction of Cobre Panama progressing
    By the end of the year, Minera Panama S.A. had entered into commitments for approximately $4.1 billion, representing 67 percent of estimated capital expenditures for the Cobre Panama project.
  • Issuance of $500 million in senior unsecured notes
    On December 18, 2012, we issued $500 million in senior unsecured notes, the proceeds of which will be used to fund development of Cobre Panama. The notes bear a coupon rate of interest of 7.5 percent and mature on June 1, 2021.
  • First Quantum offer
    On January 9, 2013, First Quantum Minerals Ltd. (First Quantum) commenced an unsolicited offer to acquire all of Inmet Mining's issued and outstanding common shares for consideration of cash or First Quantum shares or a combination of cash and First Quantum shares. Inmet's Board of Directors, on the recommendation of its Special Committee of the independent directors and with input from its, and the Special Committee's, financial and legal advisors, has recommended that Inmet shareholders reject this offer for reasons as set out in the Directors' Circular mailed to shareholders.
Key financial data
three months ended December 31 year ended December 31
(thousands, except per share amounts) 2012 2011 change 2012 2011 change
FINANCIAL HIGHLIGHTS
Sales
Gross sales $259,868 $233,394 +11 % $1,123,977 $947,911 +19 %
Net income
Net income from continuing operations $38,221 $46,544 -18 % $330,076 $256,314 +29 %
Net income from continuing operations per share $0.56 $0.67 -16 % $4.78 $3.86 +24 %
Net income from discontinued operations - - - - 80,786 -100 %
Net income from discontinued operations per share - - - - $1.22 -100 %
Net income attributable to Inmet shareholders $38,775 46,544 -17 % $331,211 $337,100 -2 %
Net income per share $0.56 $0.67 -16 % $4.78 $5.08 -6 %
Cash flow
Cash flow provided by operating activities $116,851 $70,768 +65 % $543,392 $391,976 +39 %
Cash flow provided by operating activities per share(1) $1.68 $1.02 +65 % $7.83 $5.90 +33 %
Capital spending(2) $342,467 $57,100 +500 % $785,761 $201,909 +289 %
OPERATING HIGHLIGHTS
Production
Copper (tonnes) 27,600 26,200 +5 % 111,700 84,800 +32 %
Zinc (tonnes) 20,700 17,900 +16 % 66,300 80,400 -18 %
Pyrite (tonnes) 222,500 210,500 +6 % 891,700 804,900 +11 %
Copper cash cost (US $ per pound)(3) $0.85 $0.82 +4 % $0.88 $0.86 +2 %
as at December 31 as at December 31
FINANCIAL CONDITION 2012 2011
(US millions, except ratio)
Current ratio 8.4 to 1 9.3 to 1
Net working capital balance $2,358 $1,263
Cash balance (including bonds and other securities; millions) $3,618 $1,655
Gross debt(4) $1,960 $17
Net debt (net cash)(5) ($1,658 ) ($1,639 )
Shareholders' equity attributable to Inmet shareholders $3,972 $3,306
(1) Cash flow provided by operating activities divided by average shares outstanding for the period.
(2) The year ended December 31, 2012 includes capital spending of $713 million at Cobre Panama. The year ended December 31, 2011 includes capital spending of $129 million at Cobre Panama.
(3) Copper cash cost per pound is a non-GAAP financial measure - see Supplementary financial information on pages 31 to 33.
(4) Gross debt includes long-term debt and the current portion of long-term debt
(5) Net debt (net cash) is a non-GAAP measure defined as long-term debt less cash and short-term investments, including bonds and other securities.

Fourth quarter press release

Where to find it

Our financial results 5
Key changes in 2012 5
Understanding our performance 5
Earnings from operations 8
Corporate costs 13
Results of our operations 15
Çayeli 16
Las Cruces 19
Pyhäsalmi 21
Status of our development project 23
Cobre Panama 23
Managing our liquidity 26
Financial condition 30
Supplementary financial information 31

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 December 31, 2012.

Change in Inmet's functional and presentation currencies to the US dollar

The decision to construct Cobre Panama has significantly increased Inmet's exposure to the US dollar. Effective June 1, 2012, the US dollar was adopted as Inmet's functional currency on a prospective basis. We translated Inmet's May 31, 2012 financial statement items from Canadian dollars to US dollars using the May 31, 2012 exchange rate US $0.97 per Canadian dollar (Transition Rate). Our operating entities continue to measure the items in their financial statements using their functional currencies; Çayeli and Cobre Panama use the US dollar, and Pyhäsalmi and Las Cruces use the euro.

At the same time we changed our presentation currency from Canadian dollars to US dollars and now report our results in US dollars. We have restated all comparative financial statements from previously reported Canadian dollar amounts to US dollars using the Transition Rate.

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 December 31 year ended December 31
(thousands, except per share amounts) 2012 2011 change 2012 2011 change
EARNINGS FROM OPERATIONS(1)
Çayeli $16,493 $34,668 -52 % $162,879 $154,618 +5 %
Las Cruces 73,397 40,384 +82 % 279,250 122,373 +128 %
Pyhäsalmi 32,395 30,190 +7 % 111,357 138,597 -20 %
Other (9,924 ) (16,190 ) -39 % (17,104 ) (16,190 ) +6 %
112,361 89,052 +26 % 536,382 399,398 +34 %
DEVELOPMENT AND EXPLORATION
Corporate development and exploration (8,620 ) (6,333 ) +36 % (35,616 ) (28,273 ) +26 %
CORPORATE COSTS
General and administration (14,896 ) (7,487 ) +99 % (53,522 ) (33,306 ) +61 %
Investment and other income (16,279 ) (3,883 ) +319 % 24,206 29,748 -19 %
Finance costs (2,632 ) (2,314 ) +14 % (10,070 ) (9,182 ) +10 %
Income and capital taxes (31,713 ) (22,491 ) +41 % (131,304 ) (102,071 ) +29 %
(65,520 ) (36,175 ) +81 % (170,690 ) (114,811 ) +49 %
Net income from continuing operations 38,221 46,544 -18 % 330,076 256,314 +29 %
Income from discontinued operation (net of taxes) - - - - 80,786 -100 %
Non-controlling interest 554 - +100 % 1,135 - +100 %
Net income attributable to Inmet shareholders $38,775 $46,544 -17 % $331,211 $337,100 -2 %
Income from continuing operations per common share $0.56 $0.67 -16 % $4.78 $3.86 +24 %
Diluted income from continuing operations per common share $0.56 $0.67 -16 % $4.75 $3.85 +23 %
Basic net income per common share $0.56 $0.67 -16 % $4.78 $5.08 -6 %
Diluted net income per common share $0.56 $0.67 -16 % $4.75 $5.06 -6 %
Weighted average shares outstanding 69,366 69,332 - 69,362 66,432 +4 %
(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 December 31 year ended
December 31		 see page
EARNINGS FROM OPERATIONS
Market Factors
Higher (lower) copper prices $1 ($35 ) 8
Lower zinc prices - (7 ) 8
Lower other metal prices (6 ) (9 ) 8
Lower smelter processing charges - 4 10
Foreign exchange - decreased operating costs 1 5 11
Operational Factors
Higher sales volume at Las Cruces, net of production costs 27 196 20
Higher (lower) sales volumes at our other mines (2 ) 11 8
Higher operating costs at our other mines (5 ) (9 ) 11
Higher depreciation due to Las Cruces production (3 ) (17 ) 12
Lower (higher) charge for mine rehabilitation at closed properties 6 (1 ) 11
Other 4 (1 )
Increase in operating earnings, compared to 2011 23 137
Higher taxes from higher income (9 ) (29 ) 14
Higher corporate development, exploration and administrative costs (10 ) (28 ) 13
Foreign exchange changes (11 ) (4 ) 13
Other (1 ) (2 )
Higher (lower) net income from continuing operations compared to 2011 (8 ) 74
Lower income from discontinued operation - Ok Tedi - (81 ) 14
Non-controlling interest - 1
Lower net income attributable to Inmet shareholders compared to 2011 ($8 ) ($6 )

Understanding our performance

Metal prices

The table below shows the average metal prices we realized this quarter and year to date.

The prices we realize include finalization adjustments - see Gross sales on page 8.

three months ended December 31 year ended December 31
2012 2011 change 2012 2011 change
Copper (per pound) $3.48 $3.51 -1 % $3.59 $3.84 -7 %
Zinc (per pound) $0.88 $0.87 +1 % $0.88 $0.97 -9 %

Copper

Copper prices on the London Metals Exchange (LME) averaged $3.61 per pound this year, or 10 percent lower than the average in 2011 of $4.00 per pound. Although average copper prices were lower in 2012, prices recovered substantially from the sharp decline that occurred in the fourth quarter of 2011. LME copper prices averaged $3.59 per pound in the fourth quarter, an increase of 6 percent over the comparative quarter of 2011.

Zinc

LME zinc prices averaged $0.89 per pound this quarter, an increase of 3 percent over the fourth quarter of 2011. For the year, LME zinc prices averaged $0.88 per pound, 11 percent lower than the average 2011 zinc price of $0.99 per pound.

Exchange rates

Exchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter and year to date compared to 2011.

three months ended
December 31		 year ended
December 31
2012 2011 change 2012 2011 change
Exchange rates
1 C$ to US$ $1.01 $0.98 +3 % $1.00 $1.01 -1 %
1 euro to US$ $1.30 $1.35 -4 % $1.29 $1.39 -7 %
1 US$ to Turkish lira TL 1.79 TL 1.83 -2 % TL 1.80 TL 1.65 +9 %

Compared to the same quarter last year, the value of the US dollar depreciated 3 percent relative to the Canadian dollar, and appreciated 4 percent relative to the euro and 2 percent relative to the Turkish lira.

Our earnings are affected by changes in foreign currency exchange rates when we:

  • translate the operating expenses of our euro-based operations from their functional currency to US dollars
  • revalue US dollars that we hold in cash at our operations whose functional currency is the euro
  • translate Çayeli's Turkish lira denominated costs into its functional currency (US dollars).

Prior to the adoption of the US dollar as Inmet's functional currency effective June 1, 2012, our earnings were affected by changes in foreign currency exchange rates when we revalued our US dollar denominated cash, bonds and other securities and senior unsecured notes held corporately at Inmet.

