Document:

Exhibit 4.4

 

Consolidated financial statements

 

INMET MINING CORPORATION

Consolidated statements of financial position

(Unaudited)

 

	
 
    	
 
    	
 
    	
 
    	
June 30,
    	
 
    	
December 31,
    	
 
    	
December 31,
    	
 
    
	
(thousands of US dollars)
    	
 
    	
Note reference
    	
 
    	
2012
    	
 
    	
2011(1)
    	
 
    	
2010(1)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current assets:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and short term investments
    	
 
    	
4
    	
 
    	
$
    	
2,733,063
    	
 
    	
$
    	
1,048,457
    	
 
    	
$
    	
316,045
    	
 
    
	
Restricted cash
    	
 
    	
5
    	
 
    	
920
    	
 
    	
784
    	
 
    	
597
    	
 
    
	
Accounts receivable
    	
 
    	
 
    	
 
    	
114,071
    	
 
    	
101,867
    	
 
    	
115,628
    	
 
    
	
Inventories
    	
 
    	
 
    	
 
    	
91,562
    	
 
    	
87,654
    	
 
    	
69,860
    	
 
    
	
Current portion of held to maturity investments
    	
 
    	
 
    	
 
    	
94,919
    	
 
    	
175,921
    	
 
    	
52,201
    	
 
    
	
Assets held for sale
    	
 
    	
 
    	
 
    	
—
    	
 
    	
—
    	
 
    	
308,935
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
3,034,535
    	
 
    	
1,414,683
    	
 
    	
863,266
    	
 
    
	
Restricted cash
    	
 
    	
5
    	
 
    	
74,205
    	
 
    	
69,538
    	
 
    	
67,831
    	
 
    
	
Property, plant and equipment
    	
 
    	
 
    	
 
    	
2,095,075
    	
 
    	
1,772,766
    	
 
    	
1,680,858
    	
 
    
	
Investments in equity securities
    	
 
    	
 
    	
 
    	
2,706
    	
 
    	
3,060
    	
 
    	
2,608
    	
 
    
	
Held to maturity investments
    	
 
    	
 
    	
 
    	
448,025
    	
 
    	
427,727
    	
 
    	
308,483
    	
 
    
	
Deferred income tax assets
    	
 
    	
 
    	
 
    	
1,574
    	
 
    	
317
    	
 
    	
8,444
    	
 
    
	
Other assets
    	
 
    	
 
    	
 
    	
1,511
    	
 
    	
1,380
    	
 
    	
2,261
    	
 
    
	
Total assets
    	
 
    	
 
    	
 
    	
$
    	
5,657,631
    	
 
    	
$
    	
3,689,471
    	
 
    	
$
    	
2,933,751
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current liabilities:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts payable and accrued liabilities
    	
 
    	
 
    	
 
    	
$
    	
237,618
    	
 
    	
$
    	
138,596
    	
 
    	
$
    	
132,009
    	
 
    
	
Provisions
    	
 
    	
 
    	
 
    	
13,894
    	
 
    	
13,087
    	
 
    	
17,106
    	
 
    
	
Liabilities associated with assets held for sale
    	
 
    	
 
    	
 
    	
—
    	
 
    	
—
    	
 
    	
108,338
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
251,512
    	
 
    	
151,683
    	
 
    	
257,453
    	
 
    
	
Long-term debt
    	
 
    	
6
    	
 
    	
1,463,268
    	
 
    	
16,581
    	
 
    	
16,091
    	
 
    
	
Provisions
    	
 
    	
 
    	
 
    	
178,803
    	
 
    	
170,025
    	
 
    	
157,235
    	
 
    
	
Other liabilities
    	
 
    	
 
    	
 
    	
17,242
    	
 
    	
17,156
    	
 
    	
17,541
    	
 
    
	
Deferred income tax liabilities
    	
 
    	
 
    	
 
    	
56,487
    	
 
    	
28,351
    	
 
    	
12,127
    	
 
    
	
Total liabilities
    	
 
    	
 
    	
 
    	
1,967,312
    	
 
    	
383,796
    	
 
    	
460,447
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Commitments and contingencies
    	
 
    	
15
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Equity
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Share capital
    	
 
    	
 
    	
 
    	
1,541,773
    	
 
    	
1,541,324
    	
 
    	
1,054,927
    	
 
    
	
Contributed surplus
    	
 
    	
 
    	
 
    	
64,725
    	
 
    	
64,629
    	
 
    	
64,028
    	
 
    
	
Share based compensation
    	
 
    	
7
    	
 
    	
17,964
    	
 
    	
8,256
    	
 
    	
6,334
    	
 
    
	
Retained earnings
    	
 
    	
 
    	
 
    	
2,039,382
    	
 
    	
1,851,010
    	
 
    	
1,527,342
    	
 
    
	
Accumulated other comprehensive loss
    	
 
    	
8
    	
 
    	
(146,899
    	
)
    	
(159,544
    	
)
    	
(179,327
    	
)
    
	
Total equity attributable to Inmet equity holders
    	
 
    	
 
    	
 
    	
3,516,945
    	
 
    	
3,305,675
    	
 
    	
2,473,304
    	
 
    
	
Non-controlling interest
    	
 
    	
9
    	
 
    	
173,374
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Total equity
    	
 
    	
 
    	
 
    	
3,690,319
    	
 
    	
3,305,675
    	
 
    	
2,473,304
    	
 
    
	
Total liabilities and equity
    	
 
    	
 
    	
 
    	
$
    	
5,657,631
    	
 
    	
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)

 

1

 

INMET MINING CORPORATION

Segmented statements of financial position

(Unaudited)

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
DISCONTINUED
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
CORPORATE &
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
OPERATIONS -
    	
 
    	
 
    	
 
    
	
2012 As at June 30
    	
 
    	
OTHER
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
OK TEDI
    	
 
    	
TOTAL
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(Papua New
    	
 
    	
 
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
Guinea)
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash   and short-term investments
    	
 
    	
$
    	
2,390,279
    	
 
    	
$
    	
51,822
    	
 
    	
$
    	
165,880
    	
 
    	
$
    	
43,358
    	
 
    	
$
    	
81,724
    	
 
    	
$
    	
—
    	
 
    	
$
    	
2,733,063
    	
 
    
	
Other   current assets
    	
 
    	
102,860
    	
 
    	
60,496
    	
 
    	
89,847
    	
 
    	
46,115
    	
 
    	
2,154
    	
 
    	
—
    	
 
    	
301,472
    	
 
    
	
Restricted   cash
    	
 
    	
19,312
    	
 
    	
—
    	
 
    	
53,343
    	
 
    	
1,550
    	
 
    	
—
    	
 
    	
—
    	
 
    	
74,205
    	
 
    
	
Property,   plant and equipment
    	
 
    	
2,284
    	
 
    	
132,631
    	
 
    	
833,601
    	
 
    	
65,468
    	
 
    	
1,061,091
    	
 
    	
—
    	
 
    	
2,095,075
    	
 
    
	
Investments   in equity securities
    	
 
    	
2,706
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
2,706
    	
 
    
	
Held   to maturity investments
    	
 
    	
347,583
    	
 
    	
100,442
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
448,025
    	
 
    
	
Other   non-current assets
    	
 
    	
1,387
    	
 
    	
1,698
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
3,085
    	
 
    
	
 
    	
 
    	
$
    	
2,866,411
    	
 
    	
$
    	
347,089
    	
 
    	
$
    	
1,142,671
    	
 
    	
$
    	
156,491
    	
 
    	
$
    	
1,144,969
    	
 
    	
$
    	
—
    	
 
    	
$
    	
5,657,631
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current   liabilities
    	
 
    	
$
    	
37,506
    	
 
    	
$
    	
36,257
    	
 
    	
$
    	
60,693
    	
 
    	
$
    	
18,593
    	
 
    	
$
    	
98,463
    	
 
    	
$
    	
—
    	
 
    	
$
    	
251,512
    	
 
    
	
Long-term   debt
    	
 
    	
1,463,268
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,463,268
    	
 
    
	
Provisions
    	
 
    	
70,181
    	
 
    	
18,878
    	
 
    	
59,760
    	
 
    	
29,984
    	
 
    	
—
    	
 
    	
—
    	
 
    	
178,803
    	
 
    
	
Other   liabilities
    	
 
    	
664
    	
 
    	
—
    	
 
    	
16,578
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
17,242
    	
 
    
	
Deferred   income tax liabilities
    	
 
    	
—
    	
 
    	
—
    	
 
    	
45,491
    	
 
    	
10,996
    	
 
    	
—
    	
 
    	
—
    	
 
    	
56,487
    	
 
    
	
 
    	
 
    	
$
    	
1,571,619
    	
 
    	
$
    	
55,135
    	
 
    	
$
    	
182,522
    	
 
    	
$
    	
59,573
    	
 
    	
$
    	
98,463
    	
 
    	
$
    	
—
    	
 
    	
$
    	
1,967,312
    	
 
    

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
DISCONTINUED
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
CORPORATE &
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
OPERATIONS -
    	
 
    	
 
    	
 
    
	
2011 As at December 31
    	
 
    	
OTHER
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
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
    	
 
    
	
Investments   in equity securities
    	
 
    	
3,060
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
3,060
    	
 
    
	
Held   to maturity investments
    	
 
    	
348,022
    	
 
    	
79,705
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
427,727
    	
 
    
	
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
    	
 
    

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
DISCONTINUED
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
CORPORATE &
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
OPERATIONS -
    	
 
    	
 
    	
 
    
	
2010 As at December 31
    	
 
    	
OTHER
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
OK TEDI
    	
 
    	
TOTAL
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(Papua New
    	
 
    	
 
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
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
    	
 
    
	
Investments   in equity securities
    	
 
    	
2,608
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
2,608
    	
 
    
	
Held   to maturity investments
    	
 
    	
245,680
    	
 
    	
62,803
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
308,483
    	
 
    
	
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
    	
 
    

 

2

 

INMET MINING CORPORATION

Consolidated statements of changes in equity

(unaudited)

 

	
 
    	
 
    	
Attributable   to Inmet equity holders
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Accumulated
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
other
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
comprehensive
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Note
    	
 
    	
 
    	
 
    	
Retained
    	
 
    	
Contributed
    	
 
    	
Share based
    	
 
    	
income (loss)
    	
 
    	
 
    	
 
    	
Non-controlling
    	
 
    	
 
    	
 
    
	
(thousands of US dollars)
    	
 
    	
Reference
    	
 
    	
Share Capital
    	
 
    	
earnings
    	
 
    	
surplus
    	
 
    	
compensation
    	
 
    	
(note 7)
    	
 
    	
Total
    	
 
    	
interest
    	
 
    	
Total equity
    	
 
    
	
Balance as at December 31, 2010(1)
    	
 
    	
 
    	
 
    	
$
    	
1,054,927
    	
 
    	
$
    	
1,527,342
    	
 
    	
$
    	
64,028
    	
 
    	
$
    	
6,334
    	
 
    	
$
    	
(179,327
    	
)
    	
$
    	
2,473,304
    	
 
    	
—
    	
 
    	
$
    	
2,473,304
    	
 
    
	
Comprehensive   income
    	
 
    	
 
    	
 
    	
—
    	
 
    	
192,569
    	
 
    	
—
    	
 
    	
—
    	
 
    	
41,793
    	
 
    	
234,362
    	
 
    	
—
    	
 
    	
234,362
    	
 
    
	
Equity   settled share-based compensation plans
    	
 
    	
 
    	
 
    	
—
    	
 
    	
—
    	
 
    	
292
    	
 
    	
(1,087
    	
)
    	
—
    	
 
    	
(795
    	
)
    	
—
    	
 
    	
(795
    	
)
    
	
Dividends
    	
 
    	
 
    	
 
    	
—
    	
 
    	
(6,713
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(6,713
    	
)
    	
—
    	
 
    	
(6,713
    	
)
    
	
Issuance   of share capital
    	
 
    	
 
    	
 
    	
486,199
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
486,199
    	
 
    	
—
    	
 
    	
486,199
    	
 
    
	
Balance as at June 30, 2011(1)
    	
 
    	
 
    	
 
    	
$
    	
1,541,126
    	
 
    	
$
    	
1,713,198
    	
 
    	
$
    	
64,320
    	
 
    	
$
    	
5,247
    	
 
    	
$
    	
(137,534
    	
)
    	
$
    	
3,186,357
    	
 
    	
$
    	
—
    	
 
    	
$
    	
3,186,357
    	
 
    
	
Comprehensive   income
    	
 
    	
 
    	
 
    	
—
    	
 
    	
144,531
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(22,010
    	
)
    	
122,521
    	
 
    	
—
    	
 
    	
122,521
    	
 
    
	
Equity   settled share-based compensation plans
    	
 
    	
 
    	
 
    	
198
    	
 
    	
—
    	
 
    	
309
    	
 
    	
3,009
    	
 
    	
—
    	
 
    	
3,516
    	
 
    	
—
    	
 
    	
3,516
    	
 
    
	
Dividends
    	
 
    	
 
    	
 
    	
—
    	
 
    	
(6,719
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(6,719
    	
)
    	
—
    	
 
    	
(6,719
    	
)
    
	
Balance as at December 31, 2011(1)
    	
 
    	
 
    	
 
    	
$
    	
1,541,324
    	
 
    	
$
    	
1,851,010
    	
 
    	
$
    	
64,629
    	
 
    	
$
    	
8,256
    	
 
    	
$
    	
(159,544
    	
)
    	
$
    	
3,305,675
    	
 
    	
$
    	
—
    	
 
    	
$
    	
3,305,675
    	
 
    
	
Comprehensive   income (loss)
    	
 
    	
 
    	
 
    	
—
    	
 
    	
187,539
    	
 
    	
—
    	
 
    	
—
    	
 
    	
6,872
    	
 
    	
194,411
    	
 
    	
5,715
    	
 
    	
200,126
    	
 
    
	
Equity   settled share-based compensation plans
    	
 
    	
 
    	
 
    	
449
    	
 
    	
—
    	
 
    	
96
    	
 
    	
9,708
    	
 
    	
—
    	
 
    	
10,253
    	
 
    	
—
    	
 
    	
10,253
    	
 
    
	
Dividends   on common shares
    	
 
    	
 
    	
 
    	
—
    	
 
    	
(6,759
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(6,759
    	
)
    	
—
    	
 
    	
(6,759
    	
)
    
	
Equity   funding from non-controlling shareholder
    	
 
    	
 
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
20,000
    	
 
    	
20,000
    	
 
    
	
Sale   of 20 percent interest in Cobre Panama
    	
 
    	
9
    	
 
    	
—
    	
 
    	
7,592
    	
 
    	
—
    	
 
    	
—
    	
 
    	
5,773
    	
 
    	
13,365
    	
 
    	
147,659
    	
 
    	
161,024
    	
 
    
	
Balance as at June 30, 2012
    	
 
    	
 
    	
 
    	
$
    	
1,541,773
    	
 
    	
$
    	
2,039,382
    	
 
    	
$
    	
64,725
    	
 
    	
$
    	
17,964
    	
 
    	
$
    	
(146,899
    	
)
    	
$
    	
3,516,945
    	
 
    	
$
    	
173,374
    	
 
    	
$
    	
3,690,319
    	
 
    

 

(1) refer to note 3 for effect of change in presentation currency to the US dollar.

 

(See accompanying notes)

 

3

 

INMET MINING CORPORATION

Consolidated statements of earnings

(unaudited)

 

	
 
    	
 
    	
 
    	
 
    	
Three Months Ended June 30
    	
 
    	
Six Months Ended June 30
    	
 
    
	
(thousands of US dollars except per share amounts)
    	
 
    	
Note reference
    	
 
    	
2012
    	
 
    	
2011(1)
    	
 
    	
2012
    	
 
    	
2011(1)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross sales
    	
 
    	
 
    	
 
    	
$
    	
251,395
    	
 
    	
$
    	
214,894
    	
 
    	
$
    	
536,922
    	
 
    	
$
    	
461,085
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
 
    	
 
    	
(28,480
    	
)
    	
(32,793
    	
)
    	
(57,818
    	
)
    	
(63,374
    	
)
    
	
Cost of sales (excluding depreciation)
    	
 
    	
 
    	
 
    	
(84,634
    	
)
    	
(71,302
    	
)
    	
(164,258
    	
)
    	
(147,935
    	
)
    
	
Depreciation
    	
 
    	
 
    	
 
    	
(29,193
    	
)
    	
(25,802
    	
)
    	
(59,260
    	
)
    	
(51,982
    	
)
    
	
Earnings from operations
    	
 
    	
 
    	
 
    	
109,088
    	
 
    	
84,997
    	
 
    	
255,586
    	
 
    	
197,794
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Corporate development and exploration
    	
 
    	
 
    	
 
    	
(10,290
    	
)
    	
(4,417
    	
)
    	
(19,091
    	
)
    	
(17,401
    	
)
    
	
General and administration
    	
 
    	
 
    	
 
    	
(15,899
    	
)
    	
(7,995
    	
)
    	
(25,644
    	
)
    	
(16,150
    	
)
    
	
Investment and other income
    	
 
    	
10
    	
 
    	
45,103
    	
 
    	
4,581
    	
 
    	
38,840
    	
 
    	
(1,009
    	
)
    
	
Finance costs
    	
 
    	
11
    	
 
    	
(2,379
    	
)
    	
(2,310
    	
)
    	
(4,975
    	
)
    	
(4,567
    	
)
    
	
Income before taxation
    	
 
    	
 
    	
 
    	
125,623
    	
 
    	
74,856
    	
 
    	
244,716
    	
 
    	
158,667
    	
 
    
	
Income tax expense
    	
 
    	
12
    	
 
    	
(31,444
    	
)
    	
(20,588
    	
)
    	
(57,456
    	
)
    	
(46,884
    	
)
    
	
Income from continuing operations
    	
 
    	
 
    	
 
    	
$
    	
94,179
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
187,260
    	
 
    	
$
    	
111,783
    	
 
    
	
Income from discontinued operation (net of taxes)
    	
 
    	
 
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
80,786
    	
 
    
	
Net income
    	
 
    	
 
    	
 
    	
$
    	
94,179
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
187,260
    	
 
    	
$
    	
192,569
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income attributable to:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Inmet equity holders
    	
 
    	
 
    	
 
    	
$
    	
94,458
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
187,539
    	
 
    	
$
    	
192,569
    	
 
    
	
Non-controlling interest
    	
 
    	
 
    	
 
    	
(279
    	
)
    	
—
    	
 
    	
(279
    	
)
    	
—
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
$
    	
94,179
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
187,260
    	
 
    	
$
    	
192,569
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Earnings per common share
    	
 
    	
13
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Income from continuing operations
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
 
    	
 
    	
$
    	
1.36
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
2.70
    	
 
    	
$
    	
1.76
    	
 
    
	
Diluted
    	
 
    	
 
    	
 
    	
$
    	
1.35
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
2.69
    	
 
    	
$
    	
1.75
    	
 
    
	
Income from discontinued operation
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
 
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
$
    	
1.27
    	
 
    
	
Diluted
    	
 
    	
 
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
$
    	
1.27
    	
 
    
	
Net income
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
 
    	
 
    	
$
    	
1.36
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
2.70
    	
 
    	
$
    	
3.03
    	
 
    
	
Diluted
    	
 
    	
 
    	
 
    	
$
    	
1.35
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
2.69
    	
 
    	
$
    	
3.02
    	
 
    

 

(1) refer to note 3 for effect of change in presentation currency to the US dollar.