Treatment charges for zinc decreased this year

Treatment charges are one component of smelter processing charges. We also pay smelters for content losses and price participation.

The table below shows the average charges we realized this quarter and year to date. Treatment charges for zinc concentrates were lower this year than in 2011, reflecting agreements we have signed with customers.

three months ended December 31 year ended December 31
(US$) 2012 2011 change 2012 2011 change
Treatment charges
Copper (per dry metric tonne of concentrate) $54 $55 -2 % $58 $57 +2 %
Zinc (per dry metric tonne of concentrate) $193 $184 +5 % $184 $216 -15 %
Price participation
Copper (per pound) $0.00 $0.02 -100 % $0.00 $0.02 -100 %
Zinc (per pound) $0.00 ($0.02 ) +100 % $0.00 ($0.01 ) +100 %
Freight charges
Copper (per dry metric tonne of concentrate) $47 $58 -19 % $53 $51 +4 %
Zinc (per dry metric tonne of concentrate) $26 $11 +136 % $25 $22 +14 %

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 December 31 year ended December 31
(thousands) 2012 2011 change 2012 2011 change
Gross sales $259,868 $233,394 +11 % $1,123,977 $947,911 +19 %
Smelter processing charges and freight (26,155 ) (27,330 ) -4 % (113,996 ) (126,569 ) -10 %
Cost of sales:
Direct production costs (85,739 ) (75,962 ) +13 % (321,385 ) (292,893 ) +10 %
Inventory changes 4,549 6,780 -33 % (3,740 ) 645 -680 %
Other non-cash expenses (10,083 ) (20,995 ) -52 % (21,502 ) (24,427 ) -12 %
Depreciation (30,079 ) (26,835 ) +12 % (126,972 ) (105,269 ) +21 %
Earnings from operations $112,361 $89,052 +26 % $536,382 $399,398 +34 %

Significantly higher gross sales this year

three months ended December 31 year ended December 31
(thousands) 2012 2011 change 2012 2011 change
Gross sales by operation
Çayeli $58,742 $77,124 -24 % $358,964 $342,458 +5 %
Las Cruces 136,909 97,731 +40 % 538,981 345,568 +56 %
Pyhäsalmi 64,217 58,539 +10 % 226,032 259,885 -13 %
$259,868 $233,394 +11 % $1,123,977 $947,911 +19 %
Gross sales by metal
Copper $198,076 $177,344 +12 % $902,575 $674,116 +34 %
Zinc 36,533 33,307 +10 % 125,362 171,538 -27 %
Other 25,259 22,743 +11 % 96,040 102,257 -6 %
$259,868 $233,394 +11 % $1,123,977 $947,911 +19 %

Key components of the change in gross sales: increasing sales volumes at Las Cruces, lower realized copper prices for the year


(millions)		 three months ended
December 31		 year ended
December 31
Higher (lower) copper prices $1 ($35 )
Lower zinc prices - (7 )
Lower other metal prices (6 ) (9 )
Higher sales volumes at Las Cruces 35 221
Higher (lower) copper sales volumes at Çayeli (14 ) 44
Higher (lower) zinc sales volumes 3 (39 )
Higher other sales volumes 7 -
Other - 1
Higher gross sales, compared to 2011 $26 $176

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 negative finalization adjustments from third quarter shipments.

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

  • 20 million pounds of copper provisionally priced at US $3.59 per pound
  • 19 million pounds of zinc provisionally priced at US $0.94 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
January 2013 16 19
February 2013 4 -
Unsettled sales at December 31, 2012 20 19

Higher copper sales volumes, lower zinc sales volumes this year

Our sales volumes are directly affected by the amount of production from our mines and our ability to ship to our customers. This quarter, timing of shipments resulted in copper sales volumes lagging production volumes by a combined 1,900 tonnes as compared to 3,100 tonnes in the fourth quarter of 2011.

Sales volumes

three months ended December 31 year ended December 31
2012 2011 change 2012 2011 change
Copper contained in concentrate 8,300 10,300 -19 % 46,600 41,200 +13 %
Copper cathode (tonnes) 17,400 12,800 +36 % 68,800 42,000 +64 %
Total copper (tonnes) 25,700 23,100 +11 % 115,400 83,200 +39 %
Zinc (tonnes) 19,000 17,300 +10 % 65,100 84,400 -23 %
Pyrite (tonnes) 299,700 175,900 +70 % 852,500 809,200 +5 %

Production

three months ended December 31 year ended December 31
Inmet's share 2012 2011 change 2012 2011 change objective 2013
Copper (tonnes)
Çayeli 7,000 8,600 -19 % 31,400 28,700 +9 % 27,800 - 30,900
Las Cruces 17,300 14,100 +23 % 67,700 42,100 +61 % 68,500 - 72,000
Pyhäsalmi 3,300 3,500 -6 % 12,600 14,000 -10 % 12,000 - 13,400
27,600 26,200 +5 % 111,700 84,800 +32 % 108,300 - 116,300
Zinc (tonnes)
Çayeli 11,100 11,300 -2 % 40,700 48,100 -15 % 35,900 - 39,900
Pyhäsalmi 9,700 6,600 +47 % 25,600 32,300 -21 % 20,300 - 22,500
20,800 17,900 +16 % 66,300 80,400 -18 % 56,200 - 62,400
Pyrite (tonnes)
Pyhäsalmi 222,500 210,500 +6 % 891,700 804,900 +11 % 820,000

2012 production compared to target

Copper production slightly exceeded our target range as copper grades and recoveries at Çayeli exceeded expectations. Zinc production also exceeded our target range as zinc grades and recoveries at both Çayeli and Pyhäsalmi were higher than expected. We produced more pyrite at Pyhäsalmi than our target to meet the increased customer demand in China.

2012 production compared to 2011

Copper production was higher than in 2011 mainly because of higher production at Las Cruces. Zinc production was lower than in 2011 due to lower zinc grades at Çayeli and Pyhäsalmi. This quarter, zinc production was higher than the fourth quarter of 2011 due to higher grades and recoveries at Pyhäsalmi. Pyhäsalmi increased pyrite production this year to meet higher customer demand.

2013 outlook for sales

We use our production objectives to estimate our sales target.

We expect overall copper production in 2013 of between 108,300 tonnes and 116,300 tonnes, in line with 2012.

We expect zinc production volumes in 2013 to decrease by approximately 10 percent as zinc grades trend more towards overall reserve grades at Çayeli and Pyhäsalmi.

Our revenues are also affected by the metal prices we receive.

According to international research, copper supply should grow modestly in 2013. Production from the start-up of new operations and improvements at existing mines could be somewhat offset by the risk of mine underperformance, delays to existing or new development projects and possible labour disruptions. Continued strong demand is expected in China, coupled with continued economic recovery in Europe and the United States. The small expected market surplus should support copper prices in 2013 at a level similar to 2012.

For zinc, modest increases are expected in both market supply and demand with a contracting market surplus. These market trends should support average prices in 2013 above those of 2012.

Zinc smelter processing charges down, copper charges up this year

three months ended December 31 year ended December 31
(thousands) 2012 2011 change 2012 2011 change
Smelter processing charges and freight by operation
Çayeli $12,856 $14,373 -11 % $67,348 $69,424 -3 %
Las Cruces 861 351 +145 % 2,374 1,188 +100 %
Pyhäsalmi 12,438 12,606 -1 % 44,274 55,957 -21 %
$26,155 $27,330 -4 % $113,996 $126,569 -10 %
Smelter processing charges and freight by metal
Copper $8,425 $10,986 -23 % $49,439 $42,368 +17 %
Zinc 13,479 11,251 +20 % 46,296 63,500 -27 %
Other 4,251 5,093 -17 % 18,261 20,701 -12 %
$26,155 $27,330 -4 % $113,996 $126,569 -10 %
Smelter processing charges by type, and freight
Copper treatment and refining charges $2,923 $3,683 -21 % $17,847 $14,410 +24 %
Zinc treatment charges 7,101 6,199 +15 % 23,402 34,368 -32 %
Copper price participation - 416 -100 % - 1,542 -100 %
Zinc price participation (56 ) (648 ) -91 % (10 ) (1,872 ) -99 %
Content losses 8,199 8,930 -8 % 36,626 42,427 -14 %
Freight 7,796 8,449 -8 % 35,066 34,477 +2 %
Other 192 301 -37 % 1,065 1,217 -12 %
$26,155 $27,330 -4 % $113,996 $126,569 -10 %

For the year, and the quarter, changes in our copper treatment and refining charges are due to changes in copper-in concentrate sales volumes. Sales volumes also drove variations in zinc treatment charges at Çayeli and Pyhäsalmi, in addition to more favorable terms with smelters, reflecting a deficit in the zinc concentrate market at the time our 2012 contracts were negotiated.

2013 outlook for smelter processing charges and freight

We expect our costs for copper treatment and refining to be higher in 2013 than in 2012 as the global copper concentrate supply is expected to narrowly exceed smelter capacity in 2013, shifting the market to a slight surplus position towards the end of the year. We do not expect to pay copper price participation in 2013.

We expect total zinc smelter processing charges, including price participation, to be slightly higher than 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 2012.

Higher direct production costs and cost of sales

three months ended December 31 year ended December 31
(thousands) 2012 2011 change 2012 2011 change
Direct production costs by operation
Çayeli $25,758 $23,991 +7 % $94,330 $93,237 +1 %
Las Cruces 43,506 37,798 +15 % 167,142 142,941 +17 %
Pyhäsalmi 16,475 14,173 +16 % 59,913 56,715 +6 %
Total direct production costs 85,739 75,962 +13 % 321,385 292,893 +10 %
Inventory changes (4,549 ) (6,780 ) -33 % 3,740 (645 ) -680 %
Charges for mine rehabilitation and other non-cash charges 10,083 20,995 -52 % 21,502 24,427 -12 %
Total cost of sales (excluding depreciation) $91,273 $90,177 +1 % $346,627 $316,675 +9 %

Direct production costs

Direct production costs were $28 million higher this year ($10 million higher this quarter) mainly because higher production at Las Cruces increased variable electricity, consumables and royalty costs, somewhat offset by the impact of the weaker euro relative to the US dollar.

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 an additional $17 million this year for post-closure liabilities at our closed properties, including $10 million in the fourth quarter. $7 million of these costs related to the decrease in discount rates and the US dollar to Canadian dollar exchange rate we applied in determining the liabilities in the first nine months of 2012. Under IFRS, we are required to revalue our asset retirement obligations for changes in market risk-free interest rates - this discount rate decrease reflects the current low interest rate environment. Additionally, this quarter we recognized a $4 million increase in our estimated closure obligations at Troilus for ongoing treatment of tailings effluent for suspended solids and associated labour costs, as well as increased estimated cash flows required to remediate our other closed properties. In 2011, we recorded increased asset retirement obligations of $16 million: $5 million for closure liabilities at Troilus related to an increase in our estimated closure obligations for ongoing treatment of tailings effluent for suspended solids and associated labour costs and $11 million from a decrease in the discount rates we applied.

2013 outlook for cost of sales (excluding depreciation)

We expect consolidated direct production costs to be slightly higher in 2013 because higher production at Las Cruces will increase total variable costs, primarily electricity, consumables and royalties. We also expect slightly higher direct production costs at Çayeli in 2013 due to increased labour and electricity costs, and increased costs associated with higher expected tonnes processed in 2013 than in 2012.

Our budget for 2013 assumes our costs at Pyhäsalmi will be similar to 2012.

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 report in US dollars will also be affected by the value of the euro and the Turkish lira relative to the US dollar.

Additionally, changes in market risk-free interest rates could significantly increase or decrease our costs related to mine rehabilitation at our closed properties. At December 31, 2012, the interest rates we used to value our asset retirement obligations at our closed properties ranged from 1.1 percent to 2.4 percent.

Higher depreciation

three months ended December 31 year ended December 31
(thousands) 2012 2011 change 2012 2011 change
Depreciation by operation
Çayeli $4,702 $5,391 -13 % $24,692 $21,337 +16 %
Las Cruces 22,331 19,129 +17 % 92,037 74,931 +23 %
Pyhäsalmi 3,046 2,315 +32 % 10,243 9,001 +14 %
$30,079 $26,835 +12 % $126,972 $105,269 +21 %

Depreciation was higher this year than last mainly because of higher copper sales volumes at Las Cruces and Çayeli.

2013 outlook for depreciation

We expect depreciation to be higher in 2013 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.

Spending on corporate development and exploration

Corporate development and exploration costs were approximately $8 million higher than 2011, which mainly reflects our higher budget for 2012 to explore for world class deposits.

2013 outlook for corporate development and exploration

We expect spending on exploration in 2013 to be slightly higher than 2012, focusing on Mexico, Chile and Peru, where we have established field offices, the United States and on Cobre Panama to drill more exploration targets on the concession there. We will also continue exploring in areas around our existing operations.

General and administration

General and administration costs are largely for management remuneration, governance and strategy. Costs in 2012 were $19 million higher than 2011 mainly because stock-based compensation expense was $10 million higher. As a result of the decision to proceed with full construction of Cobre Panama, we recognized a non-cash stock-based compensation expense of $8 million this year on Long-Term Incentive Plan (LTIP) units issued in previous years that relate to the project. This expense represents the cumulative impact from the units' grant dates to December 31, 2012, on a 100 percent award basis, as no value was attributed to these units prior to a positive construction decision for Cobre Panama. See note 22c to our 2011 annual financial statements for more details on these units. The increase in general and administration expense also reflects increased human resources and other costs supporting the growth of the business and construction activities for Cobre Panama.

2013 outlook for general and administration

We expect general and administration costs in 2013 to be similar to those in 2012.

Investment and other income

three months ended
December 31		 year ended
December 31
(thousands) 2012 2011 2012 2011
Interest income $3,818 $4,668 $15,144 $16,099
Foreign exchange gain (loss) (19,608 ) (8,327 ) 6,270 10,446
Dividend and royalty income 759 1,460 2,988 2,944
Other (1,248 ) (1,684 ) (196 ) 259
($16,279 ) ($3,883 ) $24,206 $29,748

Foreign exchange gains and losses

We have foreign exchange gains or losses when we revalue certain foreign denominated assets and liabilities.

Our foreign exchange gains and losses were from:

three months ended
December 31		 year ended
December 31
(thousands) 2012 2011 2012 2011
Translation of US dollar cash held by Corporate prior to June 2012 inclusive of proceeds of notes offering - 5 27,338 (8,001 )
Translation of US dollar senior unsecured notes prior to June 2012 - - (16,884 ) -
Translation of US dollar bonds and other securities prior to June 2012 - (8,321 ) 4,330 11,232
Translation of US dollar cash held in euro-based entities (14,771 ) - (15,998 ) -
Translation of Cdn dollar cash held by Corporate subsequent to May 2012 (357 ) - 2,231 -
Translation of Cdn dollar bonds and other securities subsequent to May 2012 (2,067 ) - 7,912 -
Translation of other monetary assets and liabilities (2,413 ) (11 ) (2,659 ) 7,215
($19,608 ) ($8,327 ) $6,270 $10,446

We recognized net foreign exchange gains of $15 million this year from the revaluation of US dollar denominated cash, bonds and other securities and the senior unsecured notes held in Inmet prior to the change in its functional currency from the Canadian dollar to the US dollar effective June 1, 2012. As of this date, Inmet's US dollar-denominated monetary assets and liabilities were no longer revalued. Instead we began recognizing foreign exchange impacts on the revaluation of Inmet's Canadian dollar denominated monetary assets and liabilities with a gain of $10 million in 2012 on Canadian dollar denominated cash, bonds and other securities due to a weakening in the US dollar relative to the Canadian dollar. We recognized a foreign exchange loss of $2 million this quarter on these Canadian dollar denominated holdings.

Additionally, in 2012 we began holding our euro-based operations' excess cash in US dollars. We recognized $16 million in foreign exchange losses this year, including $15 million this quarter, on the revaluation of US denominated cash balances to euros due to a depreciation in the US dollar relative to the euro.

2013 outlook for investment and other income

Investment and other income is affected by the balance of our cash, bonds and other securities, and by interest rates and exchange rates. We are capitalizing interest income earned on funds from the proceeds of our senior unsecured notes (as we are capitalizing interest costs on the senior unsecured notes). At December 31, 2012, we held Cdn $218 million in cash, bonds and other securities subject to translation in our US dollar denominated accounts and US $599 million in cash subject to translation in our euro accounts.

Income tax expense

three months ended December 31 year ended December 31
(thousands) 2012 2011 change 2012 2011 change
Çayeli $3,983 $9,444 $32,923 $50,947
Las Cruces 18,371 8,097 72,495 22,788
Pyhäsalmi 8,013 6,612 23,951 30,710
Corporate and other 1,346 (1,662 ) 1,935 (2,374 )
$31,713 $22,491 $131,304 $102,071
Consolidated effective tax rate 45 % 33 % +8 % 28 % 28 % -

Our tax expense changes as our earnings change.

The consolidated effective tax rate was higher this quarter compared to the same quarter of 2011 mainly because of the improvement in earnings at Las Cruces, combined with its lower intergroup interest expense as it repaid a portion of its intergroup debt earlier this year. Additionally, we realized higher foreign exchange losses and other corporate costs this quarter for which there is no tax recovery.

2013 outlook for income tax expense

We expect the statutory tax rates at our operations in 2013 to remain the same as they were in 2012, unless a statutory tax rate change is enacted. We expect income tax expense to increase in 2013 due to higher income from operations mainly from higher sales volumes as Las Cruces, offset partly by lower expected copper sales volumes at Çayeli.

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 $81 million in 2011 includes net earnings of $17 million in January 2011, before the sale, and a gain on sale of $64 million net of withholding taxes. We paid Papua New Guinea withholding taxes of $27 million on the sale.

Results of our operations

2013 estimates

Our financial review by operation includes estimates for our 2013 operating earnings and operating cash flows. We have based these estimates on our 2013 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 year:

Copper price US $3.60 per pound
Zinc price US $1.00 per pound
euro to C$ exchange rate $1.25
Working capital Assume no changes

Çayeli

three months ended December 31 year ended December 31
2012 2011 change 2012 2011 change
Tonnes of ore milled (000's) 319 316 +1 % 1,218 1,195 +2 %
Tonnes of ore milled per day 3,500 3,400 +1 % 3,300 3,300 +2 %
Grades (percent) copper 3.0 3.5 -14 % 3.3 3.2 +3 %
zinc 5.0 5.3 -6 % 5.0 6.0 -17 %
Mill recoveries (percent) copper 74 79 -6 % 78 75 +4 %
zinc 69 67 +3 % 66 68 -3 %
Production (tonnes) copper 7,000 8,600 -19 % 31,400 28,700 +9 %
zinc 11,100 11,300 -2 % 40,700 48,100 -15 %
Cost per tonne of ore milled $81 $76 +7 % $77 $78 -1 %

Copper production exceeded target this year

Çayeli's mine production reached a record 1.21 million tonnes this year. The increase in mine production is the result of consistent ground support and rehabilitation performance, improved mine planning processes, including new scheduling software capable of quick scenario reviews, and capturing further benefits from the mine control system implemented in 2011.

Mill production this year reached a record of 1.22 million tonnes. Managing tailings density and coordination with the mine's pastefill requirements were key in achieving the higher throughput level this year. Copper production in 2012, at 31,400 tonnes, was better than in 2011 and exceeded the high end of our guidance range due to higher copper grades and recoveries. Zinc production was significantly lower than in 2011, consistent with our expectations, due to the lower zinc grade and associated lower recoveries.

Cost per tonne of ore milled was slightly lower than 2011 mainly because we processed more ore this year. Higher cost per tonne of ore milled this quarter reflects higher costs for electricity and a study Çayeli has undertaken to further increase its productivity.

The three-year labour agreement at Çayeli expired in May 2012. The negotiation of a new labour agreement, initially delayed due to changes to government labour regulations, is proceeding in early 2013 and we will make a strong effort to manage labour cost escalations to retain our cost competitiveness.