 

(See accompanying notes)

 

4

 

INMET MINING CORPORATION

Segmented statements of earnings

(unaudited)

 

	
 
    	
 
    	
CORPORATE
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
DISCONTINUED
    	
 
    	
 
    	
 
    
	
2012 For the six months ended June 30
    	
 
    	
& OTHER
    	
 
    	
ÇAYELI
    	
 
    	
LAS CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
OPERATIONS - OK TEDI
    	
 
    	
TOTAL
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
(Papua New Guinea)
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross   sales
    	
 
    	
$
    	
—
    	
 
    	
$
    	
189,533
    	
 
    	
$
    	
238,245
    	
 
    	
$
    	
109,144
    	
 
    	
$
    	
—
    	
 
    	
$
    	
—
    	
 
    	
$
    	
536,922
    	
 
    
	
Smelter   processing charges and freight
    	
 
    	
—
    	
 
    	
(35,544
    	
)
    	
(845
    	
)
    	
(21,429
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(57,818
    	
)
    
	
Cost   of sales (excluding depreciation)
    	
 
    	
(4,148
    	
)
    	
(51,157
    	
)
    	
(78,653
    	
)
    	
(30,300
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(164,258
    	
)
    
	
Depreciation
    	
 
    	
—
    	
 
    	
(12,628
    	
)
    	
(42,025
    	
)
    	
(4,607
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(59,260
    	
)
    
	
Earnings   from operations
    	
 
    	
(4,148
    	
)
    	
90,204
    	
 
    	
116,722
    	
 
    	
52,808
    	
 
    	
—
    	
 
    	
—
    	
 
    	
255,586
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Corporate   development and exploration
    	
 
    	
(10,889
    	
)
    	
(769
    	
)
    	
(1,560
    	
)
    	
(2,282
    	
)
    	
(3,591
    	
)
    	
—
    	
 
    	
(19,091
    	
)
    
	
General   and administration
    	
 
    	
(25,644
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(25,644
    	
)
    
	
Investment   and other income
    	
 
    	
36,927
    	
 
    	
(1,033
    	
)
    	
2,083
    	
 
    	
756
    	
 
    	
107
    	
 
    	
—
    	
 
    	
38,840
    	
 
    
	
Finance   costs
    	
 
    	
(1,634
    	
)
    	
(570
    	
)
    	
(2,410
    	
)
    	
(361
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(4,975
    	
)
    
	
Income   tax expense
    	
 
    	
(722
    	
)
    	
(17,368
    	
)
    	
(28,451
    	
)
    	
(10,915
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(57,456
    	
)
    
	
Net income (loss)
    	
 
    	
$
    	
(6,110
    	
)
    	
$
    	
70,464
    	
 
    	
$
    	
86,384
    	
 
    	
$
    	
40,006
    	
 
    	
$
    	
(3,484
    	
)
    	
$
    	
—
    	
 
    	
$
    	
187,260
    	
 
    

 

	
 
    	
 
    	
CORPORATE
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
DISCONTINUED
    	
 
    	
 
    	
 
    
	
2011 For the six months ended June 30
    	
 
    	
& OTHER
    	
 
    	
ÇAYELI
    	
 
    	
LAS CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
OPERATIONS - OK TEDI
    	
 
    	
TOTAL
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
(Papua New Guinea)
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross   sales
    	
 
    	
$
    	
—
    	
 
    	
$
    	
175,130
    	
 
    	
$
    	
164,219
    	
 
    	
$
    	
121,736
    	
 
    	
$
    	
—
    	
 
    	
$
    	
—
    	
 
    	
$
    	
461,085
    	
 
    
	
Smelter   processing charges and freight
    	
 
    	
—
    	
 
    	
(35,092
    	
)
    	
(461
    	
)
    	
(27,821
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(63,374
    	
)
    
	
Cost   of sales (excluding depreciation)
    	
 
    	
—
    	
 
    	
(46,125
    	
)
    	
(75,759
    	
)
    	
(26,051
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(147,935
    	
)
    
	
Depreciation
    	
 
    	
—
    	
 
    	
(9,928
    	
)
    	
(37,604
    	
)
    	
(4,450
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(51,982
    	
)
    
	
Earnings   from operations
    	
 
    	
—
    	
 
    	
83,985
    	
 
    	
50,395
    	
 
    	
63,414
    	
 
    	
—
    	
 
    	
—
    	
 
    	
197,794
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Corporate   development and exploration
    	
 
    	
(12,725
    	
)
    	
(901
    	
)
    	
(5
    	
)
    	
(1,612
    	
)
    	
(2,158
    	
)
    	
—
    	
 
    	
(17,401
    	
)
    
	
General   and administration
    	
 
    	
(16,150
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(16,150
    	
)
    
	
Investment   and other income
    	
 
    	
(3,443
    	
)
    	
2,263
    	
 
    	
87
    	
 
    	
194
    	
 
    	
(110
    	
)
    	
—
    	
 
    	
(1,009
    	
)
    
	
Finance   costs
    	
 
    	
(1,843
    	
)
    	
(281
    	
)
    	
(2,011
    	
)
    	
(432
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(4,567
    	
)
    
	
Income   tax expense
    	
 
    	
(484
    	
)
    	
(22,842
    	
)
    	
(9,618
    	
)
    	
(13,940
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(46,884
    	
)
    
	
Net income (loss) from continuing operations
    	
 
    	
$
    	
(34,645
    	
)
    	
$
    	
62,224
    	
 
    	
$
    	
38,848
    	
 
    	
$
    	
47,624
    	
 
    	
$
    	
(2,268
    	
)
    	
$
    	
—
    	
 
    	
$
    	
111,783
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Income   from discontinued operation (net of taxes)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
80,786
    	
 
    	
80,786
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income (loss)
    	
 
    	
$
    	
(34,645
    	
)
    	
$
    	
62,224
    	
 
    	
$
    	
38,848
    	
 
    	
$
    	
47,624
    	
 
    	
$
    	
(2,268
    	
)
    	
$
    	
80,786
    	
 
    	
$
    	
192,569
    	
 
    

 

5

 

INMET MINING CORPORATION

Segmented statements of earnings

(unaudited)

 

	
 
    	
 
    	
CORPORATE
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
 
    	
 
    
	
2012 For the three months ended June 30
    	
 
    	
& OTHER
    	
 
    	
ÇAYELI
    	
 
    	
LAS CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
TOTAL
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross sales
    	
 
    	
$
    	
—
    	
 
    	
$
    	
66,162
    	
 
    	
$
    	
127,863
    	
 
    	
$
    	
57,370
    	
 
    	
$
    	
—
    	
 
    	
$
    	
251,395
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
—
    	
 
    	
(14,075
    	
)
    	
(550
    	
)
    	
(13,855
    	
)
    	
—
    	
 
    	
(28,480
    	
)
    
	
Cost of sales (excluding depreciation)
    	
 
    	
(6,895
    	
)
    	
(22,519
    	
)
    	
(40,653
    	
)
    	
(14,567
    	
)
    	
—
    	
 
    	
(84,634
    	
)
    
	
Depreciation
    	
 
    	
—
    	
 
    	
(5,366
    	
)
    	
(21,557
    	
)
    	
(2,270
    	
)
    	
—
    	
 
    	
(29,193
    	
)
    
	
Earnings from operations
    	
 
    	
(6,895
    	
)
    	
24,202
    	
 
    	
65,103
    	
 
    	
26,678
    	
 
    	
—
    	
 
    	
109,088
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Corporate development and exploration
    	
 
    	
(5,368
    	
)
    	
(388
    	
)
    	
(642
    	
)
    	
(1,507
    	
)
    	
(2,385
    	
)
    	
(10,290
    	
)
    
	
General and administration
    	
 
    	
(15,899
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(15,899
    	
)
    
	
Investment and other income
    	
 
    	
41,066
    	
 
    	
820
    	
 
    	
2,191
    	
 
    	
919
    	
 
    	
107
    	
 
    	
45,103
    	
 
    
	
Finance costs
    	
 
    	
(820
    	
)
    	
(233
    	
)
    	
(1,147
    	
)
    	
(179
    	
)
    	
—
    	
 
    	
(2,379
    	
)
    
	
Income tax expense
    	
 
    	
(586
    	
)
    	
(7,888
    	
)
    	
(17,238
    	
)
    	
(5,732
    	
)
    	
—
    	
 
    	
(31,444
    	
)
    
	
Net income (loss)
    	
 
    	
$
    	
11,498
    	
 
    	
$
    	
16,513
    	
 
    	
$
    	
48,267
    	
 
    	
$
    	
20,179
    	
 
    	
$
    	
(2,278
    	
)
    	
$
    	
94,179
    	
 
    

 

	
 
    	
 
    	
CORPORATE
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
 
    	
 
    
	
2011 For the three months ended June 30
    	
 
    	
& OTHER
    	
 
    	
ÇAYELI
    	
 
    	
LAS CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
TOTAL
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross sales
    	
 
    	
$
    	
—
    	
 
    	
$
    	
79,226
    	
 
    	
$
    	
76,282
    	
 
    	
$
    	
59,386
    	
 
    	
$
    	
—
    	
 
    	
$
    	
214,894
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
—
    	
 
    	
(17,767
    	
)
    	
(201
    	
)
    	
(14,825
    	
)
    	
—
    	
 
    	
(32,793
    	
)
    
	
Cost of sales (excluding depreciation)
    	
 
    	
—
    	
 
    	
(22,443
    	
)
    	
(36,618
    	
)
    	
(12,241
    	
)
    	
—
    	
 
    	
(71,302
    	
)
    
	
Depreciation
    	
 
    	
—
    	
 
    	
(4,868
    	
)
    	
(18,670
    	
)
    	
(2,264
    	
)
    	
—
    	
 
    	
(25,802
    	
)
    
	
Earnings from operations
    	
 
    	
—
    	
 
    	
34,148
    	
 
    	
20,793
    	
 
    	
30,056
    	
 
    	
—
    	
 
    	
84,997
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Corporate development and exploration
    	
 
    	
(3,073
    	
)
    	
(439
    	
)
    	
—
    	
 
    	
(905
    	
)
    	
—
    	
 
    	
(4,417
    	
)
    
	
General and administration
    	
 
    	
(7,995
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(7,995
    	
)
    
	
Investment and other income
    	
 
    	
3,331
    	
 
    	
1,439
    	
 
    	
(153
    	
)
    	
74
    	
 
    	
(110
    	
)
    	
4,581
    	
 
    
	
Finance costs
    	
 
    	
(932
    	
)
    	
(138
    	
)
    	
(1,020
    	
)
    	
(220
    	
)
    	
—
    	
 
    	
(2,310
    	
)
    
	
Income tax expense
    	
 
    	
(287
    	
)
    	
(11,556
    	
)
    	
(2,360
    	
)
    	
(6,385
    	
)
    	
—
    	
 
    	
(20,588
    	
)
    
	
Net income (loss)
    	
 
    	
$
    	
(8,956
    	
)
    	
$
    	
23,454
    	
 
    	
$
    	
17,260
    	
 
    	
$
    	
22,620
    	
 
    	
$
    	
(110
    	
)
    	
$
    	
54,268
    	
 
    

 

6

 

INMET MINING CORPORATION

Consolidated statements of comprehensive income 

(unaudited)

 

	
 
    	
 
    	
 
    	
 
    	
Three Months Ended June 30
    	
 
    	
Six Months Ended June 30
    	
 
    
	
(thousands of US dollars)
    	
 
    	
Note reference
    	
 
    	
2012
    	
 
    	
2011(1)
    	
 
    	
2012
    	
 
    	
2011(1)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income
    	
 
    	
 
    	
 
    	
$
    	
94,179
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
187,260
    	
 
    	
$
    	
192,569
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other comprehensive income for the period:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Continuing operations
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Changes in fair value of investments
    	
 
    	
 
    	
 
    	
(509
    	
)
    	
(2,029
    	
)
    	
(409
    	
)
    	
(2,552
    	
)
    
	
Currency translation adjustments
    	
 
    	
 
    	
 
    	
19,978
    	
 
    	
11,103
    	
 
    	
13,271
    	
 
    	
28,488
    	
 
    
	
Income tax recovery related to investments - other   comprehensive income
    	
 
    	
 
    	
 
    	
2
    	
 
    	
(72
    	
)
    	
4
    	
 
    	
3
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
19,471
    	
 
    	
9,002
    	
 
    	
12,866
    	
 
    	
25,939
    	
 
    
	
Other comprehensive income from discontinued   operation (net of
    	
 
    	
 
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
15,854
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Comprehensive income
    	
 
    	
 
    	
 
    	
$
    	
113,650
    	
 
    	
$
    	
63,270
    	
 
    	
$
    	
200,126
    	
 
    	
$
    	
234,362
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Comprehensive income (loss) attributable to:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Inmet equity holders
    	
 
    	
 
    	
 
    	
$
    	
107,935
    	
 
    	
$
    	
63,270
    	
 
    	
$
    	
194,411
    	
 
    	
$
    	
234,362
    	
 
    
	
Non-controlling interests
    	
 
    	
 
    	
 
    	
5,715
    	
 
    	
—
    	
 
    	
5,715
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
$
    	
113,650
    	
 
    	
$
    	
63,270
    	
 
    	
$
    	
200,126
    	
 
    	
$
    	
234,362
    	
 
    

 

(1) refer to note 3 for effect of change in presentation currency to the US dollar.

 

(See accompanying notes)

 

7

 

INMET MINING CORPORATION

Consolidated statements of cash flows

(unaudited)

 

	
 
    	
 
    	
 
    	
 
    	
Three Months Ended June 30
    	
 
    	
Six Months Ended June 30
    	
 
    
	
(thousands of US dollars)
    	
 
    	
Note reference
    	
 
    	
2012
    	
 
    	
2011(1)
    	
 
    	
2012
    	
 
    	
2011(1)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash provided by (used in)   operating activities(1)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income from continuing operations
    	
 
    	
 
    	
 
    	
$
    	
94,179
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
187,260
    	
 
    	
$
    	
111,783
    	
 
    
	
Add (deduct) items not affecting cash:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Depreciation
    	
 
    	
 
    	
 
    	
29,193
    	
 
    	
25,802
    	
 
    	
59,260
    	
 
    	
51,982
    	
 
    
	
Deferred income taxes
    	
 
    	
 
    	
 
    	
15,105
    	
 
    	
2,305
    	
 
    	
27,058
    	
 
    	
10,428
    	
 
    
	
Accretion expense on provisions and capital leases
    	
 
    	
 
    	
 
    	
1,942
    	
 
    	
1,860
    	
 
    	
4,105
    	
 
    	
3,691
    	
 
    
	
Change in asset retirement obligations at closed   sites
    	
 
    	
 
    	
 
    	
6,895
    	
 
    	
—
    	
 
    	
4,148
    	
 
    	
—
    	
 
    
	
Foreign exchange loss
    	
 
    	
 
    	
 
    	
2,260
    	
 
    	
524
    	
 
    	
9,660
    	
 
    	
4,614
    	
 
    
	
Other
    	
 
    	
 
    	
 
    	
9,125
    	
 
    	
(2,513
    	
)
    	
11,036
    	
 
    	
(2,917
    	
)
    
	
Settlement of asset retirement obligations
    	
 
    	
 
    	
 
    	
(1,255
    	
)
    	
(1,728
    	
)
    	
(2,137
    	
)
    	
(3,341
    	
)
    
	
Net change in non-cash working capital 
    	
 
    	
14
    	
 
    	
18,889
    	
 
    	
9,459
    	
 
    	
(9,545
    	
)
    	
28,155
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
176,333
    	
 
    	
89,977
    	
 
    	
290,845
    	
 
    	
204,395
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash provided by (used in)   investing activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Purchase of property, plant and equipment
    	
 
    	
 
    	
 
    	
(192,050
    	
)
    	
(50,154
    	
)
    	
(274,658
    	
)
    	
(89,589
    	
)
    
	
Acquisition of held to maturity investments
    	
 
    	
 
    	
 
    	
(52,970
    	
)
    	
(21,936
    	
)
    	
(54,094
    	
)
    	
(288,632
    	
)
    
	
Maturing of held to maturity investments
    	
 
    	
 
    	
 
    	
78,276
    	
 
    	
35,114
    	
 
    	
125,652
    	
 
    	
42,859
    	
 
    
	
Funding received under Cobre Panama option   agreement
    	
 
    	
 
    	
 
    	
—
    	
 
    	
4,694
    	
 
    	
—
    	
 
    	
8,512
    	
 
    
	
Sale of 20 percent interest in Cobre Panama 
    	
 
    	
9
    	
 
    	
160,952
    	
 
    	
—
    	
 
    	
160,952
    	
 
    	
—
    	
 
    
	
Purchase of equity securities
    	
 
    	
 
    	
 
    	
—
    	
 
    	
(624
    	
)
    	
—
    	
 
    	
(4,006
    	
)
    
	
Sale (purchase) of short-term investments, net
    	
 
    	
 
    	
 
    	
—
    	
 
    	
(24,126
    	
)
    	
258,459
    	
 
    	
(17,079
    	
)
    
	
Other
    	
 
    	
 
    	
 
    	
—
    	
 
    	
2,615
    	
 
    	
—
    	
 
    	
2,737
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
(5,792
    	
)
    	
(54,417
    	
)
    	
216,311
    	
 
    	
(345,198
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash provided by (used in)   financing activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Issuance of common shares
    	
 
    	
 
    	
 
    	
—
    	
 
    	
486,199
    	
 
    	
—
    	
 
    	
486,199
    	
 
    
	
Long-term debt borrowing, net of transaction costs   
    	
 
    	
6
    	
 
    	
1,429,031
    	
 
    	
—
    	
 
    	
1,429,031
    	
 
    	
—
    	
 
    
	
Dividends on common shares
    	
 
    	
 
    	
 
    	
(6,759
    	
)
    	
(6,713
    	
)
    	
(6,759
    	
)
    	
(6,713
    	
)
    
	
Financial assurance payments
    	
 
    	
 
    	
 
    	
(150
    	
)
    	
—
    	
 
    	
(5,059
    	
)
    	
—
    	
 
    
	
Funding by non-controlling shareholder
    	
 
    	
 
    	
 
    	
20,000
    	
 
    	
—
    	
 
    	
20,000
    	
 
    	
—
    	
 
    
	
Other
    	
 
    	
 
    	
 
    	
(853
    	
)
    	
(846
    	
)
    	
(1,330
    	
)
    	
(3,592
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
1,441,269
    	
 
    	
478,640
    	
 
    	
1,435,883
    	
 
    	
475,894
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Foreign exchange on cash held in   foreign currencies
    	
 
    	
 
    	
 
    	
(1,263
    	
)
    	
730
    	
 
    	
26
    	
 
    	
3,770
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash provided by discontinued   operation
    	
 
    	
 
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
297,220
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Increase in cash:
    	
 
    	
 
    	
 
    	
1,610,547
    	
 
    	
514,930
    	
 
    	
1,943,065
    	
 
    	
636,081
    	
 
    
	
Cash:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Beginning of period
    	
 
    	
 
    	
 
    	
1,122,516
    	
 
    	
430,132
    	
 
    	
789,998
    	
 
    	
308,981
    	
 
    
	
End of period
    	
 
    	
 
    	
 
    	
$
    	
2,733,063
    	
 
    	
$
    	
945,062
    	
 
    	
$
    	
2,733,063
    	
 
    	
$
    	
945,062
    	
 
    
	
Short term investments
    	
 
    	
 
    	
 
    	
—
    	
 
    	
24,126
    	
 
    	
—
    	
 
    	
24,126
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and short-term investments
    	
 
    	
 
    	
 
    	
$
    	
2,733,063
    	
 
    	
$
    	
969,188
    	
 
    	
$
    	
2,733,063
    	
 
    	
$
    	
969,188
    	
 
    

 

(See accompanying notes)

 

	
(1) Supplementary   cash flow information:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash interest paid
    	
 
    	
 
    	
 
    	
$
    	
—
    	
 
    	
$
    	
—
    	
 
    	
$
    	
532
    	
 
    	
$
    	
544
    	
 
    
	
Cash taxes paid
    	
 
    	
 
    	
 
    	
$
    	
24,432
    	
 
    	
$
    	
24,218
    	
 
    	
$
    	
37,759
    	
 
    	
$
    	
41,170
    	
 
    

 

(1) refer to note 3 for effect of change in presentation currency to the US dollar.