Our tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. In 2012 Çayeli became the subject of an audit of its 2008 to 2011 taxation years. On February 4, 2013, Çayeli received an assessment from the Turkish tax authorities adjusting the amount of withholding taxes to be remitted on dividends paid by Çayeli to its direct shareholder. The shares of Çayeli are owned by an indirect wholly-owned Spanish subsidiary of Inmet. The Turkish tax authorities have taken the position that Inmet and not the Spanish subsidiary is the beneficial owner of the dividends. The Turkish tax authorities are therefore taking the position that the withholding tax on the dividends should be the 15 percent domestic rate and not the reduced rate of 5 percent under the Turkey-Spain tax treaty. The dividends paid during the period assessed total TL 628 million. The assessed tax liability is TL 63 million (US $35 million) plus interest and penalties. Our view is that the relevant facts and circumstances support the position that Çayeli fulfilled its tax remittance obligations and Çayeli intends to vigorously dispute the assessment.

2013 outlook for production

In 2013, the production level should increase from 1.2 million tonnes to 1.25 million tonnes. The mine should benefit from the commissioning of the two new ore passes by the third quarter of 2013, the extension of a shotcrete slickline to the lower levels of the mine, improved lower mine infrastructure and the addition of stope production from a new mining block, all of which should ease pressure on existing production areas. Çayeli's ground conditions require constant monitoring and reinforcement, including the need to minimize any underground void area. Continued progress in meeting the challenges of poor ground conditions and planned operational efficiencies is aimed at reducing the risks associated with achieving our production plan.

Both copper and zinc recoveries should be lower in 2013, reflecting the increased proportions of metallurgically challenging ore types.

We expect to produce between 27,800 tonnes and 30,900 tonnes of copper and between 35,900 tonnes and 39,900 tonnes of zinc in 2013.

We expect operating costs in 2013 to be slightly higher than 2012 levels primarily due to increased manpower levels, increased electricity costs and increased mine department consumables.

Financial review

Lower copper sales volumes due to lower copper production volumes and timing of shipments this quarter

(millions unless three months ended
December 31		 year ended
December 31		 objective
otherwise stated) 2012 2011 2012 2011 2013
Sales analysis
Copper sales (tonnes) 5,100 6,900 33,200 27,500 29,400
Zinc sales (tonnes) 10,000 9,900 40,000 50,000 37,900
Gross copper sales $36 $53 $258 $214 $233
Gross zinc sales 19 19 77 101 84
Other metal sales 4 5 24 27 17
Gross sales 59 77 359 342 334
Smelter processing charges and freight (13 ) (14 ) (67 ) (69 ) (74 )
Net sales $46 $63 $292 $273 $260
Cost analysis
Tonnes of ore milled (thousands) 319 316 1,218 1,195 1,250
Direct production costs ($ per tonne) $81 $76 $77 $78 $81
Direct production costs $26 $24 $94 $93 $101
Change in inventory (4 ) (3 ) 2 (1 ) -
Depreciation and other non-cash costs 8 9 33 26 32
Operating costs $30 $28 $129 $118 $133
Operating earnings $16 $35 $163 $155 $127
Operating cash flow $64 $8 $170 $152 $120

The objective for 2013 uses the assumptions listed on page 15.

The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.

(millions) three months ended
December 31		 Year ended
December 31
Lower metal prices ($5 ) ($8 )
Higher (lower) copper sales volumes (11 ) 34
Lower zinc sales volumes - (11 )
Higher smelter processing charges and freight - 1
Higher operating costs (2 ) (1 )
Lower (higher) depreciation 1 (3 )
Other (2 ) (4 )
Higher (lower) operating earnings, compared to 2011 (19 ) 8
Change in tax expense because of foreign exchange changes in Çayeli's Turkish lira accounts 2 13
Changes in working capital (see note 17 on page 52) 72 (8 )
Higher depreciation (1 ) 3
Other 2 2
Higher operating cash flow, compared to 2011 $56 $18

Capital spending

three months ended December 31 year ended December 31 objective
(thousands) 2012 2011 change 2012 2011 change 2013
Capital spending $8,300 $3,400 +144 % $17,500 $12,700 +38 % $18,000

We spent $18 million in capital this year to begin construction of a pair of new ore passes, add to the underground mobile fleet, improve underground pastefill and water drainage infrastructure, replace the surface concrete batch plant, and continue mine development. In 2011 we spent $13 million to engineer the new ore passes, purchase mobile equipment, install column flotation cells and a conveyor dust collection system in the mill, add surface water runoff capacity, and continue our mine development.

2013 outlook for capital spending

We expect to spend $18 million on capital in 2013, including $6 million on mine development and $5 million to complete the upgrade of our ore pass system to address deterioration that has accumulated over time from normal abrasion.

Las Cruces

three months ended December 31 year ended December 31
(100 percent) 2012 2011 change 2012 2011 change
Tonnes of ore processed (000's) 276 231 +19 % 1,082 776 +39 %
Copper grades (percent) 6.9 6.9 - 7.1 6.5 +9 %
Plant recoveries (percent) 90 86 +5 % 88 84 +5 %
Cathode copper production (tonnes) 17,300 14,100 +23 % 67,700 42,100 +61 %
Cost per pound of cathode produced $1.14 $1.21 -6 % $1.12 $1.54 -27 %

Plant production consistently at or above design capacity

2012 was a year of significant accomplishments for Las Cruces with plant production averaging the design capacity of 6,000 tonnes of copper cathode for the last 9 months of the year. This production level was reached following a shutdown in March to remove and re-align the ball mill gearing as well as to make numerous operating improvements to improve process flows. Las Cruces produced 17,300 tonnes of copper cathode in this quarter of 2012, with a three day maintenance shutdown, and achieved plant recoveries of 90 percent.

The plant reliability increased in all areas during 2012 with stable reactor and agitator performance and further improvements to crushing, conveying and grinding. In all, 12 days of planned downtime were required for ongoing plant maintenance compared to our original plan of 20 days. Overall copper recoveries were 88 percent in 2012, an improvement from 84 percent in 2011 due to the full implementation of the leach feed surge tank with oxygen addition. Plant feed grades averaged 7.1 percent during the year, compared to 6.5 percent in 2011.

Las Cruces production of 67,700 tonnes of copper cathode this year was significantly higher than 42,100 tonnes in 2011 as a result of process improvements and came within 1.5 percent of the high end of our guidance range.

Cost per pound of copper produced was significantly lower than in 2011 due to higher production volumes.

2013 outlook for production

In 2013, we will concentrate on reducing recovery losses downstream of the leaching reactors that have increased with the increase in copper cathode production and due to operating with process solutions that contain more copper.

We expect to produce between 68,500 tonnes and 72,000 tonnes copper cathode in 2013. The plant will be tested at higher ore throughput and lower grade to assess the effects on plant performance before we enter into lower copper grade areas of the mine that we expect in 2014.

We expect cost per pound of copper in 2013 to be similar to 2012 levels.

Financial review

Higher sales volumes due to higher production

(millions unless three months ended
December 31		 year ended
December 31		 objective
otherwise stated) 2012 2011 2012 2011 2013
Sales analysis
Copper sales (tonnes) 17,400 12,800 68,900 42,000 70,300
Gross copper sales $137 $98 $539 $345 $562
Smelter processing charges and freight (1 ) - (2 ) (1 ) (3 )
Net sales $136 $98 $537 $344 $559
Cost analysis
Pounds of copper produced (millions) 38 31 149 93 155
Direct production costs ($ per pound) $1.14 $1.21 $1.12 1.54 $1.11
Direct production costs $43 38 $167 $143 $172
Change in inventory - (3 ) 2 1 -
Depreciation and other non-cash costs 20 23 89 78 93
Operating costs $63 $58 $258 $222 $265
Operating earnings $73 $40 $279 $122 $294
Operating cash flow $50 $44 $320 $188 $386

The objective for 2013 uses the assumptions listed on page 15.

The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.

(millions) three months ended
December 31		 year ended
December 31
Higher (lower) copper prices, denominated in US dollars $4 ($28 )
Higher copper sales volumes 32 220
Higher smelter processing charges and freights (1 ) (1 )
Higher operating costs in base currency (7 ) (35 )
Foreign exchange - decreased operating costs 2 13
Higher depreciation (3 ) (17 )
Other 6 5
Higher operating earnings, compared to 2011 33 157
Changes in working capital (see note 17 on page 52) (29 ) (42 )
Change in depreciation 3 17
Other (1 ) -
Higher operating cash flow, compared to 2011 $6 $132

Capital spending

three months ended December 31 year ended December 31 objective
(thousands) 2012 2011 change 2012 2011 change 2013
Capital spending $18,000 $9,700 +86 % $43,200 $51,900 -17 % $49,000

We spent $43 million this year mainly on mine development, tailings facility expansion and land purchase. In 2011, we spent $52 million mainly for mine development, tailings facility expansion and plant improvements.

2013 outlook for capital spending

We expect to spend $49 million on capital projects in 2013. The largest expenditures should be for mine development ($22 million), tailings facility expansion ($5 million), debottlenecking ($8 million) and other plant improvement projects.

Pyhäsalmi

three months ended December 31 year ended December 31
2012 2011 change 2012 2011 change
Tonnes of ore milled (000's) 351 348 +1 % 1,384 1,386 -
Tonnes of ore milled per day 3,800 3,800 +1 % 3,800 3,800 -
Grades (percent) copper 1.0 1.1 -9 % 1.0 1.1 -9 %
zinc 3.0 2.1 +43 % 2.0 2.6 -23 %
sulphur 41 43 -5 % 42 42 -
Mill recoveries (percent) copper 97 95 +2 % 96 96 -
zinc 93 90 +3 % 92 91 +1 %
Production (tonnes) copper 3,300 3,500 -6 % 12,600 14,000 -10 %
zinc 9,700 6,600 +47 % 25,600 32,300 -21 %
pyrite 222,500 210,500 +6 % 891,700 804,900 +11 %
Cost per tonne of ore milled $47 $41 +15 % $43 $41 +5 %

Lower grades this year in-line with annual objectives

Pyhäsalmi continued its strong performance in 2012, processing 1.4 million tonnes of ore and achieving copper recoveries of 96 percent and zinc recoveries of 92 percent. Backfill supply was reliable and the underground open void volume was maintained below planned levels.

Both copper and zinc production were at the high end of our guidance range but lower than in 2011, as expected, because of lower grades in the areas we mined. A record 891,700 tonnes of pyrite concentrate was produced this year to meet higher customer demand.

Operating costs were higher this year than they were in 2011 due to higher labour, consumables and contractor costs, and due to the incremental costs associated with producing more pyrite.

2013 outlook for production

Pyhäsalmi expects to mine 1.4 million tonnes of approximately 1 percent copper and 1.7 percent zinc in 2013, and produce between 12,000 tonnes and 13,400 tonnes of copper and 20,300 tonnes and 22,500 tonnes of zinc. Zinc production should be lower than it was in 2012 as we expect a decrease in zinc grades in 2013.

Pyhäsalmi expects to produce and sell 820,000 tonnes of pyrite in 2013.

Operating costs are expected to remain at levels consistent with 2012.

Financial review

Lower earnings because of lower sales volumes and realized metal prices this year

(millions unless three months ended
December 31		 year ended
December 31		 objective
otherwise stated) 2012 2011 2012 2011 2013
Sales analysis
Copper sales (tonnes) 3,200 3,400 13,400 13,700 12,700
Zinc sales (tonnes) 9,000 7,400 25,100 34,400 21,400
Pyrite sales (tonnes) 299,700 175,900 852,500 809,200 820,000
Gross copper sales $25 $27 $106 $114 $101
Gross zinc sales 18 14 48 70 47
Other metal sales 21 18 72 76 61
Gross sales 64 59 226 260 209
Smelter processing charges and freight (12 ) (13 ) (44 ) (56 ) (42 )
Net sales 52 $46 $182 $204 $167
Cost analysis
Tonnes of ore milled (thousands) 351 348 1,384 1,386 1,370
Direct production costs ($ per tonne) $47 $41 $43 $41 $42
Direct production costs $16 $14 $60 $57 $58
Change in inventory - (1 ) - (1 ) -
Depreciation and other non-cash costs 4 3 11 9 12
Operating costs $20 $16 $71 $65 $70
Operating earnings $32 $30 $111 $139 $97
Operating cash flow $28 $23 $97 $114 $84

The objective for 2013 uses the assumptions listed on page 15.

The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.


(millions)		 three months ended
December 31		 year ended
December 31
Lower copper prices $ - ($6 )
Higher (lower) zinc prices 1 (3 )
Higher (lower) zinc sales volumes 3 (11 )
Lower copper sales volumes (2 ) (5 )
Higher (lower) other metal sales 3 (3 )
Lower smelter processing prices and freight 1 4
Higher operating costs in base currency (3 ) (8 )
Foreign exchange - decreased operating costs 1 5
Other (2 ) (1 )
Higher (lower) operating earnings, compared to 2011 2 (28 )
Change in tax expense (1 ) 7
Changes in working capital (see note 17 on page 52) 3 5
Other 1 (1 )
Higher (lower) operating cash flow, compared to 2011 $5 ($17 )

Capital spending

three months ended December 31 year ended December 31 objective
(thousands) 2012 2011 change 2012 2011 change 2013
Capital spending $2,600 $1,900 +37 % $8,600 $7,000 +23 % $8,000

2013 outlook for capital spending

Capital spending of $8 million in 2013 will primarily be to replace underground mobile equipment, upgrade the pyrite flotation cleaner cells and flotation air blower system, and improve the reclaim water system.

Status of our development project

Cobre Panama

Construction progress

For a visual update on our construction progress, we invite you to visit our photo gallery on Inmet's web site at www.inmetmining.com.

At December 31, 2012, total construction was 9.3 percent completed compared to a planned completion percentage of 10.9 percent. We made the following advancements in the project's development this quarter:

Infrastructure

  • Our Engineering, Procurement and Construction Management (EP+CM) contractor, Joint Venture Panama (JVP), progressed with detailed engineering and procurement, earthworks and ground preparation for camps and road construction. We began the commissioning of the mine site's camp and general pioneering work is progressing well, including development work on the quarry and coastal road construction.
  • Progress at the port site in Punta Rincon included completion of the jack-up barges allowing safe mooring of barges at the port site, and the mobile crusher allowing rock production to commence at the port site. The camp platform at the port site was completed in early 2013.

Power plant

  • Our Engineering, Procurement and Construction (EPC) contractor, SK Engineering and Construction, progressed with detailed engineering and procurement activities, and with planning. Geotechnical work has started and the fabrication of long-lead equipment continued as planned.

Process plant

  • We completed our evaluation of process plant bids and awarded the contract for detailed engineering and procurement services to Joint Venture Panama in late 2012. Upon satisfactory advancement of detailed engineering and procurement of certain equipment, we expect to award the contract for construction of the process plant in the third quarter of 2013.

MPSA and its contractors' workforce comprise more than 90 percent local residents from the Provinces of Cocle and Colon, Panama. The combined construction workforce is expected to increase to more than 9,000 people by the end of 2014.

Our one-team approach for safety and health execution on the project has led to the current lost-time injury frequency of less than 0.23 injuries per 200,000 work hours worked since the Full Notice to Proceed was issued in May 2012.

Capital spending

The following table provides a breakdown of capital expenditures on a 100 percent basis.

three months ended
December 31		 year ended
December 31		 objective
(US$ millions) 2012 2011 2012 2011 2013
Capital spending since issuance of full notice to proceed (FNTP) $243 $- $593 $- $2,147
Interest paid on senior unsecured notes 70 - 70 - 169
Changes in working capital - - (81 ) (5 ) (75 )
Capital spending prior to FNTP - 42 $131 134 -
Capital spending in the consolidated statements of cash flows $313 $42 $713 $129 $2,241

We expect completion to take approximately 44 months from the point we issued Full Notice to Proceed. The schedule below provides the expected timing of capital spending by year.

(US$ millions) Total expenditures (100% basis) Inmet's
share after Stream		 Franco-Nevada's
Stream funding		 KPMC's
20% share
Cumulative spending at December 31, 2012 $593 $313 $- $280(1)
Future capital spending:
2013 2,147 1,435 283 429
2014 2,527 1,516 506 505
2015 914 520 211 183
Total direct costs $6,181 $3,784 $1,000 $1,397
(1) Includes KPMC's $161 million payment to acquire a 20% interest in MPSA, which increased KPMC's share of total project funding to $1.4 billion and reduced Inmet's share by an equal and offsetting amount.

Capital commitments

Since construction commenced in May 2012, contracts have been awarded for mass earthworks and quarry development at both the mine and port sites, the tailings management facility, the coastal road joining the mine to the port, permanent and temporary camp construction, the port causeway and commodity berth, infrastructure and the power plant, detailed engineering and procurement of certain equipment for the process plant, the mobile mine equipment fleet, fuel supply, construction camp catering and the mine pre-stripping. The total value of commitments that MPSA has entered into since the start of full construction is approximately $4.1 billion, representing 67 percent of estimated capital expenditures. MPSA expects to award the construction contract for the mineral processing plant during the third quarter of 2013.

Funding plan

The table below outlines the total project funding plan as at December 31, 2012.


(US$ millions)		 Total expenditures
(100% basis)
Total construction budget for Cobre Panama $6,181
Less: Cumulative project funding at December 31, 2012
Inmet's share (400 )
Attributable to non-controlling interest (KPMC) (261 )
Cumulative funding to date (661 )
Less: Future funding
Attributable to precious metal stream partner (Franco-Nevada) (1,000 )
Attributable to non-controlling interest (KPMC) (1,136 )
Inmet's share of future funding 3,384
Less: Cash on hand at December 31, 2012 (includes bonds and other securities and excludes MPSA cash) (3,531 )
Excess funding position at December 31, 2012 $147

Increase to Cobre Panama reserves and mine life

In December 2012, we announced an increase to proven and probable mineral reserves at Cobre Panama. The additional mineral reserves reflect the completion of work on resource definition, metallurgical recoveries, pit design and other engineering, allowing us to include the Balboa, Brazo and Botija Abajo mineralization in our mine plan for Cobre Panama. The additional mineral reserves increased Cobre Panama's total estimated contained copper by 27 percent to approximately 26 billion pounds, and increased estimated contained gold by 41 percent to approximately 7.3 million ounces. These additional mineral reserves have been integrated into a revised mine plan that extends the estimated mine life for Cobre Panama from 31 to 40 years.

2013 outlook for development

We plan to:

Infrastructure

  • Continue with mobilization of major contractors for bulk earthworks and complete the construction of platforms for the power plant and process plant.
  • Complete development of additional quarries to support construction activity at the port, mine site, tailings management facility and coastal road.
  • Continue the installation of temporary and permanent camps at the plant and port sites.
  • Award contracts for the construction of the remainder of infrastructure.
  • Develop and implement an operational readiness strategy to allow for the start of pre-stripping activities in 2014.

Power Plant

  • Progress with detailed engineering and procurement for the power plant and geotechnical investigation work.
  • Begin construction activities for the power plant following site capture.

Process Plant

  • Complete detailed engineering, procurement of equipment and award the contract for construction of the process plant.
  • Start construction activities for the process plant following site capture.

Other

  • 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 develop and implement, with the assistance of our EPC/M contractors, our one-team, project specific health & safety and environmental and social mitigation plans that are consistent with the Environmental and Social Impact Assessment and Inmet's Corporate Responsibility Standards and Procedures.
  • Continue to grow the strength of our management team and human resources dedicated to 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
December 31		 year ended
December 31
(millions) 2012 2011 2012 2011
CASH FROM OPERATING ACTIVITIES
Çayeli $64 $8 $170 $152
Las Cruces 50 44 320 188
Pyhäsalmi 28 23 97 114
Corporate development and exploration not incurred by operations (6 ) (4 ) (22 ) (21 )
General and administration (10 ) (5 ) (37 ) (26 )
Realized foreign exchange gains (losses) on cash (15 ) - 14 (8 )
Other 6 5 1 (7 )
117 71 543 392
CASH FROM INVESTING AND FINANCING
Purchase of property, plant and equipment (342 ) (57 ) (786 ) (202 )
Purchase and maturity of bonds and other securities, net 44 13 (1,452 ) (226 )
Sale of 20 percent interest in Cobre Panama - - 161 -
Long-term debt borrowing 493 - 1,922 -
Funding from non-controlling shareholders 40 - 100 -
Issuance of common shares - - - 486
Dividends on common shares (7 ) (7 ) (14 ) (13 )
Foreign exchange on cash held in foreign currency 15 (23 ) 25 (5 )
Other (1 ) (4 ) (6 ) 3
242 (78 ) (50 ) 43
CASH FROM DISCONTINUED OPERATION (OK TEDI) - - - 297
Increase (decrease) in cash 359 (7 ) 493 732
Cash and short-term investments
Beginning of period 1,182 1,055 1,048 316
End of period $1,541 $1,048 $1,541 $1,048

Our available liquidity also includes $2,077 million of bonds and other securities ($607 million at December 31, 2011), providing a total of $3,618 billion in capital available to finance our growth strategy as at December 31, 2012.