 

(See accompanying notes)

 

8

 

INMET MINING CORPORATION

Segmented statements of cash flows

(unaudited)

 

	
 
    	
 
    	
CORPORATE &
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
 
    	
 
    
	
2012 For the six months ended June 30
    	
 
    	
OTHER
    	
 
    	
ÇAYELI
    	
 
    	
LAS CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
TOTAL
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
 
    	
 
    
	
Cash provided by (used in) operating activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Before   net change in non-cash working capital
    	
 
    	
$
    	
12,598
    	
 
    	
$
    	
85,663
    	
 
    	
$
    	
159,295
    	
 
    	
$
    	
45,160
    	
 
    	
$
    	
(2,326
    	
)
    	
$
    	
300,390
    	
 
    
	
Net   change in non-cash working capital
    	
 
    	
593
    	
 
    	
(23,546
    	
)
    	
5,755
    	
 
    	
7,653
    	
 
    	
—
    	
 
    	
(9,545
    	
)
    
	
 
    	
 
    	
13,191
    	
 
    	
62,117
    	
 
    	
165,050
    	
 
    	
52,813
    	
 
    	
(2,326
    	
)
    	
290,845
    	
 
    
	
Cash provided by (used in) investing activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Purchase   of property, plant and equipment
    	
 
    	
(1,491
    	
)
    	
(5,239
    	
)
    	
(13,200
    	
)
    	
(4,575
    	
)
    	
(250,153
    	
)
    	
(274,658
    	
)
    
	
Acquisition   of held to maturity investments
    	
 
    	
(35,142
    	
)
    	
(18,952
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(54,094
    	
)
    
	
Maturing   of held to maturity investments
    	
 
    	
125,652
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
125,652
    	
 
    
	
Funding   received under Cobre Panama option agreement
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
160,952
    	
 
    	
160,952
    	
 
    
	
Sale   of short-term investments
    	
 
    	
258,459
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
258,459
    	
 
    
	
 
    	
 
    	
347,478
    	
 
    	
(24,191
    	
)
    	
(13,200
    	
)
    	
(4,575
    	
)
    	
(89,201
    	
)
    	
216,311
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash provided by (used in) financing activities
    	
 
    	
1,419,339
    	
 
    	
—
    	
 
    	
(3,527
    	
)
    	
—
    	
 
    	
20,071
    	
 
    	
1,435,883
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Foreign exchange on cash held in foreign currencies
    	
 
    	
(1,067
    	
)
    	
(1,096
    	
)
    	
(458
    	
)
    	
(1,925
    	
)
    	
4,572
    	
 
    	
26
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intergroup   funding (distributions)
    	
 
    	
158,370
    	
 
    	
(118,223
    	
)
    	
(113,784
    	
)
    	
(49,064
    	
)
    	
122,701
    	
 
    	
—
    	
 
    
	
Increase   (decrease) in cash
    	
 
    	
1,937,311
    	
 
    	
(81,393
    	
)
    	
34,081
    	
 
    	
(2,751
    	
)
    	
55,817
    	
 
    	
1,943,065
    	
 
    
	
Cash:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Beginning   of year
    	
 
    	
452,968
    	
 
    	
133,215
    	
 
    	
131,799
    	
 
    	
46,109
    	
 
    	
25,907
    	
 
    	
789,998
    	
 
    
	
End   of period
    	
 
    	
2,390,279
    	
 
    	
51,822
    	
 
    	
165,880
    	
 
    	
43,358
    	
 
    	
81,724
    	
 
    	
2,733,063
    	
 
    
	
Short term investments
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Cash and short-term investments
    	
 
    	
$
    	
2,390,279
    	
 
    	
$
    	
51,822
    	
 
    	
$
    	
165,880
    	
 
    	
$
    	
43,358
    	
 
    	
$
    	
81,724
    	
 
    	
$
    	
2,733,063
    	
 
    

 

	
 
    	
 
    	
CORPORATE
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
 
    	
 
    
	
2011 For the six months ended June 30
    	
 
    	
& OTHER
    	
 
    	
ÇAYELI
    	
 
    	
LAS CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
TOTAL
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
 
    	
 
    
	
Cash provided by (used in) operating activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Before   net change in non-cash working capital
    	
 
    	
$
    	
(38,454
    	
)
    	
$
    	
73,541
    	
 
    	
$
    	
90,801
    	
 
    	
$
    	
52,620
    	
 
    	
$
    	
(2,268
    	
)
    	
$
    	
176,240
    	
 
    
	
Net   change in non-cash working capital
    	
 
    	
(6,582
    	
)
    	
15,002
    	
 
    	
4,828
    	
 
    	
14,907
    	
 
    	
—
    	
 
    	
28,155
    	
 
    
	
 
    	
 
    	
(45,036
    	
)
    	
88,543
    	
 
    	
95,629
    	
 
    	
67,527
    	
 
    	
(2,268
    	
)
    	
204,395
    	
 
    
	
Cash provided by (used in) investing activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Purchase   of property, plant and equipment
    	
 
    	
(364
    	
)
    	
(7,418
    	
)
    	
(32,974
    	
)
    	
(2,698
    	
)
    	
(46,135
    	
)
    	
(89,589
    	
)
    
	
Acquisition   of held to maturity investments
    	
 
    	
(274,237
    	
)
    	
(14,395
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(288,632
    	
)
    
	
Maturing   of held to maturity investments
    	
 
    	
42,859
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
42,859
    	
 
    
	
Funding   received under Cobre Panama option agreement
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
8,512
    	
 
    	
8,512
    	
 
    
	
Purchase   of equity investments
    	
 
    	
(4,006
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(4,006
    	
)
    
	
Sale   (purchase) of short-term investments, net
    	
 
    	
(24,126
    	
)
    	
—
    	
 
    	
7,047
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(17,079
    	
)
    
	
Other
    	
 
    	
2,258
    	
 
    	
479
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
2,737
    	
 
    
	
 
    	
 
    	
(257,616
    	
)
    	
(21,334
    	
)
    	
(25,927
    	
)
    	
(2,698
    	
)
    	
(37,623
    	
)
    	
(345,198
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash provided by (used in) financing activities
    	
 
    	
479,492
    	
 
    	
—
    	
 
    	
(3,598
    	
)
    	
—
    	
 
    	
—
    	
 
    	
475,894
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Foreign exchange on cash held in foreign currencies
    	
 
    	
—
    	
 
    	
(3,832
    	
)
    	
3,837
    	
 
    	
4,063
    	
 
    	
(298
    	
)
    	
3,770
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash provided by discontinued operation
    	
 
    	
297,220
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
297,220
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intergroup   funding (distributions)
    	
 
    	
147,992
    	
 
    	
(95,550
    	
)
    	
(28,156
    	
)
    	
(70,970
    	
)
    	
46,684
    	
 
    	
—
    	
 
    
	
Increase   (decrease) in cash
    	
 
    	
622,052
    	
 
    	
(32,173
    	
)
    	
41,785
    	
 
    	
(2,078
    	
)
    	
6,495
    	
 
    	
636,081
    	
 
    
	
Cash:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Beginning   of year
    	
 
    	
51,493
    	
 
    	
104,324
    	
 
    	
50,897
    	
 
    	
93,970
    	
 
    	
8,297
    	
 
    	
308,981
    	
 
    
	
End   of period
    	
 
    	
673,545
    	
 
    	
72,151
    	
 
    	
92,682
    	
 
    	
91,892
    	
 
    	
14,792
    	
 
    	
945,062
    	
 
    
	
Short term investments
    	
 
    	
24,126
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
24,126
    	
 
    
	
Cash and short-term investments
    	
 
    	
$
    	
697,671
    	
 
    	
$
    	
72,151
    	
 
    	
$
    	
92,682
    	
 
    	
$
    	
91,892
    	
 
    	
$
    	
14,792
    	
 
    	
$
    	
969,188
    	
 
    

 

9

 

INMET MINING CORPORATION

Segmented statements of cash flows

(unaudited)

 

	
 
    	
 
    	
CORPORATE &
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
 
    	
 
    
	
2012 For the three months ended June 30
    	
 
    	
OTHER
    	
 
    	
ÇAYELI
    	
 
    	
LAS CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
TOTAL
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
 
    	
 
    
	
Cash provided by (used in)   operating activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Before net change in non-cash working capital
    	
 
    	
$
    	
25,990
    	
 
    	
$
    	
20,603
    	
 
    	
$
    	
87,989
    	
 
    	
$
    	
22,732
    	
 
    	
$
    	
130
    	
 
    	
$
    	
157,444
    	
 
    
	
Net change in non-cash working capital
    	
 
    	
3,651
    	
 
    	
11,670
    	
 
    	
(428
    	
)
    	
3,996
    	
 
    	
—
    	
 
    	
18,889
    	
 
    
	
 
    	
 
    	
29,641
    	
 
    	
32,273
    	
 
    	
87,561
    	
 
    	
26,728
    	
 
    	
130
    	
 
    	
176,333
    	
 
    
	
Cash provided by (used in)   investing activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Purchase of property, plant and equipment
    	
 
    	
(922
    	
)
    	
(2,989
    	
)
    	
(7,215
    	
)
    	
(2,191
    	
)
    	
(178,733
    	
)
    	
(192,050
    	
)
    
	
Acquisition of held to maturity investments
    	
 
    	
(34,462
    	
)
    	
(18,508
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(52,970
    	
)
    
	
Maturing of held to maturity investments
    	
 
    	
78,276
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
78,276
    	
 
    
	
Sale of 20 percent interest in Cobre Panama
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
160,952
    	
 
    	
160,952
    	
 
    
	
 
    	
 
    	
42,892
    	
 
    	
(21,497
    	
)
    	
(7,215
    	
)
    	
(2,191
    	
)
    	
(17,781
    	
)
    	
(5,792
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash provided by (used in)   financing activities
    	
 
    	
1,422,003
    	
 
    	
—
    	
 
    	
(805
    	
)
    	
—
    	
 
    	
20,071
    	
 
    	
1,441,269
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Foreign exchange on cash held in   foreign currencies
    	
 
    	
(3,236
    	
)
    	
1,283
    	
 
    	
(1,128
    	
)
    	
(2,627
    	
)
    	
4,445
    	
 
    	
(1,263
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intergroup funding (distributions)
    	
 
    	
161,662
    	
 
    	
(118,336
    	
)
    	
(11,864
    	
)
    	
(45,102
    	
)
    	
13,640
    	
 
    	
—
    	
 
    
	
Increase (decrease) in cash
    	
 
    	
1,652,962
    	
 
    	
(106,277
    	
)
    	
66,549
    	
 
    	
(23,192
    	
)
    	
20,505
    	
 
    	
1,610,547
    	
 
    
	
Cash:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Beginning of period
    	
 
    	
737,317
    	
 
    	
158,099
    	
 
    	
99,331
    	
 
    	
66,550
    	
 
    	
61,219
    	
 
    	
1,122,516
    	
 
    
	
End of period
    	
 
    	
2,390,279
    	
 
    	
51,822
    	
 
    	
165,880
    	
 
    	
43,358
    	
 
    	
81,724
    	
 
    	
2,733,063
    	
 
    
	
Short term investments
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Cash and short-term investments
    	
 
    	
$
    	
2,390,279
    	
 
    	
$
    	
51,822
    	
 
    	
$
    	
165,880
    	
 
    	
$
    	
43,358
    	
 
    	
$
    	
81,724
    	
 
    	
$
    	
2,733,063
    	
 
    

 

	
 
    	
 
    	
CORPORATE &
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
COBRE
    	
 
    	
 
    	
 
    
	
2011 For the three months ended June 30
    	
 
    	
OTHER
    	
 
    	
ÇAYELI
    	
 
    	
LAS CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
PANAMA
    	
 
    	
TOTAL
    	
 
    
	
(thousands of US dollars)
    	
 
    	
 
    	
 
    	
(Turkey)
    	
 
    	
(Spain)
    	
 
    	
(Finland)
    	
 
    	
(Panama)
    	
 
    	
 
    	
 
    
	
Cash provided by (used in)   operating activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Before net change in non-cash working capital
    	
 
    	
$
    	
(12,913
    	
)
    	
$
    	
28,150
    	
 
    	
$
    	
40,199
    	
 
    	
$
    	
25,192
    	
 
    	
$
    	
(110
    	
)
    	
$
    	
80,518
    	
 
    
	
Net change in non-cash working capital
    	
 
    	
(1,895
    	
)
    	
8,112
    	
 
    	
(425
    	
)
    	
3,667
    	
 
    	
—
    	
 
    	
9,459
    	
 
    
	
 
    	
 
    	
(14,808
    	
)
    	
36,262
    	
 
    	
39,774
    	
 
    	
28,859
    	
 
    	
(110
    	
)
    	
89,977
    	
 
    
	
Cash provided by (used in)   investing activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Purchase of property, plant and equipment
    	
 
    	
(188
    	
)
    	
(5,078
    	
)
    	
(18,612
    	
)
    	
(2,383
    	
)
    	
(23,893
    	
)
    	
(50,154
    	
)
    
	
Acquisition of held to maturity investments
    	
 
    	
(8,002
    	
)
    	
(13,934
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(21,936
    	
)
    
	
Maturing of held to maturity investments
    	
 
    	
35,114
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
35,114
    	
 
    
	
Funding received under Cobre Panama option   agreement
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
4,694
    	
 
    	
4,694
    	
 
    
	
Purchase of equity investments
    	
 
    	
(624
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(624
    	
)
    
	
Purchase of short-term investments
    	
 
    	
(24,126
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(24,126
    	
)
    
	
Other
    	
 
    	
2,136
    	
 
    	
479
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
2,615
    	
 
    
	
 
    	
 
    	
4,310
    	
 
    	
(18,533
    	
)
    	
(18,612
    	
)
    	
(2,383
    	
)
    	
(19,199
    	
)
    	
(54,417
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash provided by (used in)   financing activities
    	
 
    	
479,358
    	
 
    	
—
    	
 
    	
(718
    	
)
    	
—
    	
 
    	
—
    	
 
    	
478,640
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Foreign exchange on cash held in   foreign currencies
    	
 
    	
—
    	
 
    	
(423
    	
)
    	
1,481
    	
 
    	
(120
    	
)
    	
(208
    	
)
    	
730
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intergroup funding (distributions)
    	
 
    	
152,237
    	
 
    	
(95,474
    	
)
    	
(14,030
    	
)
    	
(72,819
    	
)
    	
30,086
    	
 
    	
—
    	
 
    
	
Increase (decrease) in cash
    	
 
    	
621,097
    	
 
    	
(78,168
    	
)
    	
7,895
    	
 
    	
(46,463
    	
)
    	
10,569
    	
 
    	
514,930
    	
 
    
	
Cash:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Beginning of period
    	
 
    	
52,449
    	
 
    	
150,318
    	
 
    	
84,787
    	
 
    	
138,355
    	
 
    	
4,223
    	
 
    	
430,132
    	
 
    
	
End of period
    	
 
    	
673,546
    	
 
    	
72,150
    	
 
    	
92,682
    	
 
    	
91,892
    	
 
    	
14,792
    	
 
    	
945,062
    	
 
    
	
Short term investments
    	
 
    	
24,126
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
24,126
    	
 
    
	
Cash and short-term investments
    	
 
    	
$
    	
697,672
    	
 
    	
$
    	
72,150
    	
 
    	
$
    	
92,682
    	
 
    	
$
    	
91,892
    	
 
    	
$
    	
14,792
    	
 
    	
$
    	
969,188
    	
 
    

 

10

 

Notes to the consolidated financial statements

 

1.                  Corporate information

 

Inmet Mining Corporation is a publicly traded corporation listed on the Toronto stock exchange. Our registered and head office is 330 Bay Street, Suite 1000, Toronto Canada. Our principal activities are the exploration, development and mining of base metals.

 

2.                  Basis of presentation and statement of compliance

 

We prepared these interim consolidated financial statements using the same accounting policies and methods as those described in our consolidated financial statements for the year ended December 31, 2011, except as described in note 3. These interim financial statements are in compliance with International Accounting Standard 34, Interim Financial Reporting (IAS 34). Accordingly, certain information and disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards have been omitted or condensed. The preparation of financial statements in accordance with IAS 34 requires us to use certain critical accounting estimates and requires us to exercise judgement in applying our accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, have been set out in note 4 to our consolidated financial statements for the year ended December 31, 2011. These interim financial statements should be read in conjunction with our consolidated financial statements for the year ended December 31, 2011, which are included in our 2011 annual report.

 

3.                  Change in functional and presentation currencies to the US dollar

 

Prior to June 1, 2012, Inmet’s functional and presentation currencies were the Canadian dollar. The decision to proceed with full scale development of Cobre Panama has significantly increased Inmet’s exposure to the US dollar considering:

 

·            Inmet’s share of the development costs for the project, the vast majority of which are denominated in US dollars; and

·            our issuance of US $1.5 billion of senior unsecured notes

 

Consequently, effective June 1, 2012, the US dollar was adopted as Inmet’s functional currency. IFRS requires a change in functional currency to be accounted for prospectively. We therefore 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). The resulting translated amounts for non-monetary items are treated as their historical cost. 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.

 

Following the change in Inmet’s functional currency, we elected to change our presentation currency from Canadian dollars to US dollars as we believe that changing the presentation currency to US dollars will provide shareholders with a more accurate reflection of our underlying financial performance and position. We therefore began to report our consolidated financial statements in US dollars with our June 30, 2012 interim financial statements. The change in presentation currency represents a voluntary change in accounting policy. We have restated all comparative financial statements from previously reported Canadian dollar amounts to US dollars using the Transition Rate.

 

11

 

4.                  Cash and short-term investments

 

	
 
    	
 
    	
June 30,
    2012
    	
 
    	
December 31,
   2011
    	
 
    	
December 31,
   2010
    	
 
    
	
Cash and cash   equivalents:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Liquidity funds
    	
 
    	
$
    	
2,505,158
    	
 
    	
$
    	
375,523
    	
 
    	
$
    	
188,415
    	
 
    
	
Term deposits
    	
 
    	
8,626
    	
 
    	
6,548
    	
 
    	
51,306
    	
 
    
	
Overnight deposits
    	
 
    	
99,414
    	
 
    	
70,389
    	
 
    	
4,182
    	
 
    
	
Bankers acceptances
    	
 
    	
—
    	
 
    	
891
    	
 
    	
—
    	
 
    
	
Money market funds
    	
 
    	
33,910
    	
 
    	
126,336
    	
 
    	
38,774
    	
 
    
	
Corporate
    	
 
    	
—
    	
 
    	
11,593
    	
 
    	
—
    	
 
    
	
Bank deposits
    	
 
    	
85,955
    	
 
    	
31,722
    	
 
    	
26,304
    	
 
    
	
Provincial short-term   notes
    	
 
    	
—
    	
 
    	
166,996
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
2,733,063
    	
 
    	
789,998
    	
 
    	
308,981
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Short-term investments:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Corporate
    	
 
    	
—
    	
 
    	
48,588
    	
 
    	
—
    	
 
    
	
Term deposits
    	
 
    	
—
    	
 
    	
—
    	
 
    	
7,064
    	
 
    
	
Provincial short term   notes
    	
 
    	
—
    	
 
    	
187,191
    	
 
    	
—
    	
 
    
	
Bankers acceptances
    	
 
    	
—
    	
 
    	
22,680
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
—
    	
 
    	
258,459
    	
 
    	
7,064
    	
 
    
	
Total cash and short-term   instruments
    	
 
    	
$
    	
2,733,063
    	
 
    	
$
    	
1,048,457
    	
 
    	
$
    	
316,045
    	
 
    

 

5.                  Restricted cash

 

	
 
    	
 
    	
June 30,
    2012
    	
 
    	
December 31,
   2011
    	
 
    	
December 31,
   2010
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Collateralized cash for   letter of credit facility — Inmet Mining
    	
 
    	
$
    	
19,312
    	
 
    	
$
    	
16,306
    	
 
    	
$
    	
16,368
    	
 
    
	
Collateralized cash for   letters of credit — Las Cruces
    	
 
    	
54,263
    	
 
    	
52,451
    	
 
    	
50,480
    	
 
    
	
Collateralized cash for   Pyhäsalmi reclamation
    	
 
    	
1,550
    	
 
    	
1,565
    	
 
    	
1,580
    	
 
    
	
 
    	
 
    	
75,125
    	
 
    	
70,322
    	
 
    	
68,428
    	
 
    
	
Less current portion:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Collateralized cash for   letters of credit — Las Cruces
    	
 
    	
(920
    	
)
    	
(784
    	
)
    	
(597
    	
)
    
	
 
    	
 
    	
$
    	
74,205
    	
 
    	
$
    	
69,538
    	
 
    	
$
    	
67,831
    	
 
    

 

6.                  Long-term debt

 

	
 
    	
 
    	
June 30,
    2012
    	
 
    	
December 31,
   2011
    	
 
    	
December 31,
   2010
    	
 
    
	
Senior unsecured   notes(a):
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Principal
    	
 
    	
$
    	
1,500,000
    	
 
    	
$
    	
—
    	
 
    	
$
    	
—
    	
 
    
	
Transaction costs
    	
 
    	
(54,085
    	
)
    	
—
    	
 
    	
—
    	
 
    
	
Cumulative accretion of   transaction costs
    	
 
    	
581
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
1,446,496
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Promissory note
    	
 
    	
16,772
    	
 
    	
16,581
    	
 
    	
16,091
    	
 
    
	
Total long-term debt
    	
 
    	
$
    	
1,463,268
    	
 
    	
$
    	
16,581
    	
 
    	
$
    	
16,091
    	
 
    

 

12

 

(a) On May 18, 2012, we issued $1,500 million aggregate principal amount of 8.75 percent senior unsecured notes (Notes) due 2020. The Notes were priced at 98.584 percent of their face value, yielding proceeds of $1,445 million net of the discount and directly attributable transaction costs. The Notes have been designated as Other liabilities and accounted for initially at fair value and subsequently at amortized cost using the effective interest rate method with a yield to maturity of 9.4 percent. 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 of this project.

 

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.

 

We may redeem, prior to June 1, 2015, up to 35 percent of the Notes with the net proceeds of certain equity offerings at a redemption price equal to 108.75 percent of the principal amount plus accrued interest. Prior to June 1, 2016, we may redeem the Notes in whole or in part at 100 percent of their principal amount, plus accrued interest, plus an amount equal to the greater of 1.0 percent of the principal amount of the note to be redeemed and the excess, if any, of the present value of the June 1, 2016 redemption price plus required interest payments through June 1, 2016 over the principal amount of the note. We may redeem the Notes at any time on or after June 1, 2016 at the redemption prices and periods set forth below, plus accrued and unpaid interest:

 

	
June 1, 2016
    	
 
    	
104.375 percent
    
	
June 1, 2017
    	
 
    	
102.188 percent
    
	
June 1, 2018 and thereafter
    	
 
    	
100.000 percent
    

 

7.                  Stock-based compensation

 

During 2012, the following issuances were made under our equity-based compensation plans:

 

Stock option plan

 

On February 22, 2012, a grant of 83,084 options was made to senior management, with an exercise price of Cdn $64.17, graded vesting and an expiry date of February 21, 2019. We calculated the compensation expense for these options using the Black Scholes valuation model and assuming the following weighted average parameters, resulting in a weighted average fair value per option of Cdn $29.23 per option: 5 year expected life, 50 percent expected volatility, expected dividend rate of 0.3 percent annually and a risk free interest rate of 1.5 percent.

 

Performance share unit (PSU) plan

 

On February 21, 2012, the Board granted 36,580 PSUs to senior executives based on a 5 day Volume Weighted Average Price prior to the grant date of Cdn $64.17 and a 3 year vesting period from January 1, 2012 to December 31, 2014.

 

We used a Monte Carlo simulation model to calculate the compensation expense for the PSUs assuming no forfeitures, 3 year historical average volatilities and a 3-year risk free interest rate of 1.0%, resulting in a June 30, 2012 fair value per PSU of Cdn $41.73.

 

13

 

We recognized the following share-based compensation expense in general and administration relating to all outstanding equity-based awards:

 

	
 
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
    June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Stock option plan
    	
 
    	
$
    	
1,252
    	
 
    	
$
    	
922
    	
 
    	
$
    	
2,941
    	
 
    	
$
    	
922
    	
 
    
	
Performance share unit   plan
    	
 
    	
(182
    	
)
    	
183
    	
 
    	
63
    	
 
    	
183
    	
 
    
	
Long-term incentive plan   (LTIP) 0 
    	
 
    	
6,759
    	
 
    	
—
    	
 
    	
6,759
    	
 
    	
735
    	
 
    
	
Deferred share unit plan
    	
 
    	
255
    	
 
    	
217
    	
 
    	
471
    	
 
    	
556
    	
 
    
	
Share award plan
    	
 
    	
48
    	
 
    	
147
    	
 
    	
95
    	
 
    	
292
    	
 
    
	
 
    	
 
    	
$
    	
8,132
    	
 
    	
$
    	
1,469
    	
 
    	
10,329
    	
 
    	
$
    	
2,688
    	
 
    
														

 

(a) As a result of the decision to proceed with full construction of Cobre Panama, we recognized a stock based compensation expense of $ 7 million this quarter on the LTIP units issued in previous years that relate to the project. This expense represents the cumulative impact from the units’ grant dates to June 30, 2012 on a 100 percent award basis as no value was attributed to these units prior to a positive construction decision for Cobre Panama.

 

8.                  Accumulated other comprehensive loss

 

Accumulated other comprehensive loss includes:

 

	
 
    	
 
    	
June 30,
   2012
    	
 
    	
December 31,
   2011
    	
 
    	
December 31,
   2010
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Unrealized losses on gold   forward contract sales
    	
 
    	
$
    	
—
    	
 
    	
$
    	
—
    	
 
    	
$
    	
(5,481
    	
)
    
	
Unrealized losses on   investments (net of tax of $95) (December 31, 2011 - $94,   December 31, 2010 - $76)
    	
 
    	
(939
    	
)
    	
(534
    	
)
    	
(438
    	
)
    
	
Currency translation   adjustment
    	
 
    	
(145,960
    	
)
    	
(159,010
    	
)
    	
(173,408
    	
)
    
	
Accumulated   other comprehensive income loss
    	
 
    	
$
    	
(146,899
    	
)
    	
$
    	
(159,544
    	
)
    	
$
    	
(179,327
    	
)
    

 

Currency translation adjustments

 

The table below is breakdown of our currency translation adjustments.

 

	
 
    	
 
    	
June 30,
   2012
    	
 
    	
December 31,
   2011
    	
 
    	
December 31,
   2010
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Pyhäsalmi (euro   functional currency)
    	
 
    	
$
    	
(29,612
    	
)
    	
$
    	
(27,378
    	
)
    	
$
    	
(23,580
    	
)
    
	
Las Cruces (euro   functional currency)
    	
 
    	
(112,711
    	
)
    	
(103,071
    	
)
    	
(90,456
    	
)
    
	
Çayeli (US dollar   functional currency)
    	
 
    	
(12,344
    	
)
    	
(15,068
    	
)
    	
(20,243
    	
)
    
	
Cobre Panama (US dollar   functional currency)
    	
 
    	
8,707
    	
 
    	
(13,493
    	
)
    	
(28,757
    	
)
    
	
Ok Tedi (US dollar   functional currency)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(10,372
    	
)
    
	
 
    	
 
    	
$
    	
(145,960
    	
)
    	
$
    	
(159,010
    	
)
    	
$
    	
(173,408
    	
)
    

 

14

 

9.                  Sale of 20 percent interest in Cobre Panama

 

On April 25, 2012, Korea Panama Mining Corporation (KPMC) completed its acquisition of a 20 percent interest in Minera Panama, owner and developer of Cobre Panama. KPMC acquired its interest for $161 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to that date. As we continued to control Minera Panama after the closing of this transaction, it is treated as a capital transaction with the $8 million difference between 20 percent of our book value of Cobre Panama and the consideration received recognized in retained earnings.

 

10.           Investment and other income

 

	
 
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
    June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Interest income
    	
 
    	
$
    	
3,931
    	
 
    	
$
    	
4,071
    	
 
    	
$
    	
8,183
    	
 
    	
$
    	
6,755
    	
 
    
	
Dividend and royalty   income
    	
 
    	
976
    	
 
    	
452
    	
 
    	
1,460
    	
 
    	
1,033
    	
 
    
	
Foreign exchange gain   (loss)
    	
 
    	
40,315
    	
 
    	
(259
    	
)
    	
28,244
    	
 
    	
(10,740
    	
)
    
	
Other
    	
 
    	
(119
    	
)
    	
317
    	
 
    	
953
    	
 
    	
1,943
    	
 
    
	
 
    	
 
    	
$
    	
45,103
    	
 
    	
$
    	
4,581
    	
 
    	
$
    	
38,840
    	
 
    	
$
    	
(1,009
    	
)
    

 

Foreign exchange loss is a result of:

 

	
 
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
    June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Translation of US dollar   cash held in euro based entities
    	
 
    	
$
    	
14,791
    	
 
    	
$
    	
—
    	
 
    	
$
    	
10,399
    	
 
    	
$
    	
—
    	
 
    
	
Translation of US dollar   cash held by Corporate prior to June 2012
    	
 
    	
27,457
    	
 
    	
48
    	
 
    	
27,338
    	
 
    	
$
    	
(7,927
    	
)
    
	
Translation of US dollar   senior unsecured notes prior to June 2012
    	
 
    	
(16,884
    	
)
    	
—
    	
 
    	
(16,884
    	
)
    	
—
    	
 
    
	
Translation of US dollar   held-to-maturity investments prior to June 2012 
    	
 
    	
9,262
    	
 
    	
—
    	
 
    	
4,330
    	
 
    	
(2,760
    	
)
    
	
Translation of Cdn dollar   cash held by Corporate subsequent to May 2012
    	
 
    	
977
    	
 
    	
(1,354
    	
)
    	
977
    	
 
    	
—
    	
 
    
	
Translation of Cdn dollar   held-to-maturity investments subsequent to May 2012
    	
 
    	
3,042
    	
 
    	
—
    	
 
    	
3,042
    	
 
    	
—
    	
 
    
	
Translation of other   monetary assets and liabilities
    	
 
    	
1,670
    	
 
    	
1,047
    	
 
    	
(958
    	
)
    	
(53
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
$
    	
40,315
    	
 
    	
$
    	
(259
    	
)
    	
$
    	
28,244
    	
 
    	
$
    	
(10,740
    	
)
    

 

15

 

11.           Finance costs

 

	
 
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
    June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Interest on note payable
    	
 
    	
$
    	
263
    	
 
    	
$
    	
284
    	
 
    	
$
    	
528
    	
 
    	
$
    	
554
    	
 
    
	
Accretion on note payable
    	
 
    	
174
    	
 
    	
167
    	
 
    	
342
    	
 
    	
322
    	
 
    
	
Accretion on provisions   and capital lease obligations
    	
 
    	
1,942
    	
 
    	
1,859
    	
 
    	
4,105
    	
 
    	
3,691
    	
 
    
	
 
    	
 
    	
$
    	
2,379
    	
 
    	
$
    	
2,310
    	
 
    	
$
    	
4,975
    	
 
    	
$
    	
4,567
    	
 
    

 

12.           Income tax

 

For the three months ended June 30, 2012:

 

	
 
    	
 
    	
Corporate
   and other
    	
 
    	
Çayeli
    (Turkey)
    	
 
    	
Las
   Cruces
   (Spain)
    	
 
    	
Pyhäsalmi
    (Finland)
    	
 
    	
Total
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current income taxes 
    	
 
    	
$
    	
586
    	
 
    	
$
    	
9,948
    	
 
    	
$
    	
—
    	
 
    	
$
    	
5,805
    	
 
    	
$
    	
16,339
    	
 
    
	
Deferred income taxes
    	
 
    	
—
    	
 
    	
(2,060
    	
)
    	
17,238
    	
 
    	
(73
    	
)
    	
15,105
    	
 
    
	
Income tax expense
    	
 
    	
$
    	
586
    	
 
    	
$
    	
7,888
    	
 
    	
$
    	
17,238
    	
 
    	
$
    	
5,732
    	
 
    	
$
    	
31,444
    	
 
    

 

For the three months ended June 30, 2011:

 

	
 
    	
 
    	
Corporate
   and other
    	
 
    	
Çayeli
    (Turkey)
    	
 
    	
Las Cruces
   (Spain)
    	
 
    	
Pyhäsalmi
    (Finland)
    	
 
    	
Total
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current income taxes 
    	
 
    	
$
    	
316
    	
 
    	
$
    	
11,030
    	
 
    	
$
    	
462
    	
 
    	
$
    	
6,475
    	
 
    	
$
    	
18,283
    	
 
    
	
Deferred income taxes
    	
 
    	
(29
    	
)
    	
526
    	
 
    	
1,898
    	
 
    	
(90
    	
)
    	
2,305
    	
 
    
	
Income tax expense
    	
 
    	
$
    	
287
    	
 
    	
$
    	
11,556
    	
 
    	
$
    	
2,360
    	
 
    	
$
    	
6,385
    	
 
    	
$
    	
20,588
    	
 
    

 

For the six months ended June 30, 2012:

 

	
 
    	
 
    	
Corporate
   and other
    	
 
    	
Çayeli
    (Turkey)
    	
 
    	
Las
   Cruces
   (Spain)
    	
 
    	
Pyhäsalmi
    (Finland)
    	
 
    	
Total
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current income taxes 
    	
 
    	
$
    	
728
    	
 
    	
$
    	
18,597
    	
 
    	
$
    	
—
    	
 
    	
$
    	
11,073
    	
 
    	
$
    	
30,398
    	
 
    
	
Deferred income taxes
    	
 
    	
(6
    	
)
    	
(1,229
    	
)
    	
28,451
    	
 
    	
(158
    	
)
    	
27,058
    	
 
    
	
Income tax expense
    	
 
    	
$
    	
722
    	
 
    	
$
    	
17,368
    	
 
    	
$
    	
28,451
    	
 
    	
$
    	
10,915
    	
 
    	
$
    	
57,456
    	
 
    

 

For the six months ended June 30, 2011:

 

	
 
    	
 
    	
Corporate
   and other
    	
 
    	
Çayeli
    (Turkey)
    	
 
    	
Las Cruces
   (Spain)
    	
 
    	
Pyhäsalmi
    (Finland)
    	
 
    	
Total
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current income taxes 
    	
 
    	
$
    	
556
    	
 
    	
$
    	
21,283
    	
 
    	
$
    	
462
    	
 
    	
$
    	
14,155
    	
 
    	
$
    	
36,456
    	
 
    
	
Deferred income taxes
    	
 
    	
(72
    	
)
    	
1,559
    	
 
    	
9,156
    	
 
    	
(215
    	
)
    	
10,428
    	
 
    
	
Income tax expense
    	
 
    	
$
    	
484
    	
 
    	
$
    	
22,842
    	
 
    	
$
    	
9,618
    	
 
    	
$
    	
13,940
    	
 
    	
$
    	
46,884
    	
 
    

 

16

 

 

13.           Net income per share

 

	
 
    	
 
    	
three months ended June30
    	
 
    	
six months ended June 30
    	
 
    
	
(thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
Income from continuing   operations available to common shareholders
    	
 
    	
$
    	
94,458
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
187,539
    	
 
    	
$
    	
111,783
    	
 
    
	
Income from discontinued   operations available to common shareholders
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
80,786
    	
 
    
	
Net income available to   common shareholders
    	
 
    	
$
    	
94,458
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
187,539
    	
 
    	
$
    	
192,569
    	
 
    

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
Weighted average common   shares outstanding
    	
 
    	
69,366
    	
 
    	
65,393
    	
 
    	
69,358
    	
 
    	
63,483
    	
 
    
	
Plus incremental shares   from assumed conversions:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Deferred share units
    	
 
    	
98
    	
 
    	
117
    	
 
    	
98
    	
 
    	
117
    	
 
    
	
Long term incentive plan   units
    	
 
    	
312
    	
 
    	
22
    	
 
    	
312
    	
 
    	
37
    	
 
    
	
Stock options
    	
 
    	
—
    	
 
    	
1
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Diluted weighted average   common shares outstanding
    	
 
    	
69,776
    	
 
    	
65,533
    	
 
    	
69,768
    	
 
    	
63,637
    	
 
    

 

The table below shows our earnings per common share for the three months ended June 30.

 

	
 
    	
 
    	
three months ended June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
(US dollars per share)
    	
 
    	
Basic
    	
 
    	
Diluted
    	
 
    	
Basic
    	
 
    	
Diluted
    	
 
    
	
Net income from   continuing operations per share
    	
 
    	
$
    	
1.36
    	
 
    	
$
    	
1.35
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
0.83
    	
 
    
	
Income from discontinued   operations per share
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Net income per share
    	
 
    	
$
    	
1.36
    	
 
    	
$
    	
1.35
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
0.83
    	
 
    

 

The table below shows our earnings per common share for the six months ended June 30.

 

	
 
    	
 
    	
six months ended June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
(US dollars per share)
    	
 
    	
Basic
    	
 
    	
Diluted
    	
 
    	
Basic
    	
 
    	
Diluted
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income from   continuing operations per share
    	
 
    	
$
    	
2.70
    	
 
    	
$
    	
2.69
    	
 
    	
$
    	
1.76
    	
 
    	
$
    	
1.75
    	
 
    
	
Income from discontinued   operations per share
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1.27
    	
 
    	
1.27
    	
 
    
	
Net income per share
    	
 
    	
$
    	
2.70
    	
 
    	
$
    	
2.69
    	
 
    	
$
    	
3.03
    	
 
    	
$
    	
3.02
    	
 
    

 

17

 

14.           Statements of cash flows

 

The tables below show the components of our net change in non-cash working capital by segment.

 

For the three months ended June 30, 2012:

 

	
 
    	
 
    	
Corporate
   and other
    	
 
    	
Çayeli
    (Turkey)
    	
 
    	
Las Cruces
   (Spain)
    	
 
    	
Pyhäsalmi
    (Finland)
    	
 
    	
Total
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts   receivable
    	
 
    	
$
    	
(1,914
    	
)
    	
$
    	
19,563
    	
 
    	
$
    	
(4,464
    	
)
    	
$
    	
3,139
    	
 
    	
$
    	
16,324
    	
 
    
	
Inventories
    	
 
    	
—
    	
 
    	
(2,335
    	
)
    	
(2,536
    	
)
    	
21
    	
 
    	
(4,850
    	
)
    
	
Accounts   payable and accrued liabilities
    	
 
    	
4,485
    	
 
    	
(2,023
    	
)
    	
6,647
    	
 
    	
2,681
    	
 
    	
11,790
    	
 
    
	
Taxes   payable
    	
 
    	
1,078
    	
 
    	
(3,453
    	
)
    	
(75
    	
)
    	
(1,843
    	
)
    	
(4,293
    	
)
    
	
Other
    	
 
    	
2
    	
 
    	
(82
    	
)
    	
—
    	
 
    	
(2
    	
)
    	
(82
    	
)
    
	
 
    	
 
    	
$
    	
3,651
    	
 
    	
$
    	
11,670
    	
 
    	
$
    	
(428
    	
)
    	
$
    	
3,996
    	
 
    	
$
    	
18,889
    	
 
    

 

For the three months ended June 30, 2011:

 

	
 
    	
 
    	
Corporate
   and other
    	
 
    	
Çayeli
    (Turkey)
    	
 
    	
Las Cruces
   (Spain)
    	
 
    	
Pyhäsalmi
    (Finland)
    	
 
    	
Total
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts receivable
    	
 
    	
$
    	
(364
    	
)
    	
$
    	
13,127
    	
 
    	
$
    	
(1,970
    	
)
    	
$
    	
12,281
    	
 
    	
$
    	
23,074
    	
 
    
	
Inventories
    	
 
    	
—
    	
 
    	
(1,544
    	
)
    	
(2,702
    	
)
    	
(2,813
    	
)
    	
(7,059
    	
)
    
	
Accounts payable and   accrued liabilities
    	
 
    	
(936
    	
)
    	
(1,485
    	
)
    	
3,785
    	
 
    	
671
    	
 
    	
2,035
    	
 
    
	
Taxes payable
    	
 
    	
(571
    	
)
    	
(2,067
    	
)
    	
462
    	
 
    	
(6,472
    	
)
    	
(8,648
    	
)
    
	
Other
    	
 
    	
(24
    	
)
    	
81
    	
 
    	
—
    	
 
    	
—
    	
 
    	
57
    	
 
    
	
 
    	
 
    	
$
    	
(1,895
    	
)
    	
$
    	
8,112
    	
 
    	
$
    	
(425
    	
)
    	
$
    	
3,667
    	
 
    	
$
    	
9,459
    	
 
    

 

18

 

For the six months ended June 30, 2012:

 

	
 
    	
 
    	
Corporate
   and other
    	
 
    	
Çayeli
    (Turkey)
    	
 
    	
Las Cruces
   (Spain)
    	
 
    	
Pyhäsalmi
    (Finland)
    	
 
    	
Total
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts   receivable
    	
 
    	
$
    	
(811
    	
)
    	
$
    	
(14,979
    	
)
    	
$
    	
1,296
    	
 
    	
$
    	
6,641
    	
 
    	
$
    	
(7,853
    	
)
    
	
Inventories
    	
 
    	
—
    	
 
    	
1,987
    	
 
    	
(4,479
    	
)
    	
1,245
    	
 
    	
(1,247
    	
)
    
	
Accounts   payable and accrued liabilities
    	
 
    	
(55
    	
)
    	
(8,726
    	
)
    	
9,013
    	
 
    	
2,327
    	
 
    	
2,559
    	
 
    
	
Taxes   payable
    	
 
    	
1,742
    	
 
    	
(1,744
    	
)
    	
(75
    	
)
    	
(2,558
    	
)
    	
(2,635
    	
)
    
	
Other
    	
 
    	
(283
    	
)
    	
(84
    	
)
    	
—
    	
 
    	
(2
    	
)
    	
(369
    	
)
    
	
 
    	
 
    	
$
    	
593
    	
 
    	
$
    	
(23,546
    	
)
    	
$
    	
5,755
    	
 
    	
$
    	
7,653
    	
 
    	
$
    	
(9,545
    	
)
    

 

For the six months ended June 30, 2011:

 

	
 
    	
 
    	
Corporate
   and other
    	
 
    	
Çayeli
    (Turkey)
    	
 
    	
Las Cruces
   (Spain)
    	
 
    	
Pyhäsalmi
    (Finland)
    	
 
    	
Total
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts receivable
    	
 
    	
$
    	
(1,099
    	
)
    	
$
    	
20,473
    	
 
    	
$
    	
(7,049
    	
)
    	
$
    	
21,069
    	
 
    	
$
    	
33,394
    	
 
    
	
Inventories
    	
 
    	
—
    	
 
    	
(856
    	
)
    	
3,079
    	
 
    	
(2,877
    	
)
    	
(654
    	
)
    
	
Accounts payable and   accrued liabilities
    	
 
    	
(3,036
    	
)
    	
(699
    	
)
    	
8,336
    	
 
    	
(1,653
    	
)
    	
2,948
    	
 
    
	
Taxes payable
    	
 
    	
(1,929
    	
)
    	
(3,994
    	
)
    	
462
    	
 
    	
(1,632
    	
)
    	
(7,093
    	
)
    
	
Other
    	
 
    	
(518
    	
)
    	
78
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(440
    	
)
    
	
 
    	
 
    	
$
    	
(6,582
    	
)
    	
$
    	
15,002
    	
 
    	
$
    	
4,828
    	
 
    	
$
    	
14,907
    	
 
    	
$
    	
28,155
    	
 
    

 

15.           Capital commitments

 

As at June 30, 2012, Cobre Panama had committed $1,226 million on a 100 percent basis for the design and supply of the coal-fired power plant, two SAG mills, four ball mills and the related gearless drives, engineering, and other construction activities.

 

19Exhibit 4.5

 

 

 

Quarterly Report

Three and Six Months Ended June 30, 2012

 

All amounts are in US dollars, unless otherwise stated.

 

Management’s Interim Discussion and Analysis

 

The following is management’s interim discussion and analysis of operations and consolidated financial condition and should be read in conjunction with the consolidated audited financial statements and management’s discussion and analysis included in Inmet’s 2011 Annual Report.

 

Highlights

 

·             Strong earnings from operations

Earnings from operations were $109 million compared to $85 million in the second quarter of 2011. Significantly higher copper sales volumes increased operating earnings by $83 million — a result of higher production at Las Cruces and Çayeli. Lower realized copper and zinc prices and lower zinc sales volumes compared to the second quarter of 2011 reduced earnings by $43 million.