OPERATING ACTIVITIES

Key components of the change in operating cash flows


(millions)		 three months ended
December 31		 year ended
December 31
Higher earnings from operations (see page 5) $23 $137
Add back higher depreciation included in earnings from operations 3 22
Lower income tax expense - 18
Higher corporate development and administrative costs (7 ) (12 )
Realized foreign exchange loss on cash held by Inmet Corporate (15 ) 22
Changes in working capital (see note 17 on page 52) 51 (38 )
Other (9 ) 2
Higher operating cash flow, compared to 2011 $46 $151

Operating cash flows this quarter and year to date were higher than in 2011 primarily due to higher earnings from operations before non-cash charges. The increase this quarter was also due to a reduction in net working capital, mainly due to the timing of income tax payments made by Pyhäsalmi, and payments received from Çayeli's customers.

This year, the increase in net working capital reflects higher accounts receivable at Las Cruces associated with higher copper cathode sales during 2012 and the timing of collections from customers.

2013 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 15), and the assumptions in Results of our operations (starting on page 15).

2013 estimated operating cash flow by operation


(millions)
Çayeli $120
Las Cruces 386
Pyhäsalmi 84
$590

INVESTING AND FINANCING

Capital spending

three months ended
December 31		 year ended
December 31		 objective
(millions) 2012 2011 2012 2011 2013
Çayeli $8 $3 $18 $13 $18
Las Cruces 18 10 43 52 49
Pyhäsalmi 3 2 9 7 8
Cobre Panama 313 42 713 129 2,241
Corporate and other - - 3 1 10
$342 $57 $786 $202 $2,326

Please see Results of our operations and Status of our development project for a discussion of actual results and our 2013 objectives. Capital spending this year was mainly for Cobre Panama.

Purchase and maturing of investments

In 2012, we invested $2.3 billion in US dollar-denominated bonds and other securities comprising US Treasury bonds, Canadian government and corporate bonds and Supranational bonds with credit ratings of A to AAA. The securities mature between 2013 and 2018 and have a weighted average annual yield to maturity of 0.31 percent. During the year, $840 million of securities matured. In 2011, we used most of the US dollar proceeds from the sale of Ok Tedi to buy $274 million in US Treasury bonds with AA credit ratings and $67 million of bonds matured.

Issuance of senior unsecured notes

On May 18, 2012, we issued $1.5 billion in senior unsecured notes, bearing a coupon rate of interest of 8.75 percent and maturing on June 1, 2020. The notes were priced at 98.584 percent of their face value, yielding proceeds of $1.43 billion net of the discount and transaction fees. On December 18, 2012, we issued an additional $0.5 billion of senior unsecured notes, bearing a coupon rate of interest of 7.5 percent and maturing in June 2021. The notes were priced at 100 percent of their face value, yielding proceeds of $493 million net of transaction fees. Interest is payable on the notes semi-annually on December 1 and June 1 of each year. As the proceeds will be used to fund the development of Cobre Panama, interest costs will be capitalized to project assets during the construction period.

These notes are unconditionally guaranteed on a senior unsecured basis by certain Inmet subsidiaries. The notes contain certain customary covenants and restrictions for a financing instrument of this type.

Sale of 20 percent interest in Cobre Panama

On April 25, 2012, KPMC completed its acquisition of a 20 percent interest in MPSA. KPMC acquired its interest for $161 million in cash. Together with the 20 percent of funding of the estimated $6.2 billion of development costs for Cobre Panama it will provide during the construction period, this amounts to total funding of $1.4 billion. During 2012, KPMC provided $100 million of this funding ($40 million this quarter).

Issuance of common shares - 2011

In May 2011, a subsidiary of Temasek Holdings (Private) Ltd. exchanged its subscription receipts for 7.78 million Inmet common shares and we received cash of $486 million.

Cash from discontinued operation - 2011

In January 2011, we sold our 18 percent equity interest in Ok Tedi for net proceeds of $297 million (after Papua New Guinea withholding taxes).

2013 outlook for investing and financing

Capital spending

We expect capital spending to be $2,326 million in 2013. The more significant items include:

• $2,241 million at Cobre Panama to advance construction activities on the project
• $49 million at Las Cruces, including $22 million for mine development, as well as other capital projects including a tailings facility expansion and certain plant improvements.

Sale of precious metal stream to Franco-Nevada

In August 2012, we announced the completion of a precious metals stream agreement with Franco-Nevada. Under the terms of the agreement, a wholly-owned subsidiary of Franco-Nevada will provide a $1 billion deposit which will be used to fund a portion of Cobre Panama project capital costs. The deposit will become available after Inmet's funding since issuing a FNTP reaches $1 billion (expected by mid-2013) and will be provided pro-rata on a 1:3 ratio with Inmet's subsequent funding contributions.

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 December 31, 2012, we had $3,618 million in total funds, including $1,541 million of cash and short-term investments and $2,077 million invested in bonds and other securities.

Cash

At December 31, 2012 our cash and short-term investments of $1,541 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 high 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 December 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 4 on page 45 in the consolidated financial statements for more details about where our cash is invested.

Bonds and other securities

We hold a portfolio of bonds and other securities to provide better yields while minimizing our investment risk. As at December 31, 2012, our portfolio was $2,077 million. The portfolio includes:

  • 34 percent US Treasury bonds
  • 25 percent Canadian and provincial government bonds
  • 37 percent corporate bonds
  • 4 percent Supranational bonds.

The securities mature between 2013 and 2018.

Restricted cash

Our restricted cash balance of $78 million as at December 31, 2012 included:

  • $20 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
  • $1 million for future reclamation at Pyhäsalmi.

COMMON SHARES

Common shares outstanding as of December 31, 2012 and February 21, 2013 69,365,748
Deferred share units outstanding as of December 31, 2012 109,022
(redeemable on a one-for-one basis for common shares)

Additional risk factor

We have significantly increased our cash balance following the issuance of our senior unsecured notes for the construction of Cobre Panama. For U.S. federal income tax purposes a non-U.S. corporation may be classified as a "passive foreign investment company" (PFIC) for U.S. federal income tax purposes in any taxable year in which either (1) at least 75 percent of its gross income is passive income, or (2) on average at least 50 percent of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income. Based on our analysis, we do not believe that we are a PFIC in the current taxation year. The methods used to determine income and assets for the purpose of this test are subject to interpretation and judgement, and based on the manner in which fair value is determined, the analysis could show that we are a PFIC. If we are classified as a PFIC, U.S. taxpayers that hold our common shares could be subject to adverse U.S. federal income tax consequences, including increased tax liabilities and possible additional reporting requirements. As the determination of PFIC status is made annually at the close of each tax year and is dependent on a number of assumptions, there can be no assurance that Inmet is not a PFIC in the current year or will not become a PFIC in any future tax year. U.S. taxpayers that hold our common shares are urged to consult their tax advisors concerning the potential U.S. federal income tax consequences of holding common shares if Inmet were considered a PFIC in any year.

Supplementary financial information

Pages 32 and 33 include 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), and have an 80 percent interest in the Cobre Panama development project, currently in construction.

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

Fourth quarter conference call

Will be held on

You can also dial in by calling

  • Local or international: +1.416.340.8530
  • Toll-free within North America: +1.877.240.9772

Starting at approximately 10:30 a.m. (ET) Friday, February 22, 2013, a conference call replay will be available