 

·             Las Cruces achieved design capacity for each month of the quarter

Las Cruces produced 18,300 tonnes of copper cathode in the quarter compared to 8,500 tonnes produced during the same period of 2011. Plant production exceeded 6,000 tonnes of copper cathode (design capacity) each month this quarter and unit costs decreased to $1.04 per pound of copper cathode produced.

 

·             Inmet begins reporting financial results in US dollars

Effective June 1, 2012, the US dollar was adopted as Inmet’s functional and presentation currencies. We have restated all comparative financial statements from previously reported Canadian dollar amounts to US dollars using the May 31, 2012 transition rate of US$0.97 per Canadian dollar (see page 3 for more details).

 

·             Foreign exchange gains increased net income from continuing operations

We recognized $40 million in foreign exchange gains this quarter, mainly on the revaluation of our US dollar denominated cash and long-term bonds held in Inmet Mining prior to the change in its functional currency from the Canadian dollar to the US dollar, and US dollar cash held in our euro-based entities.

 

·             We began full scale construction for Cobre Panama

During May 2012, we announced the completion of basic engineering for Cobre Panama, the launch of a financing plan to fully fund our 80 percent share of the related development costs and issued Full Notice to Proceed (FNTP) to start construction of the project.

 

·             Issuance of $1.5 billion in senior unsecured notes

On May 18, 2012, we issued $1.5 billion 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 8.75 percent and mature on June 1, 2020.

 

1

 

Key financial data

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands, except per share amounts)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
FINANCIAL HIGHLIGHTS
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Sales
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross sales
    	
 
    	
$
    	
251,395
    	
 
    	
$
    	
214,894
    	
 
    	
+17
    	
%
    	
$
    	
536,922
    	
 
    	
$
    	
461,085
    	
 
    	
+16
    	
%
    
	
Net income
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income from   continuing operations
    	
 
    	
$
    	
94,179
    	
 
    	
$
    	
54,268
    	
 
    	
+74
    	
%
    	
$
    	
187,260
    	
 
    	
$
    	
111,783
    	
 
    	
+68
    	
%
    
	
Net income from   continuing operations per share
    	
 
    	
$
    	
1.36
    	
 
    	
$
    	
0.83
    	
 
    	
+64
    	
%
    	
$
    	
2.70
    	
 
    	
$
    	
1.76
    	
 
    	
+53
    	
%
    
	
Net income from   discontinued operations
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
80,786
    	
 
    	
-100
    	
%
    
	
Net income from   discontinued operations per share
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
$
    	
1.27
    	
 
    	
-100
    	
%
    
	
Net income attributable   to Inmet shareholders
    	
 
    	
$
    	
94,458
    	
 
    	
$
    	
54,268
    	
 
    	
+74
    	
%
    	
$
    	
187,539
    	
 
    	
$
    	
192,569
    	
 
    	
-3
    	
%
    
	
Net income per share
    	
 
    	
$
    	
1.36
    	
 
    	
$
    	
0.83
    	
 
    	
+64
    	
%
    	
$
    	
2.70
    	
 
    	
$
    	
3.03
    	
 
    	
-11
    	
%
    
	
Cash flow
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash flow provided by   operating activities
    	
 
    	
$
    	
176,333
    	
 
    	
$
    	
89,977
    	
 
    	
+96
    	
%
    	
$
    	
290,845
    	
 
    	
$
    	
204,395
    	
 
    	
+42
    	
%
    
	
Cash flow provided by   operating activities per share (1)
    	
 
    	
$
    	
2.54
    	
 
    	
$
    	
1.38
    	
 
    	
+84
    	
%
    	
$
    	
4.19
    	
 
    	
$
    	
3.22
    	
 
    	
+30
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Capital spending (2)
    	
 
    	
$
    	
192,050
    	
 
    	
$
    	
50,154
    	
 
    	
+283
    	
%
    	
$
    	
274,658
    	
 
    	
$
    	
89,589
    	
 
    	
+207
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
OPERATING HIGHLIGHTS
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Production
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper (tonnes)
    	
 
    	
29,600
    	
 
    	
19,200
    	
 
    	
+54
    	
%
    	
54,400
    	
 
    	
36,900
    	
 
    	
+47
    	
%
    
	
Zinc (tonnes)
    	
 
    	
14,700
    	
 
    	
18,300
    	
 
    	
-20
    	
%
    	
29,800
    	
 
    	
39,500
    	
 
    	
-25
    	
%
    
	
Pyrite (tonnes)
    	
 
    	
214,700
    	
 
    	
198,200
    	
 
    	
+8
    	
%
    	
425,900
    	
 
    	
384,200
    	
 
    	
+11
    	
%
    
	
Copper cash cost (US $ per pound) (3)
    	
 
    	
$
    	
0.86
    	
 
    	
$
    	
1.04
    	
 
    	
-17
    	
%
    	
$
    	
0.91
    	
 
    	
$
    	
0.99
    	
 
    	
-8
    	
%
    

 

	
 
    	
 
    	
as at June 30
    	
 
    	
as at December 31
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
FINANCIAL CONDITION
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current ratio
    	
 
    	
12.1 to 1
    	
 
    	
9.3 to 1
    	
 
    
	
Gross debt to total   equity
    	
 
    	
40
    	
%
    	
1
    	
%
    
	
Net working capital   balance (millions)
    	
 
    	
$
    	
2,783
    	
 
    	
$
    	
1,263
    	
 
    
	
Cash balance and   long-term bonds (millions)
    	
 
    	
$
    	
3,276
    	
 
    	
$
    	
1,652
    	
 
    
	
Gross debt (millions)
    	
 
    	
$
    	
1,463
    	
 
    	
$
    	
17
    	
 
    
	
Shareholders’ equity   (millions)
    	
 
    	
$
    	
3,690
    	
 
    	
$
    	
3,306
    	
 
    

 

(1)          Cash flow provided by operating activities divided by average shares outstanding for the period.

(2)          The six months ended June 30, 2012 includes capital spending of $250 million at Cobre Panama. The six months ended June 30, 2011 includes capital spending of $46 million at Cobre Panama.

(3)          Copper cash cost per pound is a non-GAAP financial measure — see Supplementary financial information on pages 28 to 30.

 

2

 

Second quarter report

 

We prepared this report as of July 30, 2012.

 

In this report, Inmet means Inmet Mining Corporation and we, us and our mean Inmet and/or its subsidiaries and joint ventures. This quarter refers to the three months ended June 30, 2012. Revised objective is as of July 30, 2012.

 

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

 

The decision to proceed with full scale development of 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 have reported our results in US dollars for the first time this quarter. 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.

 

3

 

	
Where   to find it
    	
 
    
	
 
    	
 
    
	
Our financial results
    	
5
    
	
Key changes in 2012
    	
5
    
	
Understanding our performance
    	
6
    
	
Earnings   from operations
    	
8
    
	
Corporate   costs
    	
13
    
	
Results of our operations
    	
15
    
	
Çayeli
    	
16
    
	
Las   Cruces
    	
18
    
	
Pyhäsalmi
    	
20
    
	
Status of our development   project
    	
22
    
	
Cobre   Panama
    	
22
    
	
Managing Our Liquidity
    	
24
    
	
Financial condition
    	
27
    
	
Supplementary financial   information
    	
28
    

 

4

 

Our financial results

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands, except per share amounts)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
EARNINGS FROM OPERATIONS (1)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
$
    	
24,202
    	
 
    	
$
    	
34,148
    	
 
    	
-29
    	
%
    	
$
    	
90,204
    	
 
    	
$
    	
83,985
    	
 
    	
+7
    	
%
    
	
Las Cruces
    	
 
    	
65,103
    	
 
    	
20,793
    	
 
    	
+213
    	
%
    	
116,722
    	
 
    	
50,395
    	
 
    	
+132
    	
%
    
	
Pyhäsalmi
    	
 
    	
26,678
    	
 
    	
30,056
    	
 
    	
-11
    	
%
    	
52,808
    	
 
    	
63,414
    	
 
    	
-17
    	
%
    
	
Other
    	
 
    	
(6,895
    	
)
    	
—
    	
 
    	
—
    	
 
    	
(4,148
    	
)
    	
—
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
109,088
    	
 
    	
84,997
    	
 
    	
+28
    	
%
    	
255,586
    	
 
    	
197,794
    	
 
    	
+29
    	
%
    
	
DEVELOPMENT AND EXPLORATION
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Corporate development and   exploration
    	
 
    	
(10,290
    	
)
    	
(4,417
    	
)
    	
+133
    	
%
    	
(19,091
    	
)
    	
(17,401
    	
)
    	
+10
    	
%
    
	
CORPORATE COSTS
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
General and   administration
    	
 
    	
(15,899
    	
)
    	
(7,995
    	
)
    	
+99
    	
%
    	
(25,644
    	
)
    	
(16,150
    	
)
    	
+59
    	
%
    
	
Investment and other   income
    	
 
    	
45,103
    	
 
    	
4,581
    	
 
    	
+885
    	
%
    	
38,840
    	
 
    	
(1,009
    	
)
    	
-3,949
    	
%
    
	
Finance costs
    	
 
    	
(2,379
    	
)
    	
(2,310
    	
)
    	
+3
    	
%
    	
(4,975
    	
)
    	
(4,567
    	
)
    	
+9
    	
%
    
	
Income and capital taxes
    	
 
    	
(31,444
    	
)
    	
(20,588
    	
)
    	
+53
    	
%
    	
(57,456
    	
)
    	
(46,884
    	
)
    	
+23
    	
%
    
	
 
    	
 
    	
(4,619
    	
)
    	
(26,312
    	
)
    	
-82
    	
%
    	
(49,235
    	
)
    	
(68,610
    	
)
    	
-28
    	
%
    
	
Net income from   continuing operations
    	
 
    	
94,179
    	
 
    	
54,268
    	
 
    	
+74
    	
%
    	
187,260
    	
 
    	
111,783
    	
 
    	
+68
    	
%
    
	
Income from discontinued   operation (net of taxes)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
80,786
    	
 
    	
-100
    	
%
    
	
Non-controlling interest
    	
 
    	
279
    	
 
    	
—
    	
 
    	
+100
    	
%
    	
279
    	
 
    	
—
    	
 
    	
+100
    	
%
    
	
Net income attributable to Inmet shareholders
    	
 
    	
$
    	
94,458
    	
 
    	
$
    	
54,268
    	
 
    	
+74
    	
%
    	
$
    	
187,539
    	
 
    	
$
    	
192,569
    	
 
    	
-3
    	
%
    
	
Income from continuing operations per common  share
    	
 
    	
$
    	
1.36
    	
 
    	
$
    	
0.83
    	
 
    	
+64
    	
%
    	
$
    	
2.70
    	
 
    	
$
    	
1.76
    	
 
    	
+53
    	
%
    
	
Diluted income from continuing operations per  common share
    	
 
    	
$
    	
1.35
    	
 
    	
$
    	
0.83
    	
 
    	
+63
    	
%
    	
$
    	
2.69
    	
 
    	
$
    	
1.75
    	
 
    	
+54
    	
%
    
	
Basic net income per common share
    	
 
    	
$
    	
1.36
    	
 
    	
$
    	
0.83
    	
 
    	
+64
    	
%
    	
$
    	
2.70
    	
 
    	
$
    	
3.03
    	
 
    	
-11
    	
%
    
	
Diluted net income per common share
    	
 
    	
$
    	
1.35
    	
 
    	
$
    	
0.83
    	
 
    	
+63
    	
%
    	
$
    	
2.69
    	
 
    	
$
    	
3.02
    	
 
    	
-11
    	
%
    
	
Weighted average shares outstanding 
    	
 
    	
69,366
    	
 
    	
65,393
    	
 
    	
+6
    	
%
    	
69,358
    	
 
    	
63,483
    	
 
    	
+9
    	
%
    

 

(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

 

	
(US$ millions)
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
   June 30
    	
 
    	
see
   page
    	
 
    
	
EARNINGS FROM OPERATIONS
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Sales
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Lower copper prices 
    	
 
    	
$
    	
(32
    	
)
    	
$
    	
(54
    	
)
    	
8
    	
 
    
	
Lower   zinc prices 
    	
 
    	
(3
    	
)
    	
(7
    	
)
    	
8
    	
 
    
	
Higher   copper sales volumes
    	
 
    	
83
    	
 
    	
153
    	
 
    	
8
    	
 
    
	
Lower   zinc sales volumes
    	
 
    	
(8
    	
)
    	
(15
    	
)
    	
8
    	
 
    
	
Costs
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Lower processing charges   and freight
    	
 
    	
1
    	
 
    	
2
    	
 
    	
10
    	
 
    
	
Higher operating costs
    	
 
    	
(5
    	
)
    	
(12
    	
)
    	
11
    	
 
    
	
Charge for mine   rehabilitation at closed properties
    	
 
    	
(7
    	
)
    	
(4
    	
)
    	
11
    	
 
    
	
Higher depreciation 
    	
 
    	
(3
    	
)
    	
(7
    	
)
    	
12
    	
 
    
	
Other
    	
 
    	
(2
    	
)
    	
2
    	
 
    	
 
    	
 
    
	
Higher earnings from operations compared to 2011
    	
 
    	
24
    	
 
    	
58
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
CORPORATE COSTS
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Higher exploration and   administrative costs
    	
 
    	
(14
    	
)
    	
(11
    	
)
    	
13
    	
 
    
	
Higher taxes from higher   income
    	
 
    	
(11
    	
)
    	
(11
    	
)
    	
14
    	
 
    
	
Foreign exchange changes
    	
 
    	
41
    	
 
    	
39
    	
 
    	
13
    	
 
    
	
Higher net income from continuing operations compared to   2011
    	
 
    	
40
    	
 
    	
75
    	
 
    	
 
    	
 
    
	
Lower   income from discontinued operation — Ok Tedi
    	
 
    	
—
    	
 
    	
(81
    	
)
    	
14
    	
 
    
	
Higher (lower) net income attributable to Inmet   shareholders  compared to 2011
    	
 
    	
$
    	
40
    	
 
    	
$
    	
(6
    	
)
    	
 
    	
 
    

 

5

 

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 June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Copper (per pound)
    	
 
    	
$
    	
3.42
    	
 
    	
$
    	
4.16
    	
 
    	
-18
    	
%
    	
$
    	
3.65
    	
 
    	
$
    	
4.24
    	
 
    	
-14
    	
%
    
	
Zinc (per pound)
    	
 
    	
$
    	
0.86
    	
 
    	
$
    	
1.01
    	
 
    	
-15
    	
%
    	
$
    	
0.89
    	
 
    	
$
    	
1.03
    	
 
    	
-14
    	
%
    

 

Copper

 

Copper prices on the London Metals Exchange (LME) averaged $3.57 per pound this quarter, a decrease of 9 percent from the first quarter of 2012 and a 14 percent decrease from the second quarter of 2011.

 

Zinc

 

Zinc prices on the LME averaged $0.87 per pound this quarter, a 5 percent decrease from last quarter’s average price of $0.92 per pound and a 15 percent decrease from the second quarter of 2011.

 

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 June 30
    	
 
    	
six months ended June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Exchange rates
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1 C$ to US$
    	
 
    	
$
    	
0.99
    	
 
    	
$
    	
1.03
    	
 
    	
-4
    	
%
    	
$
    	
0.99
    	
 
    	
$
    	
1.02
    	
 
    	
-3
    	
%
    
	
1 euro to US$
    	
 
    	
$
    	
1.28
    	
 
    	
$
    	
1.44
    	
 
    	
-11
    	
%
    	
$
    	
1.30
    	
 
    	
$
    	
1.44
    	
 
    	
-10
    	
%
    
	
1 US$ to Turkish   lira
    	
 
    	
TL 1.80
    	
 
    	
TL 1.56
    	
 
    	
+15
    	
%
    	
TL 1.79
    	
 
    	
TL 1.56
    	
 
    	
+15
    	
%
    

 

Compared to the same quarter last year, the value of the US dollar appreciated 4 percent relative to the Canadian dollar, and appreciated 11 percent relative to the euro.

 

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

·                  translate the results 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

·                  revalue Canadian dollars and euros that we hold in cash and long-term bonds corporately at Inmet

·                  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, investments in long-term bonds and senior unsecured notes held corporately at Inmet.

 

6

 

Treatment charges for copper increased

 

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

 

The table below shows the average charges we realized this quarter and year to date. We finalized our terms with zinc smelters this quarter, agreeing on treatment charges for zinc concentrates that are lower than last year, reflecting a tightening zinc concentrate market. Results this quarter include adjustments we’ve made to first quarter charges, which were at 2011 rates.

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Treatment charges 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper (per dry metric   tonne of concentrate)
    	
 
    	
$
    	
64
    	
 
    	
$
    	
57
    	
 
    	
+12
    	
%
    	
$
    	
59
    	
 
    	
$
    	
52
    	
 
    	
+13
    	
%
    
	
Zinc (per dry metric   tonne of concentrate) 
    	
 
    	
$
    	
160
    	
 
    	
$
    	
197
    	
 
    	
-19
    	
%
    	
$
    	
179
    	
 
    	
$
    	
225
    	
 
    	
-20
    	
%
    
	
Price participation
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper (per pound)
    	
 
    	
$
    	
0.00
    	
 
    	
$
    	
0.02
    	
 
    	
-100
    	
%
    	
$
    	
0.00
    	
 
    	
$
    	
0.02
    	
 
    	
-100
    	
%
    
	
Zinc (per pound) 
    	
 
    	
$
    	
0.01
    	
 
    	
$
    	
(0.01
    	
)
    	
+200
    	
%
    	
$
    	
0.00
    	
 
    	
$
    	
(0.01
    	
)
    	
+100
    	
%
    
	
Freight charges
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper (per dry metric   tonne of concentrate)
    	
 
    	
$
    	
51
    	
 
    	
$
    	
52
    	
 
    	
-2
    	
%
    	
$
    	
56
    	
 
    	
$
    	
51
    	
 
    	
+10
    	
%
    
	
Zinc (per dry metric   tonne of concentrate)
    	
 
    	
$
    	
23
    	
 
    	
$
    	
23
    	
 
    	
—
    	
 
    	
$
    	
26
    	
 
    	
$
    	
24
    	
 
    	
+8
    	
%
    

 

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
    	
%
    

 

7

 

Earnings from operations

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Gross sales
    	
 
    	
$
    	
251,395
    	
 
    	
$
    	
214,894
    	
 
    	
+17
    	
%
    	
$
    	
536,922
    	
 
    	
$
    	
461,085
    	
 
    	
+16
    	
%
    
	
Smelter processing   charges and freight
    	
 
    	
(28,480
    	
)
    	
(32,793
    	
)
    	
-13
    	
%
    	
(57,818
    	
)
    	
(63,374
    	
)
    	
-9
    	
%
    
	
Cost of sales:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Direct production costs 
    	
 
    	
(79,282
    	
)
    	
(74,767
    	
)
    	
+6
    	
%
    	
(157,455
    	
)
    	
(143,924
    	
)
    	
+9
    	
%
    
	
Inventory changes
    	
 
    	
4,297
    	
 
    	
5,473
    	
 
    	
-21
    	
%
    	
(957
    	
)
    	
(1,453
    	
)
    	
-34
    	
%
    
	
Other non-cash expenses
    	
 
    	
(9,649
    	
)
    	
(2,008
    	
)
    	
+381
    	
%
    	
(5,846
    	
)
    	
(2,558
    	
)
    	
+129
    	
%
    
	
Depreciation
    	
 
    	
(29,193
    	
)
    	
(25,802
    	
)
    	
+13
    	
%
    	
(59,260
    	
)
    	
(51,982
    	
)
    	
+14
    	
%
    
	
Earnings from operations
    	
 
    	
$
    	
109,088
    	
 
    	
$
    	
84,997
    	
 
    	
+28
    	
%
    	
$
    	
255,586
    	
 
    	
$
    	
197,794
    	
 
    	
+29
    	
%
    

 

Gross sales were higher

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Gross sales by operation
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
$
    	
66,162
    	
 
    	
$
    	
79,226
    	
 
    	
-16
    	
%
    	
$
    	
189,533
    	
 
    	
$
    	
175,130
    	
 
    	
+8
    	
%
    
	
Las Cruces
    	
 
    	
127,863
    	
 
    	
76,282
    	
 
    	
+68
    	
%
    	
238,245
    	
 
    	
164,219
    	
 
    	
+45
    	
%
    
	
Pyhäsalmi 
    	
 
    	
57,370
    	
 
    	
59,386
    	
 
    	
-3
    	
%
    	
109,144
    	
 
    	
121,736
    	
 
    	
-10
    	
%
    
	
 
    	
 
    	
$
    	
251,395
    	
 
    	
$
    	
214,894
    	
 
    	
+17
    	
%
    	
$
    	
536,922
    	
 
    	
$
    	
461,085
    	
 
    	
+16
    	
%
    
	
Gross sales by metal
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper
    	
 
    	
$
    	
196,094
    	
 
    	
$
    	
140,164
    	
 
    	
+40
    	
%
    	
$
    	
432,324
    	
 
    	
$
    	
325,776
    	
 
    	
+33
    	
%
    
	
Zinc
    	
 
    	
30,222
    	
 
    	
48,689
    	
 
    	
-38
    	
%
    	
58,862
    	
 
    	
92,131
    	
 
    	
-36
    	
%
    
	
Other 
    	
 
    	
25,079
    	
 
    	
26,041
    	
 
    	
-4
    	
%
    	
45,736
    	
 
    	
43,178
    	
 
    	
+6
    	
%
    
	
 
    	
 
    	
$
    	
251,395
    	
 
    	
$
    	
214,894
    	
 
    	
+17
    	
%
    	
$
    	
536,922
    	
 
    	
$
    	
461,085
    	
 
    	
+16
    	
%
    

 

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

 

	
(US$ millions)
    	
 
    	
three months ended
    June 30
    	
 
    	
six months ended
    June 30
    	
 
    
	
Lower copper prices
    	
 
    	
$
    	
(32
    	
)
    	
$
    	
(54
    	
)
    
	
Lower zinc prices
    	
 
    	
(3
    	
)
    	
(7
    	
)
    
	
Higher copper sales   volumes at Las Cruces
    	
 
    	
72
    	
 
    	
108
    	
 
    
	
Higher copper sales   volumes at our other mines
    	
 
    	
16
    	
 
    	
52
    	
 
    
	
Lower zinc sales volumes 
    	
 
    	
(15
    	
)
    	
(27
    	
)
    
	
Changes in other metal   sales
    	
 
    	
(1
    	
)
    	
4
    	
 
    
	
Higher gross sales, compared to 2011
    	
 
    	
$
    	
37
    	
 
    	
$
    	
76
    	
 
    

 

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 $4 million in negative finalization adjustments from first quarter 2012 sales.

 

8

 

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

·                  25 million pounds of copper provisionally priced at $3.49 per pound

·                  17 million pounds of zinc provisionally priced at $0.85 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
    	
 
    
	
July 2012
    	
 
    	
14
    	
 
    	
17
    	
 
    
	
August 2012
    	
 
    	
7
    	
 
    	
—
    	
 
    
	
September 2012
    	
 
    	
4
    	
 
    	
—
    	
 
    
	
Unsettled sales at June 30, 2012
    	
 
    	
25
    	
 
    	
17
    	
 
    

 

Higher copper sales volumes, lower zinc sales volumes

 

Our sales volumes are directly affected by the amount of production from our mines and our ability to ship to our customers.

 

Copper production and sales volumes were higher this quarter and year to date mainly because of production at Las Cruces and the mining of higher-grade areas at Çayeli. The timing of shipments resulted in copper sales volumes lagging production volumes by a combined 3,000 tonnes for this quarter and a combined 2,900 tonnes in the second quarter of 2011.

 

Zinc production and sales volumes were lower than in 2011 due to lower zinc grades at Çayeli and Pyhäsalmi, which production was consistent with our objectives.

 

Sales volumes

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Copper contained in   concentrate (tonnes)
    	
 
    	
9,600
    	
 
    	
7,600
    	
 
    	
+26
    	
%
    	
24,600
    	
 
    	
18,600
    	
 
    	
+32
    	
%
    
	
Copper cathode (tonnes)
    	
 
    	
16,900
    	
 
    	
8,700
    	
 
    	
+94
    	
%
    	
30,500
    	
 
    	
18,400
    	
 
    	
+66
    	
%
    
	
Total copper (tonnes)
    	
 
    	
26,600
    	
 
    	
16,300
    	
 
    	
+63
    	
%
    	
55,100
    	
 
    	
37,000
    	
 
    	
+49
    	
%
    
	
Zinc (tonnes)
    	
 
    	
16,100
    	
 
    	
23,300
    	
 
    	
-31
    	
%
    	
30,600
    	
 
    	
43,100
    	
 
    	
-29
    	
%
    
	
Pyrite (tonnes)
    	
 
    	
227,000
    	
 
    	
222,800
    	
 
    	
+2
    	
%
    	
339,300
    	
 
    	
364,100
    	
 
    	
-7
    	
%
    

 

Production

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    	
objective
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    
	
Copper (tonnes)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
8,500
    	
 
    	
7,000
    	
 
    	
+21
    	
%
    	
16,600
    	
 
    	
13,000
    	
 
    	
+28
    	
%
    	
27,000 - 30,000
    	
 
    
	
Las Cruces 
    	
 
    	
18,300
    	
 
    	
8,500
    	
 
    	
+115
    	
%
    	
31,600
    	
 
    	
16,600
    	
 
    	
+90
    	
%
    	
61,700 - 68,600
    	
 
    
	
Pyhäsalmi
    	
 
    	
2,800
    	
 
    	
3,700
    	
 
    	
-24
    	
%
    	
6,200
    	
 
    	
7,300
    	
 
    	
-15
    	
%
    	
11,300 – 12,600
    	
 
    
	
 
    	
 
    	
29,600
    	
 
    	
19,200
    	
 
    	
+54
    	
%
    	
54,400
    	
 
    	
36,900
    	
 
    	
+47
    	
%
    	
100,000 –111,200
    	
 
    
	
Zinc (tonnes)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
8,400
    	
 
    	
10,500
    	
 
    	
-20
    	
%
    	
18,900
    	
 
    	
23,000
    	
 
    	
-18
    	
%
    	
36,000 – 39,800
    	
 
    
	
Pyhäsalmi
    	
 
    	
6,300
    	
 
    	
7,800
    	
 
    	
-19
    	
%
    	
10,900
    	
 
    	
16,500
    	
 
    	
-34
    	
%
    	
22,800 – 25,200
    	
 
    
	
 
    	
 
    	
14,700
    	
 
    	
18,300
    	
 
    	
-20
    	
%
    	
29,800
    	
 
    	
39,500
    	
 
    	
-25
    	
%
    	
58,800 – 65,000
    	
 
    
	
Pyrite (tonnes)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Pyhäsalmi
    	
 
    	
214,700
    	
 
    	
198,200
    	
 
    	
+8
    	
%
    	
425,900
    	
 
    	
384,200
    	
 
    	
+11
    	
%
    	
800,000
    	
 
    

 

9

 

2012 outlook for sales

 

We use our production objectives to estimate our sales target. Our production guidance for copper and zinc remains as previously disclosed.

 

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

 

Zinc smelter processing charges down, copper charges up

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Smelter processing charges and freight by operation
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
$
    	
14,075
    	
 
    	
$
    	
17,767
    	
 
    	
-21
    	
%
    	
$
    	
35,544
    	
 
    	
$
    	
35,092
    	
 
    	
+1
    	
%
    
	
Las Cruces
    	
 
    	
550
    	
 
    	
201
    	
 
    	
+174
    	
%
    	
845
    	
 
    	
461
    	
 
    	
+83
    	
%
    
	
Pyhäsalmi 
    	
 
    	
13,855
    	
 
    	
14,825
    	
 
    	
-7
    	
%
    	
21,429
    	
 
    	
27,821
    	
 
    	
-23
    	
%
    
	
 
    	
 
    	
$
    	
28,480
    	
 
    	
$
    	
32,793
    	
 
    	
-13
    	
%
    	
$
    	
57,818
    	
 
    	
$
    	
63,374
    	
 
    	
-9
    	
%
    
	
Smelter processing charges and freight by metal
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper
    	
 
    	
$
    	
9,947
    	
 
    	
$
    	
8,159
    	
 
    	
+22
    	
%
    	
$
    	
26,388
    	
 
    	
19,007
    	
 
    	
+39
    	
%
    
	
Zinc
    	
 
    	
10,865
    	
 
    	
17,134
    	
 
    	
-37
    	
%
    	
21,830
    	
 
    	
34,247
    	
 
    	
-36
    	
%
    
	
Other 
    	
 
    	
7,668
    	
 
    	
7,500
    	
 
    	
+2
    	
%
    	
9,600
    	
 
    	
10,120
    	
 
    	
-5
    	
%
    
	
 
    	
 
    	
$
    	
28,480
    	
 
    	
$
    	
32,793
    	
 
    	
-13
    	
%
    	
$
    	
57,818
    	
 
    	
$
    	
63,374
    	
 
    	
-9
    	
%
    
	
Smelter processing charges by type and freight
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper treatment and refining   charges
    	
 
    	
$
    	
3,979
    	
 
    	
$
    	
2,733
    	
 
    	
+46
    	
%
    	
$
    	
9,675
    	
 
    	
$
    	
6,002
    	
 
    	
+61
    	
%
    
	
Zinc treatment charges
    	
 
    	
5,032
    	
 
    	
8,569
    	
 
    	
-41
    	
%
    	
10,789
    	
 
    	
18,064
    	
 
    	
-40
    	
%
    
	
Copper price   participation
    	
 
    	
—
    	
 
    	
316
    	
 
    	
-100
    	
%
    	
—
    	
 
    	
692
    	
 
    	
-100
    	
%
    
	
Zinc price participation
    	
 
    	
273
    	
 
    	
(346
    	
)
    	
-179
    	
%
    	
21
    	
 
    	
(541
    	
)
    	
-104
    	
%
    
	
Content losses
    	
 
    	
7,931
    	
 
    	
10,725
    	
 
    	
-26
    	
%
    	
18,487
    	
 
    	
22,060
    	
 
    	
-16
    	
%
    
	
Freight
    	
 
    	
11,113
    	
 
    	
10,494
    	
 
    	
+6
    	
%
    	
18,288
    	
 
    	
16,524
    	
 
    	
+11
    	
%
    
	
Other 
    	
 
    	
152
    	
 
    	
302
    	
 
    	
-50
    	
%
    	
558
    	
 
    	
573
    	
 
    	
-3
    	
%
    
	
 
    	
 
    	
$
    	
28,480
    	
 
    	
$
    	
32,793
    	
 
    	
-13
    	
%
    	
$
    	
57,818
    	
 
    	
$
    	
63,374
    	
 
    	
-9
    	
%
    

 

Our copper treatment and refining charges were higher than they were in 2011 because our terms with smelters were higher, as we expected, and because we sold more copper. This was offset by lower zinc treatment charges than last year due to lower zinc sales volumes at Çayeli and Pyhäsalmi, and because our terms with smelters were lower.

 

10

 

2012 outlook for smelter processing charges and freight

 

We expect our costs for copper treatment and refining to be slightly higher in 2012 than in 2011 based on agreements we have signed with our customers. A tight concentrate supply is expected to keep the copper market in a deficit position in 2012. We do not expect to pay copper price participation.

 

We expect total zinc smelter processing charges, including price participation, to be lower than in 2011 and a continued deficit to exist in the zinc concentrate market in 2012.

 

Las Cruces sells its copper cathode production directly to buyers in the Spanish and Mediterranean markets and therefore does not incur smelting processing charges and has relatively low freight costs.

 

We expect our ocean freight costs to be similar to rates realized in 2011.

 

Higher direct production costs and cost of sales

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Direct production costs by operation
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
$
    	
22,981
    	
 
    	
$
    	
22,161
    	
 
    	
+4
    	
%
    	
$
    	
46,269
    	
 
    	
$
    	
44,796
    	
 
    	
+3
    	
%
    
	
Las Cruces
    	
 
    	
41,937
    	
 
    	
37,992
    	
 
    	
+10
    	
%
    	
81,844
    	
 
    	
70,415
    	
 
    	
+16
    	
%
    
	
Pyhäsalmi 
    	
 
    	
14,364
    	
 
    	
14,614
    	
 
    	
-2
    	
%
    	
29,341
    	
 
    	
28,713
    	
 
    	
+2
    	
%
    
	
Total direct production   costs
    	
 
    	
79,282
    	
 
    	
74,767
    	
 
    	
+6
    	
%
    	
157,454
    	
 
    	
143,924
    	
 
    	
+9
    	
%
    
	
Inventory changes
    	
 
    	
(4,298
    	
)
    	
(5,474
    	
)
    	
-21
    	
%
    	
957
    	
 
    	
1,453
    	
 
    	
-34
    	
%
    
	
Charges for mine   rehabilitation and other non-cash charges
    	
 
    	
9,650
    	
 
    	
2,009
    	
 
    	
+380
    	
%
    	
5,847
    	
 
    	
2,558
    	
 
    	
+129
    	
%
    
	
Total cost of sales (excluding depreciation)
    	
 
    	
$
    	
84,634
    	
 
    	
$
    	
71,302
    	
 
    	
+19
    	
%
    	
$
    	
164,258
    	
 
    	
$
    	
147,935
    	
 
    	
+11
    	
%
    

 

Direct production costs

 

Direct production costs were higher this year 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.

 

Inventory changes

 

Copper inventories at Çayeli and Las Cruces increased at the end of this quarter, and at Çayeli and Pyhäsalmi in the second quarter of 2011, because of the timing of shipments.

 

Charges for mine rehabilitation and other non-cash charges

 

These charges include accruals for asset retirement obligations, provisions for severance and retirement and other non-cash expenses. We recorded an increase of $7 million this quarter in post-closure liabilities at our closed properties, and $4 million year to date. This increase was a result of a decrease in the discount rates we applied in determining the liabilities. Under International Financial Reporting Standards, we are required to revalue our asset retirement obligations for changes in market risk-free interest rates.

 

2012 outlook for cost of sales (excluding depreciation)

 

We expect consolidated direct production costs to be higher in 2012 because we expect higher production at Las Cruces to increase total variable costs, primarily electricity and royalties.

 

Our budget for 2012 continues to assume our costs at Çayeli and Pyhäsalmi will be similar to those of 2011.

 

Certain variable costs may continue to affect our earnings, depending on metal prices:

·             royalties at Çayeli are affected by its net income

·             royalties at Las Cruces are affected by its net sales.

 

The total amount we report in US dollars will also be affected by the value of the euro 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 June 30, 2012, the interest rates we used to value our asset retirement obligations at our closed properties ranged from 1.3 percent to 2.3 percent.

 

11

 

Higher depreciation

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Depreciation by operation
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
$
    	
5,366
    	
 
    	
$
    	
4,868
    	
 
    	
+10
    	
%
    	
$
    	
12,628
    	
 
    	
$
    	
9,928
    	
 
    	
+27
    	
%
    
	
Las Cruces
    	
 
    	
21,557
    	
 
    	
18,670
    	
 
    	
+15
    	
%
    	
42,025
    	
 
    	
37,604
    	
 
    	
+12
    	
%
    
	
Pyhäsalmi 
    	
 
    	
2,270
    	
 
    	
2,264
    	
 
    	
—
    	
 
    	
4,607
    	
 
    	
4,450
    	
 
    	
+4
    	
%
    
	
 
    	
 
    	
$
    	
29,193
    	
 
    	
$
    	
25,802
    	
 
    	
+13
    	
%
    	
$
    	
59,260
    	
 
    	
$
    	
51,982
    	
 
    	
+14
    	
%
    

 

Depreciation was higher this quarter and for the year to date mainly because of higher copper sales volumes at Las Cruces and Çayeli.

 

2012 outlook for depreciation

 

We expect depreciation to be higher in 2012 because of higher sales volumes at Las Cruces.

 

12

 

Corporate costs

 

Corporate costs include corporate development and exploration, general and administration costs, taxes, interest and other income.

 

General and administration

 

General and administration costs were $8 million higher this quarter, and $9 million higher year to date compared to 2011. As a result of the decision to proceed with full construction of Cobre Panama, we recognized a non-cash stock based compensation expense of $7 million this quarter 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 June 30, 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 the 2011 annual financial statements for more details on these units.

 

2012 outlook for general and administration

 

We expect general and administration costs to be higher in 2012 due to increased human resource costs supporting construction activities for Cobre Panama. We expect to recognize an additional expense of $1 million for the LTIP units for the balance of this year.

 

Investment and other income

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
Interest income
    	
 
    	
$
    	
3,931
    	
 
    	
$
    	
4,071
    	
 
    	
$
    	
8,183
    	
 
    	
$
    	
6,755
    	
 
    
	
Foreign exchange gains   (losses)
    	
 
    	
40,315
    	
 
    	
(259
    	
)
    	
28,244
    	
 
    	
(10,740
    	
)
    
	
Dividend and royalty   income
    	
 
    	
976
    	
 
    	
452
    	
 
    	
1,460
    	
 
    	
$
    	
1,033
    	
 
    
	
Other
    	
 
    	
(119
    	
)
    	
317
    	
 
    	
953
    	
 
    	
$
    	
1,943
    	
 
    
	
 
    	
 
    	
$
    	
45,103
    	
 
    	
$
    	
4,581
    	
 
    	
$
    	
38,840
    	
 
    	
$
    	
(1,009
    	
)
    

 

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 June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
Translation of US dollar   cash held in euro-based  entities
    	
 
    	
$
    	
14,791
    	
 
    	
$
    	
—
    	
 
    	
$
    	
10,399
    	
 
    	
$
    	
—
    	
 
    
	
Translation of US dollar   cash held by Corporate prior to June 2012 inclusive of proceeds of notes  offering
    	
 
    	
27,457
    	
 
    	
48
    	
 
    	
27,338
    	
 
    	
(7,927
    	
)
    
	
Translation of US dollar   senior unsecured notes  prior to June 2012
    	
 
    	
(16,884
    	
)
    	
—
    	
 
    	
(16,884
    	
)
    	
—
    	
 
    
	
Translation of US dollar   held-to-maturity  investments   prior to June 2012
    	
 
    	
9,262
    	
 
    	
(1,354
    	
)
    	
4,330
    	
 
    	
(2,760
    	
)
    
	
Translation of Cdn dollar   cash held by Corporate  subsequent to May 2012
    	
 
    	
977
    	
 
    	
—
    	
 
    	
977
    	
 
    	
—
    	
 
    
	
Translation of Cdn dollar   held-to-maturity  investments   subsequent to May 2012
    	
 
    	
3,042
    	
 
    	
—
    	
 
    	
3,042
    	
 
    	
—
    	
 
    
	
Translation of other   monetary assets and liabilities
    	
 
    	
1,670
    	
 
    	
1,047
    	
 
    	
(958
    	
)
    	
(53
    	
)
    
	
 
    	
 
    	
$
    	
40,315
    	
 
    	
$
    	
(259
    	
)
    	
$
    	
28,244
    	
 
    	
$
    	
(10,740
    	
)
    

 

We recognized net foreign exchange gains of $20 million this quarter, and $15 million year to date, from the revaluation of US dollar denominated cash, held to maturity bonds 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 $4 million in June 2012 on Canadian dollar denominated cash and held to maturity bonds.

 

13

 

Additionally, in 2012 we began holding our euro-based operations’ excess cash in US dollars. We recognized $15 million in foreign exchange gains this quarter and $10 million year to date on the revaluation of US-denominated cash balances to euros resulting from a weakening in the euro relative to the US dollar.

 

2012 outlook for investment and other income

 

Investment and other income is affected by our cash and held to maturity investment balances, and by interest rates and exchange rates. At June 30, 2012, we held Cdn $264 million in cash and held to maturity investments subject to translation in our US dollar-denominated accounts and US $404 million in cash subject to translation in our euro accounts.

 

Income tax expense

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Çayeli
    	
 
    	
$
    	
7,888
    	
 
    	
$
    	
11,556
    	
 
    	
 
    	
 
    	
$
    	
17,368
    	
 
    	
$
    	
22,842
    	
 
    	
 
    	
 
    
	
Las Cruces
    	
 
    	
17,238
    	
 
    	
2,360
    	
 
    	
 
    	
 
    	
28,451
    	
 
    	
9,618
    	
 
    	
 
    	
 
    
	
Pyhäsalmi
    	
 
    	
5,732
    	
 
    	
6,385
    	
 
    	
 
    	
 
    	
10,915
    	
 
    	
13,940
    	
 
    	
 
    	
 
    
	
Corporate and other
    	
 
    	
586
    	
 
    	
287
    	
 
    	
 
    	
 
    	
722
    	
 
    	
484
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
$
    	
31,444
    	
 
    	
$
    	
20,588
    	
 
    	
 
    	
 
    	
$
    	
57,456
    	
 
    	
$
    	
46,884
    	
 
    	
 
    	
 
    
	
Consolidated effective   tax rate
    	
 
    	
25
    	
%
    	
28
    	
%
    	
-3
    	
%
    	
23
    	
%
    	
30
    	
%
    	
-7
    	
%
    

 

Our tax expense changes as our earnings change.

 

The consolidated effective tax rate is lower this quarter compared to the same quarter of last year mainly because Çayeli’s taxes were lower as it recognized a foreign exchange loss from its US dollar denominated cash (Çayeli’s income taxes are denominated in Turkish lira). Additionally, there was a decrease in the statutory tax rate at Pyhäsalmi from 26 percent to 24.5 percent this year.

 

2012 outlook for income tax expense

 

Other than the decrease in the statutory tax rate at Pyhäsalmi from 26 percent to 24.5 percent, we expect the statutory tax rates at our operations to remain the same in 2012 as they were in 2011.

 

Discontinued operation — 2011

 

We sold our 18 percent equity interest in Ok Tedi in January 2011, and have reported our results relating to Ok Tedi in that year as discontinued operations. After-tax income of $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.