  • Local or international: +1.905.694.9451 passcode 7813798
  • Toll-free within North America: +1.800.408.3053 passcode 7813798
INMET MINING CORPORATION
Supplementary financial information
Cash costs
2012 For the year ended December 31
per pound of copper
LAS
ÇAYELI CRUCES PYHÄSALMI TOTAL
(US dollars)
Direct production costs$1.27 $1.08 $2.18 $1.26
Royalties and variable compensation0.11 0.06 - 0.07
Smelter processing charges and freight0.97 0.02 0.95 0.39
Metal credits(1.47)- (3.81) (0.84)
Cash cost$0.88 $1.16 ($0.68) $0.88
2011 For the year ended December 31
per pound of copper
LAS
ÇAYELI CRUCES PYHÄSALMI TOTAL
(US dollars)
Direct production costs$1.35 $1.55 $1.93 $1.54
Royalties and variable compensation$0.18 0.07 - 0.10
Smelter processing charges and freight$1.48 0.01 1.16 0.70
Metal credits(2.41)- (4.02) (1.48)
Cash cost$0.60 $1.63 ($0.93) $0.86
Reconciliation of cash costs to statements of earnings
2012 For the year ended December 31
per pound of copper
(millions of US dollars, except where otherwise noted)ÇAYELI LAS
CRUCES		 PYHÄSALMI TOTAL
GAAP referencepage 17 page 20 page 22
Direct production costs$94 $167 $60 $321
Smelter processing charges and freight67 2 44 113
By product sales(101)- (120) (221)
Adjust smelter processing and freight, and sales to production basis1 - (3) (2)
Operating costs net of metal credits$61 $169 ($19) $211
Inmet's share of production (000's)69,200 149,200 27,800 246,200
Cash cost (US dollars)$0.88 $1.16 ($0.68) $0.88
2011 For the year ended December 31
per pound of copper
(millions of US dollars, except where otherwise noted)ÇAYELI LAS
CRUCES		 PYHÄSALMI TOTAL
GAAP referencepage 17 page 20 page 22
Direct production costs$93 $143 $57 $293
Smelter processing charges and freight69 1 56 126
By product sales(128)- (146) (274)
Adjust smelter processing and freight, and sales to production basis4 - 4 8
Operating costs net of metal credits$38 $144 ($29) $153
Inmet's share of production (000's)63,300 92,900 30,800 187,000
Cash cost (US dollars)$0.60 $1.63 ($0.93) $0.86
INMET MINING CORPORATION
Supplementary financial information
Cash costs
2012 For the three months ended December 31
per pound of copper
ÇAYELI LAS
CRUCES		 PYHÄSALMI TOTAL
(US dollars)
Direct production costs $1.59 $1.11 $2.30 $1.37
Royalties and variable compensation 0.08 0.05 - 0.05
Smelter processing charges and freight 1.03 0.02 $1.21 0.42
Metal credits (1.68) - ($4.71) (0.99)
Cash cost $1.02 $1.18 ($1.20) $0.85
2011 For the three months ended December 31
per pound of copper
LAS
ÇAYELI CRUCES PYHÄSALMI TOTAL
(US dollars)
Direct production costs $1.15 $1.19 $1.86 $1.27
Royalties and variable compensation 0.09 0.05 - 0.06
Smelter processing charges and freight 1.13 0.01 0.92 0.50
Metal credits (1.71) - (3.36) (1.01)
Cash cost $0.66 $1.25 ($0.58) $0.82
Reconciliation of cash costs to statements of earnings
2012 For the three months ended December 31
per pound of copper
(millions of US dollars, except where otherwise noted) ÇAYELI LAS
CRUCES		 PYHÄSALMI TOTAL
GAAP reference page 17 page 20 page 22
Direct production costs $26 $43 $16 $85
Smelter processing charges and freight 13 1 12 26
By product sales (23) - (39) (62)
Adjust smelter processing and freight, and sales to production basis - - 2 2
Operating costs net of metal credits $16 $44 ($9) $51
Inmet's share of production (000's) 15,500 38,200 7,200 60,900
Cash cost (US dollars) $1.02 $1.18 ($1.20) $0.85
2011 For the three months ended December 31
per pound of copper
(millions of US dollars, except where otherwise noted) ÇAYELI LAS
CRUCES		 PYHÄSALMI TOTAL
GAAP reference page 17 page 20 page 22
Direct production costs $24 $38 $14 $76
Smelter processing charges and freight 14 - 13 27
By product sales (24) - (32) (56)
Adjust smelter processing and freight, and sales to production basis (1) - 1 -
Operating costs net of metal credits $13 $38 ($4) $47
Inmet's share of production (000's) 19,000 31,100 7,700 57,800
Cash cost (US dollars) $0.66 $1.25 ($0.58) $0.82
INMET MINING CORPORATION
Quarterly review
(unaudited)
Latest Four Quarters
(thousands of US dollars, except per share amounts) 2012
Fourth
quarter		 2012(2)
Third
quarter		 2012
Second
quarter		 2012(1)
First
quarter
STATEMENTS OF EARNINGS
Gross sales $259,868 $327,187 $251,395 $285,527
Smelter processing charges and freight (26,155) (30,023) (28,480) (29,338)
Cost of sales (excluding depreciation) (91,273) (91,096) (84,634) (79,624)
Depreciation (30,079) (37,633) (29,193) (30,067)
112,361 168,435 109,088 146,498
Corporate development and exploration (8,620) (7,905) (10,290) (8,801)
General and administration (14,896) (12,982) (15,899) (9,745)
Investment and other income (16,279) 1,645 45,103 (6,263)
Finance costs (2,632) (2,463) (2,379) (2,596)
Income tax expense (31,713) (42,135) (31,444) (26,012)
Income from continuing operations $38,221 $104,595 $94,179 $93,081
Net income attributable to:
Inmet equity holders $38,775 $104,897 $94,458 $93,081
Non-controlling interest (554) (302) (279) -
$38,221 $104,595 $94,179 $93,081
Net Income per share
Basic $0.56 $1.51 $1.36 $1.35
Diluted $0.56 $1.50 $1.35 $1.34
Previous Four Quarters
(thousands of US dollars, except per share amounts) 2011(1)
Fourth
quarter		 2011(1)
Third
quarter		 2011(1)
Second
quarter		 2011(1)
First
quarter
STATEMENTS OF EARNINGS
Gross sales $233,394 $253,432 $214,894 $246,191
Smelter processing charges and freight (27,330) (35,865) (32,793) (30,581)
Cost of sales (excluding depreciation) (90,177) (78,563) (71,302) (76,633)
Depreciation (26,835) (26,452) (25,802) (26,180)
89,052 112,552 84,997 112,797
Corporate development and exploration (6,333) (4,539) (4,417) (12,984)
General and administration (7,487) (9,669) (7,995) (8,155)
Investment and other income (3,883) 34,640 4,581 (5,590)
Finance costs (2,314) (2,301) (2,310) (2,257)
Income tax expense (22,491) (32,696) (20,588) (26,296)
Income from continuing operations 46,544 97,987 54,268 57,515
Income from discontinued operation (net of taxes) - - 80,786
$46,544 $97,987 $54,268 $138,301
Net income attributable to:
Inmet equity holders $46,544 $97,987 $54,268 $138,301
Non-controlling interest - - - -
$46,544 $97,987 $54,268 $138,301
Income from continuing operations per share
Basic $0.67 $1.41 $0.83 $0.94
Diluted $0.67 $1.41 $0.83 $0.93
Income from discontinuing operations per share
Basic $- $- $- $1.32
Diluted $- $- $- $1.31
Net Income per share
Basic $0.67 $1.41 $0.83 $2.26
Diluted $0.67 $1.41 $0.83 $2.24
1. Information restated from previously reported Canadian dollar amounts to US dollar amounts at May 31, 2012 exchange rate of US $0.97 per Canadian dollar.
2. Investment and other income in the third quarter has been recast as a result of a reassessment of the embedded derivative relating to the senior unsecured notes prepayment option as being closely related at inception. The net effect was a decrease to investment and other income for the third quarter of 2012 and an equivalent decrease in net income in that period.
INMET MINING CORPORATION
Consolidated statements of financial position
(Unaudited)
As at balance sheet date
(thousands of US dollars)
Note reference		 December 31,
2012		 December 31,
2011(1)		 December 31,
2010(1)
Assets
Current assets:
Cash and short term investments4 $1,541,219 $1,048,457 $316,045
Restricted cash5 1,291 784 597
Accounts receivable 160,387 101,867 115,628
Inventories 92,399 87,654 69,860
Current portion of bonds and other securities6 883,599 175,921 52,201
Assets held for sale - - 308,935
2,678,895 $1,414,683 863,266
Restricted cash5 77,050 69,538 67,831
Property, plant and equipment 2,632,297 1,772,766 1,680,858
Bonds and other securities6 1,193,088 430,787 311,091
Deferred income tax assets 895 317 8,444
Other assets 1,643 1,380 2,261
Total assets $6,583,868 $3,689,471 $2,933,751
Liabilities
Current liabilities:
Accounts payable and accrued liabilities7 282,676 138,596 $132,009
Provisions8 20,041 13,087 17,106
Current portion of long term debt9 17,870 - -
Liabilities associated with assets held for sale - - 108,338
320,587 $151,683 257,453
Long-term debt9 1,941,989 16,581 16,091
Provisions8 227,146 170,025 157,235
Other liabilities 18,243 17,156 17,541
Deferred income tax liabilities 104,099 28,351 12,127
Total liabilities 2,612,064 $383,796 460,447
Commitments and contingencies18
Equity
Share capital 1,541,773 1,541,324 1,054,927
Contributed surplus 64,825 64,629 64,028
Share based compensation10 21,896 8,256 6,334
Retained earnings 2,176,197 1,851,010 1,527,342
Accumulated other comprehensive loss11 (85,413) (159,544) (179,327)
Total equity attributable to Inmet equity holders $3,719,278 $3,305,675 2,473,304
Non-controling interest12 252,526 - -
Total equity $3,971,804 $3,305,675 $2,473,304
Total liabilities and equity $6,583,868 $3,689,471 $2,933,751
(1)refer to note 3 for effect of change in presentation currency to the US Dollar
(See accompanying notes)
INMET MINING CORPORATION
Segmented statements of financial position
(unaudited)


2012 As at December 31
CORPORATE
& OTHER

ÇAYELI

LAS
CRUCES

PYHÄSALMI
COBRE
PANAMA		 DISCONTINUED
OPERATIONS -
OK TEDI

TOTAL

(thousands of US dollars)
(Turkey)
(Spain)
(Finland)
(Panama)		 (Papua New
Guinea)
Assets
Cash and short-term investments$1,128,087 $148,678 $157,903 $22,071 $84,480 $- $1,541,219
Other current assets 894,911 41,529 148,250 51,823 1,163 - 1,137,676
Restricted cash 19,804 - 55,629 1,617 - - 77,050
Property, plant and equipment 3,764 134,389 852,955 70,166 1,571,023 - 2,632,297
Bonds and other securities 1,092,056 101,032 - - - - 1,193,088
Other non-current assets 1,466 1,072 - - - - 2,538
$3,140,088 $426,700 $1,214,737 $145,677 $1,656,666 $- $6,583,868
Liabilities
Current liabilities$61,204 $54,111 $59,288 $19,472 $126,512 $- $320,587
Long-term debt 1,941,989 - - - - - 1,941,989
Provisions 79,809 21,772 69,189 35,800 20,576 - 227,146
Other liabilities 681 - 17,562 - - - 18,243
Deferred income tax liabilities 889 - 91,594 11,616 - - 104,099
$2,084,572 $75,883 $237,633 $66,888 $147,088 $- $2,612,064
2011 As at December 31
CORPORATE
& OTHER

ÇAYELI

LAS
CRUCES

PYHÄSALMI
COBRE
PANAMA		 DISCONTINUED
OPERATIONS -
OK TEDI

TOTAL
(Papua New
(thousands of US dollars) (Turkey) (Spain) (Finland) (Panama) Guinea)
Assets
Cash and short-term investments$711,427 $133,215 $131,799 $46,109 $25,907 $- $1,048,457
Other current assets 183,715 44,728 83,926 51,893 1,964 - 366,226
Restricted cash 16,306 - 51,667 1,565 - - 69,538
Property, plant and equipment 1,196 137,736 869,308 66,103 698,423 - 1,772,766
Bonds and other securities 351,082 79,705 - - - - 430,787
Other non-current assets 1,262 435 - - - - 1,697
$1,264,988 $395,819 $1,136,700 $165,670 $726,294 $- $3,689,471
Liabilities
Current liabilities$21,305 $41,460 $53,152 $16,418 $19,348 $- $151,683
Long-term debt 16,581 - - - - - 16,581
Provisions 68,823 17,450 53,857 29,895 - - 170,025
Other liabilities 655 - 16,501 - - - 17,156
Deferred income tax liabilities - - 17,095 11,256 - - 28,351
$107,364 $58,910 $140,605 $57,569 $19,348 $- $383,796
2010 As at December 31
CORPORATE
& OTHER

ÇAYELI

LAS
CRUCES

PYHÄSALMI
COBRE
PANAMA		 DISCONTINUED
OPERATIONS -
OK TEDI

TOTAL
(thousands of US dollars)
(Turkey)
(Spain)
(Finland)
(Panama)		 (Papua New
Guinea)
Assets
Cash and short-term investments$51,493 $104,324 $57,961 $93,970 $8,297 $- $316,045
Other current assets 58,851 57,084 57,708 64,088 664 308,826 547,221
Restricted cash 16,368 - 49,883 1,580 - - 67,831
Property, plant and equipment 754 147,799 911,496 64,854 555,955 - 1,680,858
Bonds and other securities 248,288 62,803 - - - - 311,091
Other non-current assets 922 5,571 4,212 - - - 10,705
$376,676 $377,581 $1,081,260 $224,492 $564,916 $308,826 $2,933,751
Liabilities
Current liabilities$29,322 $38,393 $45,718 $27,994 $7,688 $108,338 $257,453
Long-term debt 16,091 - - - - - 16,091
Provisions 55,707 20,920 54,644 25,964 - - 157,235
Other liabilities 655 - 16,886 - - - 17,541
Deferred income tax liabilities 171 - - 11,956 - - 12,127
$101,946 $59,313 $117,248 $65,914 $7,688 $108,338 $460,447
INMET MINING CORPORATION
Consolidated statements of changes in equity
(unaudited)
Attributable to Inmet equity holders
(thousands of US dollars)Note
reference


Share
Capital
Retained
earnings
Contributed
surplus		Share based
compensation		 Accumulated
other
comprehensive
income (loss)
(note 11)

Total		 Non-
controlling
interest		Total
equity
Balance as at December 31, 2010 $1,054,927$1,527,342 $64,028$6,334 ($179,327)$2,473,304 $ -$2,473,304
Comprehensive income -337,100 -- 19,783 356,883 -356,883
Equity settled share-based compensation plans 198- 6011,922 - 2,721 -2,721
Dividends -(13,432)-- - (13,432)-(13,432)
Issuance of share capital 486,199- -- - 486,199 -486,199
Balance as at December 31, 2011 $1,541,324$1,851,010 $64,629$8,256 ($159,544)$3,305,675 $ -$3,305,675
Comprehensive income -331,211 -- 68,358 399,569 4,867404,436
Equity settled share-based compensation plans 449- 19613,640 - 14,285 -14,285
Dividends -(13,616)-- - (13,616)-(13,616)
Equity funding from non-controlling shareholder -- -- - - 100,000100,000
Sale of 20 percent interest in Cobre Panama12-7,592 -- 5,773 13,365 147,659161,024
Balance as at December 31, 2012 1,541,7732,176,197 64,82521,896 (85,413)$3,719,278 $252,526$3,971,804
INMET MINING CORPORATION
Consolidated statements of earnings
(unaudited)
Three Months
Ended
December 31		 Year Ended
December 31
(thousands of US dollars except per share amounts) reference 2012 2011(1) 2012 2011(1)
Gross sales $259,868 $233,394 $1,123,977 $947,911
Smelter processing charges and freight (26,155) (27,330) (113,996) (126,569)
Cost of sales (excluding depreciation) (91,273) (90,177) (346,627) (316,675)
Depreciation (30,079) (26,835) (126,972) (105,269)
Earnings from operations 112,361 89,052 536,382 399,398
Corporate development and exploration (8,620) (6,333) (35,616) (28,273)
General and administration (14,896) (7,487) (53,522) (33,306)
Investment and other income 13 (16,279) (3,883) 24,206 29,748
Finance costs 14 (2,632) (2,314) (10,070) (9,182)
Income before taxation 69,934 69,035 461,380 358,385
Income tax expense 15 (31,713) (22,491) (131,304) (102,071)
Income from continuing operations 38,221 46,544 330,076 $256,314
Income from discontinued operation (net of taxes) - - - 80,786
Net income 38,221 46,544 330,076 $337,100
Net income (loss) attributable to:
Inmet equity holders 38,775 46,544 331,211 $337,100
Non-controlling interests (554) - (1,135) -
38,221 46,544 330,076 $337,100
Earnings per common share 16
Income from continuing operations
Basic $0.56 $0.67 $4.78 $3.86
Diluted $0.56 $0.67 $4.75 $3.85
Income from discontinued operation
Basic $ - - $ - $1.22
Diluted $ - - $ - $1.21
Net income
Basic $0.56 $0.67 $4.78 $5.08
Diluted $0.56 $0.67 $4.75 $5.06
(1) refer to note 3 for effect of change in presentation currency to the US Dollar
(See accompanying notes)
INMET MINING CORPORATION
Segmented statements of earnings
(unaudited)


2012 For the year ended December 31
CORPORATE
& OTHER

ÇAYELI

LAS
CRUCES

PYHÄSALMI
COBRE
PANAMA		 DISCONTINUED
OPERATIONS -OK TEDI

TOTAL
(thousands of US dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea)
Gross sales $- $358,964 $538,981 $226,032 $- $- $1,123,977
Smelter processing charges and freight - (67,348) (2,374) (44,274) - - (113,996)
Cost of sales (excluding depreciation) (17,104) (104,045) (165,320) (60,158) - - (346,627)
Depreciation - (24,692) (92,037) (10,243) - - (126,972)
Earnings from operations (17,104) 162,879 279,250 111,357 - - 536,382
Corporate development and exploration (22,490) (1,347) (1,600) (4,368) (5,811) - (35,616)
General and administration (53,522) - - - - - (53,522)
Investment and other income 25,241 (524) 1,580 (1,727) (364) - 24,206
Finance costs (3,340) (1,155) (4,753) (726) (96) - (10,070)
Income tax expense (1,935) (32,923) (72,495) (23,951) - - (131,304)
Net income from continuing operations $(73,150) $126,930 $201,982 $80,585 $(6,271) $- $330,076
Income from discontinued operation (net of taxes) - - - - - - -
Net income (loss) $(73,150) $126,930 $201,982 $80,585 $(6,271) $- $330,076


2011 For the year ended December 31
CORPORATE
& OTHER

ÇAYELI

LAS
CRUCES

PYHÄSALMI
COBRE
PANAMA		 DISCONTINUED
OPERATIONS -OK TEDI

TOTAL
(thousands of US dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea)
Gross sales $- $342,458 $345,568 $259,885 $- $- $947,911
Smelter processing charges and freight - (69,424) (1,188) (55,957) - - (126,569)
Cost of sales (excluding depreciation) (16,190) (97,079) (147,076) (56,330) - - (316,675)
Depreciation - (21,337) (74,931) (9,001) - - (105,269)
Earnings from operations (16,190) 154,618 122,373 138,597 - - 399,398
Corporate development and exploration (20,590) (1,612) (435) (3,478) (2,158) - (28,273)
General and administration (33,306) - - - - - (33,306)
Investment and other income 20,074 7,521 1,686 447 20 - 29,748
Finance costs (3,720) (570) (4,027) (865) - - (9,182)
Income tax expense 2,374 (50,947) (22,788) (30,710) - - (102,071)
Net income from continuing operations $(51,358) $109,010 $96,809 $103,991 $(2,138) $- $256,314
Income from discontinued operation (net of taxes) - - - - - 80,786 80,786
Net income (loss) $(51,358) $109,010 $96,809 $103,991 $(2,138) $80,786 $337,100
INMET MINING CORPORATION
Segmented statements of earnings
(unaudited)


2012 For the three months ended December 31
CORPORATE
& OTHER

ÇAYELI

LAS
CRUCES

PYHÄSALMI

COBRE
PANAMA		 DISCONTINUED
OPERATIONS -
OK TEDI

TOTAL
(thousands of US dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea)
Gross sales $- $58,742 $136,909 $64,217 $- $- $259,868
Smelter processing charges and freight - (12,856) (861) (12,438) - - (26,155)
Cost of sales (excluding depreciation) (9,924) (24,691) (40,320) (16,338) - - (91,273)
Depreciation - (4,702) (22,331) (3,046) - - (30,079)
Earnings from operations (9,924) 16,493 73,397 32,395 - - 112,361
Corporate development and exploration (5,679) (355) 5 (1,028) (1,573) - (8,620)
General and administration (14,896) - - - - - (14,896)
Investment and other income (12,970) 376 (2,238) (953) (494) - (16,279)
Finance costs (867) (293) (1,190) (186) (96) - (2,632)
Income tax expense (1,346) (3,983) (18,371) (8,013) - - (31,713)
Net income from continuing operations $(45,682) $12,238 $51,603 $22,215 $(2,153) $- $38,221
- - - - - - -
Net income (loss) $(45,682) $12,238 $51,603 $22,215 $(2,153) $- $38,221


2011 For the three months ended December 31
CORPORATE
& OTHER

ÇAYELI

LAS
CRUCES

PYHÄSALMI
COBRE
PANAMA		 DISCONTINUED
OPERATIONS -OK TEDI

TOTAL
(thousands of US dollars) (Turkey) (Spain) (Finland) (Panama) (Papua New Guinea)
Gross sales $- $77,124 $97,731 $58,539 $- $- $233,394
Smelter processing charges and freight - (14,373) (351) (12,606) - - (27,330)
Cost of sales (excluding depreciation) (16,190) (22,692) (37,867) (13,428) - - (90,177)
Depreciation - (5,391) (19,129) (2,315) - - (26,835)
Earnings from operations (16,190) 34,668 40,384 30,190 - - 89,052