 

14

 

Results of our operations

 

2012 estimates

 

Our financial review by operation includes estimates for our 2012 operating earnings and operating cash flows. We have based these estimates on our 2012 objectives for production (using the midpoints in our production volume ranges) and cost per tonne of ore milled (cost per pound of copper produced at Las Cruces), as well as the following assumptions for the remaining six months of the year:

 

	
Copper price
    	
 
    	
US $3.65 per pound
    	
 
    
	
Zinc price
    	
 
    	
US $0.90 per pound
    	
 
    
	
euro to US$ exchange rate
    	
 
    	
$1.30
    	
 
    
	
Working capital
    	
 
    	
Assume no changes for the year
    	
 
    

 

15

 

Çayeli

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Tonnes of ore milled   (000’s)
    	
 
    	
295
    	
 
    	
275
    	
 
    	
+7
    	
%
    	
594
    	
 
    	
568
    	
 
    	
+5
    	
%
    
	
Tonnes of ore milled per   day
    	
 
    	
3,200
    	
 
    	
3,000
    	
 
    	
+7
    	
%
    	
3,300
    	
 
    	
3,100
    	
 
    	
+5
    	
%
    
	
Grades (percent) 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
copper
    	
 
    	
3.6
    	
 
    	
3.3
    	
 
    	
+9
    	
%
    	
3.5
    	
 
    	
3.1
    	
 
    	
+13
    	
%
    
	
zinc
    	
 
    	
4.5
    	
 
    	
5.7
    	
 
    	
-21
    	
%
    	
5.0
    	
 
    	
6.0
    	
 
    	
-17
    	
%
    
	
Mill recoveries (percent)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
copper
    	
 
    	
81
    	
 
    	
77
    	
 
    	
+5
    	
%
    	
80
    	
 
    	
75
    	
 
    	
+7
    	
%
    
	
zinc
    	
 
    	
63
    	
 
    	
67
    	
 
    	
-6
    	
%
    	
64
    	
 
    	
68
    	
 
    	
-6
    	
%
    
	
Production (tonnes)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
copper
    	
 
    	
8,500
    	
 
    	
7,000
    	
 
    	
+21
    	
%
    	
16,600
    	
 
    	
13,000
    	
 
    	
+28
    	
%
    
	
zinc
    	
 
    	
8,400
    	
 
    	
10,500
    	
 
    	
-20
    	
%
    	
18,900
    	
 
    	
23,000
    	
 
    	
-18
    	
%
    
	
Cost per tonne of ore   milled (US$)
    	
 
    	
$
    	
78
    	
 
    	
$
    	
81
    	
 
    	
-4
    	
%
    	
$
    	
78
    	
 
    	
$
    	
79
    	
 
    	
-1
    	
%
    
																			

 

Higher grades and recoveries increased copper production

 

Copper grades this quarter and year to date were higher than 2011, while zinc grades were lower, because we produced from different areas of the mine. This higher copper grade ore and lower zinc grade ore compared to last year led to higher copper recoveries and lower zinc recoveries, respectively.

 

The result was higher copper production and lower zinc production compared to 2011. Due to the timing of shipments, Çayeli’s copper sales volumes lagged production volumes by approximately 1,900 tonnes this quarter and 2,000 tonnes in the second quarter of 2011.

 

Cost per tonne of ore milled so far this year was slightly lower than last year and our target.

 

The three-year labour agreement at Çayeli expired in May of this year and the governmental authorities have not yet granted permission to begin the bargaining process as part of a general suspension of bargaining activities. We anticipate this process to begin later this year although we have no certainty on this timing. Once initiated, we will make a strong effort to manage labour cost escalations to maintain our competitiveness.

 

2012 outlook for production

 

In 2012, mill throughput should remain at approximately 1.2 million tonnes. We expect lower copper grades for the remainder of 2012 as we produce from lower grade areas of the mine. Zinc grades are expected to increase slightly for the remainder of 2012, however we continue to expect zinc grades to be lower than 2011. We continue to expect to produce between 27,000 tonnes and 30,000 tonnes of copper and between 36,000 and 39,800 tonnes of zinc. In 2012, lower zinc grades, as expected, account for the anticipated decline in zinc production compared to those in recent years. Both copper and zinc recoveries should remain near 2011 levels in 2012.

 

16

 

Financial review

 

Higher copper sales volumes due to higher copper production volumes and timing of shipments

 

	
(millions of US dollars
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended June
   30
    	
 
    	
revised
   objective
    	
 
    
	
unless otherwise stated)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    
	
Sales analysis
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper sales (tonnes)
    	
 
    	
6,600
    	
 
    	
5,000
    	
 
    	
17,800
    	
 
    	
12,500
    	
 
    	
28,500
    	
 
    
	
Zinc sales (tonnes)
    	
 
    	
9,800
    	
 
    	
15,500
    	
 
    	
20,100
    	
 
    	
25,500
    	
 
    	
37,900
    	
 
    
	
Gross copper sales
    	
 
    	
$
    	
45
    	
 
    	
$
    	
41
    	
 
    	
$
    	
139
    	
 
    	
$
    	
108
    	
 
    	
$
    	
226
    	
 
    
	
Gross zinc sales
    	
 
    	
18
    	
 
    	
32
    	
 
    	
39
    	
 
    	
55
    	
 
    	
74
    	
 
    
	
Other metal sales
    	
 
    	
3
    	
 
    	
6
    	
 
    	
12
    	
 
    	
12
    	
 
    	
23
    	
 
    
	
Gross sales
    	
 
    	
$
    	
66
    	
 
    	
$
    	
79
    	
 
    	
$
    	
190
    	
 
    	
$
    	
175
    	
 
    	
$
    	
323
    	
 
    
	
Smelter processing   charges and freight
    	
 
    	
(14
    	
)
    	
(18
    	
)
    	
(36
    	
)
    	
(35
    	
)
    	
(70
    	
)
    
	
Net sales 
    	
 
    	
$
    	
52
    	
 
    	
$
    	
61
    	
 
    	
$
    	
154
    	
 
    	
$
    	
140
    	
 
    	
$
    	
253
    	
 
    
	
Cost analysis
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tonnes of ore milled   (thousands)
    	
 
    	
295
    	
 
    	
275
    	
 
    	
594
    	
 
    	
568
    	
 
    	
1,200
    	
 
    
	
Direct production costs ($ per   tonne)
    	
 
    	
$
    	
78
    	
 
    	
$
    	
80
    	
 
    	
$
    	
78
    	
 
    	
$
    	
79
    	
 
    	
$
    	
80
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
23
    	
 
    	
$
    	
22
    	
 
    	
$
    	
46
    	
 
    	
$
    	
45
    	
 
    	
$
    	
96
    	
 
    
	
Change in inventory
    	
 
    	
(2
    	
)
    	
(1
    	
)
    	
2
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Depreciation and other   non-cash costs
    	
 
    	
7
    	
 
    	
6
    	
 
    	
16
    	
 
    	
11
    	
 
    	
33
    	
 
    
	
Operating costs
    	
 
    	
$
    	
28
    	
 
    	
$
    	
27
    	
 
    	
$
    	
64
    	
 
    	
$
    	
56
    	
 
    	
$
    	
129
    	
 
    
	
Operating earnings 
    	
 
    	
$
    	
24
    	
 
    	
$
    	
34
    	
 
    	
$
    	
90
    	
 
    	
$
    	
84
    	
 
    	
$
    	
124
    	
 
    
	
Operating cash flow
    	
 
    	
$
    	
32
    	
 
    	
$
    	
36
    	
 
    	
$
    	
62
    	
 
    	
$
    	
89
    	
 
    	
$
    	
123
    	
 
    

 

The objective for 2012 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.

 

	
(US$ millions)
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
   June 30
    	
 
    
	
Lower copper prices
    	
 
    	
$
    	
(9
    	
)
    	
$
    	
(14
    	
)
    
	
Lower zinc prices
    	
 
    	
(2
    	
)
    	
(5
    	
)
    
	
Higher copper sales   volumes
    	
 
    	
11
    	
 
    	
36
    	
 
    
	
Lower zinc sales volumes
    	
 
    	
(6
    	
)
    	
(6
    	
)
    
	
Higher depreciation
    	
 
    	
(1
    	
)
    	
(3
    	
)
    
	
Other
    	
 
    	
(3
    	
)
    	
(2
    	
)
    
	
Higher (lower) operating earnings, compared to 2011
    	
 
    	
(10
    	
)
    	
6
    	
 
    
	
Change in cash taxes
    	
 
    	
1
    	
 
    	
3
    	
 
    
	
Changes in working   capital (see note 14 on page 50)
    	
 
    	
4
    	
 
    	
(39
    	
)
    
	
Change in depreciation
    	
 
    	
1
    	
 
    	
3
    	
 
    
	
Lower operating cash flow, compared to 2011
    	
 
    	
$
    	
(4
    	
)
    	
$
    	
(27
    	
)
    

 

Lower capital spending due to timing

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    	
objective
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    
	
Capital spending
    	
 
    	
$
    	
3,000
    	
 
    	
$
    	
5,100
    	
 
    	
-41
    	
%
    	
$
    	
5,200
    	
 
    	
$
    	
7,400
    	
 
    	
-30
    	
%
    	
$
    	
20,000
    	
 
    
																					

 

2012 outlook for capital spending

 

We expect to spend $20 million on capital in 2012, including $7 million to upgrade our ore pass system to address deterioration that has accumulated over time from normal abrasion, and to extend the shotcrete slickline and replace certain mobile equipment.

 

17

 

Las Cruces

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Tonnes of ore processed   (000’s)
    	
 
    	
269
    	
 
    	
164
    	
 
    	
+64
    	
%
    	
516
    	
 
    	
336
    	
 
    	
+54
    	
%
    
	
Copper grades (percent) 
    	
 
    	
7.7
    	
 
    	
6.3
    	
 
    	
+22
    	
%
    	
7.2
    	
 
    	
6.2
    	
 
    	
+16
    	
%
    
	
Plant recoveries   (percent)
    	
 
    	
86
    	
 
    	
83
    	
 
    	
+4
    	
%
    	
86
    	
 
    	
80
    	
 
    	
+8
    	
%
    
	
Cathode copper production   (tonnes)
    	
 
    	
18,300
    	
 
    	
8,500
    	
 
    	
+115
    	
%
    	
31,600
    	
 
    	
16,600
    	
 
    	
+90
    	
%
    
	
Cost per pound of cathode   produced (US$)
    	
 
    	
$
    	
1.04
    	
 
    	
$
    	
2.00
    	
 
    	
-48
    	
%
    	
$
    	
1.17
    	
 
    	
$
    	
1.93
    	
 
    	
-39
    	
%
    
																		

 

Plant production exceeded design capacity

 

Las Cruces production this quarter was significantly higher than the second quarter of 2011, more than doubling from 8,500 tonnes of copper cathode to 18,300 tonnes. Plant production exceeded the design capacity of 6,000 tonnes of copper cathode each month this quarter, including a record 6,191 tonnes in May. The ability to operate above design capacity allows us to offset any downtime that occurs from time to time. Overall recoveries increased to 86 percent this quarter with leach recoveries nearing design levels. The difference from design level recoveries is mostly in copper already leached but retained in the filtration residue. Our focus has shifted to improving recoveries in washing and filtration. Plant feed grades were significantly higher year to date compared to 2011 and we expect grades to gradually decline to approximately 6.5 percent during the remainder of 2012.

 

Las Cruces’ copper sales volumes lagged production volumes by approximately 1,400 tonnes this quarter as a result of the timing of shipments.

 

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

 

2012 outlook for production

 

For 2012, we continue to expect to produce between 61,700 and 68,600 tonnes of copper cathode, or approximately 90 percent of design capacity. No major construction projects or major shutdowns are planned for the remainder of the year. In total, we expect a minimum of 90 percent operating time throughout 2012.

 

18

 

Financial review

 

Higher sales volumes due to higher production

 

	
(millions of US dollars unless otherwise
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
   June 30
    	
 
    	
revised
   objective
    	
 
    
	
stated)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    
	
Sales analysis 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper sales (tonnes)
    	
 
    	
16,900
    	
 
    	
8,700
    	
 
    	
30,500
    	
 
    	
18,400
    	
 
    	
65,200
    	
 
    
	
Gross copper sales
    	
 
    	
$
    	
128
    	
 
    	
$
    	
76
    	
 
    	
$
    	
238
    	
 
    	
$
    	
164
    	
 
    	
$
    	
523
    	
 
    
	
Freight
    	
 
    	
(1
    	
)
    	
—
    	
 
    	
(1
    	
)
    	
—
    	
 
    	
(3
    	
)
    
	
Net sales 
    	
 
    	
$
    	
127
    	
 
    	
$
    	
76
    	
 
    	
$
    	
237
    	
 
    	
$
    	
164
    	
 
    	
$
    	
520
    	
 
    
	
Cost analysis
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Pounds of copper produced   (millions)
    	
 
    	
40
    	
 
    	
19
    	
 
    	
70
    	
 
    	
37
    	
 
    	
144
    	
 
    
	
Direct production costs   ($ per pound)
    	
 
    	
$
    	
1.04
    	
 
    	
$
    	
2.00
    	
 
    	
$
    	
1.17
    	
 
    	
$
    	
1.93
    	
 
    	
$
    	
1.14
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
42
    	
 
    	
$
    	
38
    	
 
    	
$
    	
82
    	
 
    	
$
    	
70
    	
 
    	
$
    	
164
    	
 
    
	
Change in inventory
    	
 
    	
(2
    	
)
    	
(2
    	
)
    	
(2
    	
)
    	
5
    	
 
    	
—
    	
 
    
	
Depreciation and other   non-cash costs
    	
 
    	
22
    	
 
    	
19
    	
 
    	
40
    	
 
    	
39
    	
 
    	
95
    	
 
    
	
Operating costs
    	
 
    	
$
    	
62
    	
 
    	
$
    	
55
    	
 
    	
$
    	
120
    	
 
    	
$
    	
114
    	
 
    	
$
    	
259
    	
 
    
	
Operating earnings 
    	
 
    	
$
    	
65
    	
 
    	
$
    	
21
    	
 
    	
$
    	
117
    	
 
    	
$
    	
50
    	
 
    	
$
    	
261
    	
 
    
	
Operating cash flow
    	
 
    	
$
    	
88
    	
 
    	
$
    	
40
    	
 
    	
$
    	
165
    	
 
    	
$
    	
96
    	
 
    	
$
    	
359
    	
 
    

 

The objective for 2012 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.

 

	
(US$ millions)
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
   June 30
    	
 
    
	
Lower copper prices
    	
 
    	
$
    	
(20
    	
)
    	
$
    	
(34
    	
)
    
	
Higher copper sales   volume
    	
 
    	
72
    	
 
    	
115
    	
 
    
	
Higher production costs   denominated in local currencies
    	
 
    	
(7
    	
)
    	
(16
    	
)
    
	
Foreign exchange —   decreased costs
    	
 
    	
3
    	
 
    	
4
    	
 
    
	
Higher depreciation
    	
 
    	
(2
    	
)
    	
(4
    	
)
    
	
Other
    	
 
    	
(2
    	
)
    	
2
    	
 
    
	
Higher operating earnings, compared to 2011
    	
 
    	
44
    	
 
    	
67
    	
 
    
	
Changes in working   capital (see note 14 on page 50)
    	
 
    	
—
    	
 
    	
1
    	
 
    
	
Change in depreciation
    	
 
    	
2
    	
 
    	
4
    	
 
    
	
Other
    	
 
    	
2
    	
 
    	
(3
    	
)
    
	
Higher operating cash flow, compared to 2011
    	
 
    	
$
    	
48
    	
 
    	
$
    	
69
    	
 
    

 

Capital spending

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    	
objective
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    
	
Capital spending
    	
 
    	
$
    	
7,200
    	
 
    	
$
    	
18,600
    	
 
    	
-61
    	
%
    	
$
    	
13,200
    	
 
    	
$
    	
33,000
    	
 
    	
-60
    	
%
    	
$
    	
48,000
    	
 
    
																					

 

Capital expenditures for the quarter were mainly for mine development and the tailings facility expansion.

 

2012 outlook for capital spending

 

We expect to spend $48 million on capital projects in 2012. The largest expenditures will come in the areas of mine development, tailings facility expansion and land purchase.

 

19

 

Pyhäsalmi

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    
	
 
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    
	
Tonnes of ore milled   (000’s)
    	
 
    	
344
    	
 
    	
352
    	
 
    	
-2
    	
%
    	
686
    	
 
    	
687
    	
 
    	
—
    	
 
    
	
Tonnes of ore milled per   day
    	
 
    	
3,800
    	
 
    	
3,900
    	
 
    	
-2
    	
%
    	
3,800
    	
 
    	
3,800
    	
 
    	
—
    	
 
    
	
Grades (percent)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
copper
    	
 
    	
0.9
    	
 
    	
1.1
    	
 
    	
-18
    	
%
    	
0.9
    	
 
    	
1.1
    	
 
    	
-18
    	
%
    
	
zinc
    	
 
    	
2.0
    	
 
    	
2.4
    	
 
    	
-17
    	
%
    	
1.7
    	
 
    	
2.6
    	
 
    	
-35
    	
%
    
	
sulphur
    	
 
    	
43
    	
 
    	
41
    	
 
    	
+5
    	
%
    	
43
    	
 
    	
41
    	
 
    	
+5
    	
%
    
	
Mill recoveries (percent)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
copper
    	
 
    	
96
    	
 
    	
96
    	
 
    	
—
    	
 
    	
96
    	
 
    	
96
    	
 
    	
—
    	
 
    
	
zinc
    	
 
    	
93
    	
 
    	
91
    	
 
    	
+2
    	
%
    	
92
    	
 
    	
91
    	
 
    	
+1
    	
%
    
	
Production (tonnes) 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
copper 
    	
 
    	
2,800
    	
 
    	
3,700
    	
 
    	
-24
    	
%
    	
6,200
    	
 
    	
7,300
    	
 
    	
-15
    	
%
    
	
zinc
    	
 
    	
6,300
    	
 
    	
7,800
    	
 
    	
-19
    	
%
    	
10,900
    	
 
    	
16,500
    	
 
    	
-34
    	
%
    
	
pyrite
    	
 
    	
214,700
    	
 
    	
198,200
    	
 
    	
+8
    	
%
    	
425,900
    	
 
    	
384,200
    	
 
    	
+11
    	
%
    
	
Cost per tonne of ore   milled (US$)
    	
 
    	
$
    	
42
    	
 
    	
$
    	
42
    	
 
    	
—
    	
 
    	
$
    	
43
    	
 
    	
$
    	
42
    	
 
    	
+2
    	
%
    
																		

 

Lower grades in line with annual objectives

 

Pyhäsalmi maintained its strong performance, processing at an annualized rate in-line with its annual objective and achieving copper recoveries of 96 percent and zinc recoveries of 93 percent. Copper and zinc grades this quarter and year to date were lower than the comparative periods of 2011 and consistent with our plan. Copper and zinc production so far this year were therefore lower than in 2011.

 

Operating costs were in line with 2011 and our target as the impact of higher labour and materials costs was offset by a depreciation in the value of the euro relative to the US dollar.

 

2012 outlook for production

 

Pyhäsalmi expects to mine 1.4 million tonnes of approximately 1 percent copper and 2 percent zinc in 2012, and produce between 11,300 tonnes and 12,600 tonnes of copper and 22,800 tonnes and 25,200 tonnes of zinc. Copper and zinc production should be lower than it was in 2011 as fewer higher grade stopes are available in the short-term mining sequence. Both copper and zinc grades should recover after 2012.

 

Pyhäsalmi expects to produce 800,000 tonnes of pyrite in 2012 and expects to sell 915,000 tonnes of pyrite due to stronger demand from Asian customers. We are working to recover and filter an additional 60,000 tonnes of pyrite from our tailings pond to meet expected demand.

 

20

 

Financial review

 

Lower earnings mainly because of lower zinc sales volumes

 

	
(millions of US dollars unless
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    	
revised
   objective
    	
 
    
	
otherwise stated)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    
	
Sales analysis
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper sales (tonnes)
    	
 
    	
3,000
    	
 
    	
2,600
    	
 
    	
6,900
    	
 
    	
6,100
    	
 
    	
11,900
    	
 
    
	
Zinc sales (tonnes)
    	
 
    	
6,300
    	
 
    	
7,900
    	
 
    	
10,500
    	
 
    	
17,500
    	
 
    	
24,000
    	
 
    
	
Pyrite sales (tonnes)
    	
 
    	
227,000
    	
 
    	
222,800
    	
 
    	
339,300
    	
 
    	
364,100
    	
 
    	
915,000
    	
 
    
	
Gross copper sales
    	
 
    	
$
    	
23
    	
 
    	
$
    	
23
    	
 
    	
$
    	
55
    	
 
    	
$
    	
53
    	
 
    	
$
    	
97
    	
 
    
	
Gross zinc sales
    	
 
    	
12
    	
 
    	
16
    	
 
    	
20
    	
 
    	
37
    	
 
    	
47
    	
 
    
	
Other metal sales
    	
 
    	
22
    	
 
    	
20
    	
 
    	
34
    	
 
    	
32
    	
 
    	
73
    	
 
    
	
Gross sales
    	
 
    	
$
    	
57
    	
 
    	
59
    	
 
    	
$
    	
109
    	
 
    	
122
    	
 
    	
$
    	
217
    	
 
    
	
Smelter processing   charges and freight
    	
 
    	
(14
    	
)
    	
(15
    	
)
    	
(21
    	
)
    	
(28
    	
)
    	
(45
    	
)
    
	
Net sales 
    	
 
    	
$
    	
43
    	
 
    	
$
    	
44
    	
 
    	
$
    	
88
    	
 
    	
$
    	
94
    	
 
    	
$
    	
172
    	
 
    
	
Cost analysis
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tonnes of ore milled   (thousands)
    	
 
    	
344
    	
 
    	
352
    	
 
    	
686
    	
 
    	
687
    	
 
    	
1,370
    	
 
    
	
Direct production costs   ($ per tonne)
    	
 
    	
$
    	
42
    	
 
    	
$
    	
42
    	
 
    	
$
    	
43
    	
 
    	
$
    	
42
    	
 
    	
$
    	
43
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
14
    	
 
    	
$
    	
15
    	
 
    	
$
    	
29
    	
 
    	
$
    	
29
    	
 
    	
$
    	
59
    	
 
    
	
Change in inventory
    	
 
    	
—
    	
 
    	
(3
    	
)
    	
1
    	
 
    	
(3
    	
)
    	
—
    	
 
    
	
Depreciation and other   non-cash costs
    	
 
    	
2
    	
 
    	
2
    	
 
    	
5
    	
 
    	
5
    	
 
    	
10
    	
 
    
	
Operating costs
    	
 
    	
$
    	
16
    	
 
    	
$
    	
14
    	
 
    	
$
    	
35
    	
 
    	
$
    	
31
    	
 
    	
$
    	
69
    	
 
    
	
Operating earnings
    	
 
    	
$
    	
27
    	
 
    	
$
    	
30
    	
 
    	
$
    	
53
    	
 
    	
$
    	
63
    	
 
    	
$
    	
103
    	
 
    
	
Operating cash flow
    	
 
    	
$
    	
28
    	
 
    	
$
    	
29
    	
 
    	
$
    	
53
    	
 
    	
$
    	
68
    	
 
    	
$
    	
89
    	
 
    

 

The objective for 2012 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.

 

	
(US$ millions)
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
   June 30
    	
 
    
	
Lower copper prices
    	
 
    	
$
    	
(3
    	
)
    	
$
    	
(5
    	
)
    
	
Lower zinc prices
    	
 
    	
(1
    	
)
    	
(2
    	
)
    
	
Higher other metal sales   prices
    	
 
    	
2
    	
 
    	
4
    	
 
    
	
Lower zinc sales volumes
    	
 
    	
(2
    	
)
    	
(9
    	
)
    
	
Other
    	
 
    	
1
    	
 
    	
2
    	
 
    
	
Lower operating earnings, compared to 2011
    	
 
    	
(3
    	
)
    	
(10
    	
)
    
	
Change in cash taxes 
    	
 
    	
1
    	
 
    	
3
    	
 
    
	
Changes in working   capital (see note 14 on page 50)
    	
 
    	
—
    	
 
    	
(7
    	
)
    
	
Other
    	
 
    	
1
    	
 
    	
(1
    	
)
    
	
Lower operating cash flow, compared to 2011
    	
 
    	
$
    	
(1
    	
)
    	
$
    	
(15
    	
)
    

 

Capital spending

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    	
objective
    	
 
    
	
(US$ thousands)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    
	
Capital spending
    	
 
    	
$
    	
2,200
    	
 
    	
$
    	
2,400
    	
 
    	
-8
    	
%
    	
$
    	
4,600
    	
 
    	
$
    	
2,700
    	
 
    	
+70
    	
%
    	
$
    	
10,000
    	
 
    
																					

 

2012 outlook for capital spending

 

Capital spending of $10 million in 2012 will primarily be to replace underground mobile equipment, improve the tailings impoundment area, and upgrade the satellite ore grinding circuit and zinc cleaner cells.

 

21

 

Status of our development project

 

Cobre Panama

 

During May 2012, we announced the completion of basic engineering for Cobre Panama and issued FNTP to start construction of the project.

 

Basic engineering

 

The results of basic engineering indicate a capital cost estimate of $6.2 billion. The table below provides a breakdown of the capital costs estimate by major area:

 

	
Area
    	
 
    	
total
   (US$ millions)
    	
 
    	
% of project
    	
 
    
	
Mining
    	
 
    	
760
    	
 
    	
12
    	
 
    
	
Process plant
    	
 
    	
1,184
    	
 
    	
19
    	
 
    
	
Site and services
    	
 
    	
550
    	
 
    	
9
    	
 
    
	
Port site facilities
    	
 
    	
543
    	
 
    	
9
    	
 
    
	
Power plant
    	
 
    	
646
    	
 
    	
10
    	
 
    
	
Total direct costs
    	
 
    	
3,682
    	
 
    	
59
    	
 
    
	
Construction indirects
    	
 
    	
844
    	
 
    	
14
    	
 
    
	
Total field costs
    	
 
    	
4,526
    	
 
    	
73
    	
 
    
	
EPCM services
    	
 
    	
355
    	
 
    	
6
    	
 
    
	
Owner costs
    	
 
    	
885
    	
 
    	
14
    	
 
    
	
Contingency
    	
 
    	
415
    	
 
    	
7
    	
 
    
	
Project total costs
    	
 
    	
6,181
    	
 
    	
100
    	
 
    

 

(1)       figure does not sum due to rounding

 

To reduce exposure to capital cost escalation, our objective is to commit as much of the capital as early as possible. We expect to commit in excess of $4 billion of the estimated capital by the end of 2012.

 

The power plant has been contracted under a lump sum, turn-key contract to SK Engineering & Construction Co. Ltd. (SKEC), a Korean engineering and construction firm that has already secured suppliers for long-lead items such as boilers, steam turbine generators, and flue gas desulphurization systems.

 

The detailed engineering and construction for the process plant should be contracted in the third quarter this year and the bidding process is currently underway. The SAG mills, ball mills and wrap-around drives have been ordered, and are currently being fabricated with delivery expected next year.

 

The balance of project infrastructure is under contract with Joint Venture Panama (JVP), a joint venture led by SNC Lavalin Group Inc. (70 percent), with partners Techint International Construction Corp. (15 percent) and GyM.S.A., a member of Graña y Montero Group (15 percent) under an Engineering, Procurement and Construction Management agreement. JVP’s procurement activities are well underway and should result in the award of all major earthworks, site infrastructure, permanent camps and site services packages during the third quarter this year.

 

Procurement of the initial mine fleet is well underway and we expect to make a commitment by the third quarter this year.

 

22

 

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

 

	
(US$ millions)
    	
 
    	
Total expenditures
   (100% basis)
    	
 
    	
Inmet’s 80% share
    	
 
    
	
2012
    	
 
    	
$
    	
810
    	
 
    	
$
    	
648
    	
 
    
	
2013
    	
 
    	
2,136
    	
 
    	
1,709
    	
 
    
	
2014
    	
 
    	
2,080
    	
 
    	
1,664
    	
 
    
	
2015
    	
 
    	
1,155
    	
 
    	
924
    	
 
    
	
Total direct costs
    	
 
    	
$
    	
6,181
    	
 
    	
$
    	
4,945
    	
 
    

 

Other progress

 

Detailed engineering and the construction of the power plant are proceeding, and a deposit payment of $99 million was made this quarter representing 15 percent of the power plant’s total contract cost. Additionally, permitting has progressed allowing us to begin site capture at the port and mine sites. We also continued with progress on roadwork and bypasses that will advance access to the project site. Survey and property acquisition for the transmission line continued as planned and we expect to start construction of the transmission line in late 2012.

 

As we began full-scale construction, we implemented our intensive flora and fauna rescue program to ensure the protection of the biodiversity of the area. Additionally, we continued to progress in resettling the people who will be physically and economically displaced by the project. We began clearing land for the two new indigenous communities and finalized housing designs jointly with the affected families.

 

Capital spending

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    	
objective
    	
 
    
	
(US$ millions)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
change
    	
 
    	
2012
    	
 
    
	
Capital spending
    	
 
    	
$
    	
179
    	
 
    	
$
    	
24
    	
 
    	
+646
    	
%
    	
$
    	
250
    	
 
    	
$
    	
46
    	
 
    	
+443
    	
%
    	
$
    	
975
    	
 
    
																					

 

2012 outlook for development

 

We plan to:

·             continue to build our privilege to operate through intensive dialogue with stakeholders at the community, regional and national levels, to increase their understanding of the project and its benefits to Panama, and our understanding of their potential concerns

·             continue with mobilization of major contractors for site capture and bulk earthworks

·             progress with detailed engineering and procurement for the power plant

·             award the EPC contract for the process plant and begin detailed engineering and procurement

·             complete additional work on resource definition, metallurgical recoveries, pit design and other engineering to allow us to include the Balboa and Brazo mineralization in our mine plan for Cobre Panama

·             complete procurement of mobile mining equipment

·             develop and implement, with the assistance of our EP+CM contractors, project specific health & safety and environmental and social mitigation plans that are consistent with the ESIA and Inmet’s corporate responsibility standards

·             continue to grow the strength of our management team and human resources dedicated to the project.

 

Total capital expenditures for 2012 on a 100 percent basis are expected to be $975 million, including spending prior to FNTP of $94 million, changes in net working capital and interest on the senior unsecured notes.

 

23

 

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
   June 30
    	
 
    	
six months ended
   June 30
    	
 
    
	
(US$ millions)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
CASH FROM OPERATING ACTIVITIES
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
$
    	
32
    	
 
    	
$
    	
36
    	
 
    	
$
    	
62
    	
 
    	
$
    	
89
    	
 
    
	
Las Cruces
    	
 
    	
88
    	
 
    	
40
    	
 
    	
165
    	
 
    	
96
    	
 
    
	
Pyhäsalmi
    	
 
    	
27
    	
 
    	
29
    	
 
    	
53
    	
 
    	
68
    	
 
    
	
Corporate development and   exploration not incurred by operations
    	
 
    	
(5
    	
)
    	
(3
    	
)
    	
(11
    	
)
    	
(13
    	
)
    
	
General and   administration
    	
 
    	
(9
    	
)
    	
(8
    	
)
    	
(26
    	
)
    	
(16
    	
)
    
	
Realized foreign exchange   gains (losses) on cash
    	
 
    	
43
    	
 
    	
—
    	
 
    	
38
    	
 
    	
(8
    	
)
    
	
Other
    	
 
    	
—
    	
 
    	
(4
    	
)
    	
10
    	
 
    	
(12
    	
)
    
	
 
    	
 
    	
176
    	
 
    	
90
    	
 
    	
291
    	
 
    	
204
    	
 
    
	
CASH FROM INVESTING AND FINANCING
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Purchase of property,   plant and equipment
    	
 
    	
(192
    	
)
    	
(50
    	
)
    	
(275
    	
)
    	
(90
    	
)
    
	
Purchase and maturity of   long-term investments, net
    	
 
    	
25
    	
 
    	
13
    	
 
    	
72
    	
 
    	
(246
    	
)
    
	
Issuance of common shares
    	
 
    	
—
    	
 
    	
486
    	
 
    	
—
    	
 
    	
486
    	
 
    
	
Sale of 20 percent   interest in Cobre Panama 
    	
 
    	
161
    	
 
    	
—
    	
 
    	
161
    	
 
    	
—
    	
 
    
	
Long-term debt borrowing
    	
 
    	
1,429
    	
 
    	
—
    	
 
    	
1,429
    	
 
    	
—
    	
 
    
	
Other
    	
 
    	
12
    	
 
    	
—
    	
 
    	
7
    	
 
    	
2
    	
 
    
	
 
    	
 
    	
1,435
    	
 
    	
449
    	
 
    	
1,394
    	
 
    	
152
    	
 
    
	
CASH FROM DISCONTINUED OPERATION (OK TEDI)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
297
    	
 
    
	
Increase in cash
    	
 
    	
1,611
    	
 
    	
539
    	
 
    	
1,685
    	
 
    	
653
    	
 
    
	
Cash and short-term   investments
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Beginning of period
    	
 
    	
1,122
    	
 
    	
430
    	
 
    	
1,048
    	
 
    	
316
    	
 
    
	
End of period
    	
 
    	
$
    	
2,733
    	
 
    	
$
    	
969
    	
 
    	
$
    	
2,733
    	
 
    	
$
    	
969
    	
 
    

 

Our available liquidity also includes $543 million of held to maturity investments ($604 million at December 31, 2011), providing a total of $3.3 billion in capital available to finance our growth strategy as at June 30, 2012.

 

24

 

OPERATING ACTIVITIES

 

Key components of the change in operating cash flows

 

	
(US$ millions)
    	
 
    	
three months ended
   June 30
    	
 
    	
six months ended
    June 30
    	
 
    
	
Higher earnings from   operations (see page 5) 
    	
 
    	
$
    	
24
    	
 
    	
$
    	
58
    	
 
    
	
Add back higher   depreciation and other non-cash charges included in earnings from operations
    	
 
    	
10
    	
 
    	
11
    	
 
    
	
Lower cash taxes 
    	
 
    	
2
    	
 
    	
6
    	
 
    
	
Changes in working   capital (see note 14 on page 50)
    	
 
    	
9
    	
 
    	
(38
    	
)
    
	
Realized foreign exchange   changes — cash
    	
 
    	
43
    	
 
    	
47
    	
 
    
	
Higher exploration and   administration costs
    	
 
    	
(7
    	
)
    	
(4
    	
)
    
	
Other
    	
 
    	
5
    	
 
    	
7
    	
 
    
	
Change in operating cash flow, compared to 2011
    	
 
    	
$
    	
86
    	
 
    	
$
    	
87
    	
 
    

 

Operating cash flows this quarter were higher than the second quarter of 2011 primarily due to higher earnings from operations before non-cash charges and realized foreign exchange gains on our cash. Year to date, this impact was somewhat offset by an increase in net working capital, mainly reflecting higher accounts receivable at Çayeli and Pyhäsalmi due to the timing of shipments and collections from customers.

 

2012 outlook for cash from operating activities

 

The table below shows expected operating cash flow from our operations, based on our outlook for metal prices and production (see page 15), and the assumptions in Results of our operations (starting on page 15).

 

2012 estimated operating cash flow by operation

 

	
(US$ millions)
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
$
    	
123
    	
 
    
	
Las Cruces
    	
 
    	
359
    	
 
    
	
Pyhäsalmi
    	
 
    	
89
    	
 
    
	
 
    	
 
    	
$
    	
571
    	
 
    

 

25

 

INVESTING AND FINANCING

 

Capital spending

 

	
 
    	
 
    	
three months ended June 30
    	
 
    	
six months ended June 30
    	
 
    	
revised objective
    	
 
    
	
(US$ millions)
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    	
2011
    	
 
    	
2012
    	
 
    
	
Çayeli
    	
 
    	
$
    	
3
    	
 
    	
$
    	
5
    	
 
    	
$
    	
5
    	
 
    	
$
    	
8
    	
 
    	
$
    	
20
    	
 
    
	
Las Cruces
    	
 
    	
7
    	
 
    	
19
    	
 
    	
13
    	
 
    	
33
    	
 
    	
48
    	
 
    
	
Pyhäsalmi
    	
 
    	
2
    	
 
    	
2
    	
 
    	
5
    	
 
    	
3
    	
 
    	
10
    	
 
    
	
Cobre Panama
    	
 
    	
178
    	
 
    	
24
    	
 
    	
250
    	
 
    	
46
    	
 
    	
975
    	
 
    
	
 
    	
 
    	
$
    	
190
    	
 
    	
$
    	
50
    	
 
    	
$
    	
273
    	
 
    	
$
    	
90
    	
 
    	
$
    	
1,053
    	
 
    

 

Please see Results of our operations and Status of our development project for a discussion of actual results and our 2012 objectives. Capital spending this quarter was mainly for Cobre Panama.

 

Issuance of $1.5 billion in 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.  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.

 

Purchase and maturing of long-term investments

 

This quarter, $78 million of our bond portfolio matured and $53 million was reinvested in new held-to-maturity bonds. The remaining $25 million of matured bonds was converted into cash.

 

Sale of 20 percent interest in Cobre Panama

 

On April 25, 2012, Korea Panama Mining Corporation (KPMC) completed its acquisition of a 20 percent interest in Minera Panama, owner and developer of Cobre Panama. KPMC acquired its interest for $161 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to closing. Together with the 20 percent of funding of the development costs of Cobre Panama it will provide, this amounts to funding of $1.4 billion.

 

Issuance of common shares — 2011

 

In May 2011, a subsidiary of Temasek Holdings (Private) Ltd. exchanged its subscriptions 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).

 

2012 outlook for investing and financing

 

Capital spending

 

At our operating mines, we expect capital spending to be $78 million in 2012, most significantly $48 million at Las Cruces, including $22 million for mine development, as well as several smaller expenditures including a tailings facility expansion, land purchase and certain plant improvements. We expect to spend $975 million on the construction and development of Cobre Panama this year.

 

Financing Cobre Panama construction costs

 

The senior unsecured notes issuance and the sale of a 20 percent interest in Cobre Panama to KPMC, together with pre-existing cash, represent a significant portion of the development costs for this project. We also continue to engage in discussions with interested parties to sell a portion of future gold and silver production attributable to our 80 percent interest in Cobre Panama. Our estimated timeframe to conclude this transaction is within the third quarter of this year. We are working to create additional financial flexibility and to further mitigate financial risk.

 

26

 

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 June 30, 2012, we had $3,276 million in total funds, including $2,733 million of cash and short-term investments and $543 million invested in long-term bonds.

 

Cash

 

At June 30, 2012 our cash and short-term investments of $2,733 million included cash and money market instruments that mature in 90 days or less.

 

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

 

At June 30, 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 44 in the consolidated financial statements for more details about where our cash is invested.

 

Long-term bonds

 

We hold a bond portfolio to provide better yields while minimizing our investment risk. As at June 30, 2012, the portfolio was $543 million and included:

 

59 percent US Treasury bonds

4 percent Government of Canada bonds

28 percent Canadian Provincial Government bonds

9 percent corporate bonds.

 

The bonds mature between June 2012 and May 2016. Although our intention is to hold these investments to maturity, there is a liquid market for them and they are available to us at any time.

 

Restricted cash

 

Our restricted cash balance of $75 million as at June 30, 2012 included:

 

·                  $19 million in cash collateralized letters of credit for Inmet

·                  $54 million at Las Cruces related to a reclamation bond, issuing letters of credit to suppliers and the local water authority and for its labour bond to the government

·                  $2 million for future reclamation at Pyhäsalmi.

 

COMMON SHARES

 

	
Common shares outstanding   as of June 30, 2012
    	
 
    	
69,365,748
    	
 
    
	
Deferred share units   outstanding as of June 30, 2012
   (redeemable on a one-for-one basis for common shares)
    	
 
    	
98,109
    	
 
    

 

27

 

Additional risk factor

 

We have significantly increased our cash balance following the issuance of our senior unsecured notes for the construction of Cobre Panama.  Based on our analysis, we do not believe that we are a “passive foreign investment company” (PFIC) for the current tax year. For U.S. federal income tax purposes a non-U.S. corporation may be classified as a 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. If we were 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 in part on factors beyond our control (such as changes in the relative values of our assets), there can be no assurance that Inmet will not become a PFIC in the current or 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 29 and 30 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.

 

 

	
 
    	

    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Jochen Tilk
    	
 
    
	
Toronto, Canada
    	
President and
    	
 
    
	
July 30, 2012
    	
Chief Executive Officer
    	
 
    

 

28

 

INMET MINING CORPORATION

Supplementary financial information

 

Cash costs

2012 For the six months ended June 30

 

	
 
    	
 
    	
per pound of copper
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
(US dollars)
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
TOTAL
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
1.18
    	
 
    	
$
    	
1.14
    	
 
    	
$
    	
2.19
    	
 
    	
$
    	
1.27
    	
 
    
	
Royalties and variable compensation
    	
 
    	
0.12
    	
 
    	
0.06
    	
 
    	
—
    	
 
    	
0.07
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
0.91
    	
 
    	
0.01
    	
 
    	
0.88
    	
 
    	
0.38
    	
 
    
	
Metal credits
    	
 
    	
(1.33
    	
)
    	
—
    	
 
    	
(3.57
    	
)
    	
(0.81
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash cost
    	
 
    	
$
    	
0.88
    	
 
    	
$
    	
1.21
    	
 
    	
$
    	
(0.50
    	
)
    	
$
    	
0.91
    	
 
    

 

2011 For the six months ended June 30

 

	
 
    	
 
    	
per pound of copper
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
(US dollars)
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
TOTAL
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
1.49
    	
 
    	
$
    	
1.95
    	
 
    	
$
    	
1.90
    	
 
    	
$
    	
1.78
    	
 
    
	
Royalties and variable compensation
    	
 
    	
$
    	
0.17
    	
 
    	
0.08
    	
 
    	
—
    	
 
    	
0.10
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
$
    	
1.60
    	
 
    	
0.01
    	
 
    	
1.19
    	
 
    	
0.80
    	
 
    
	
Metal credits
    	
 
    	
(2.65
    	
)
    	
—
    	
 
    	
(3.81
    	
)
    	
(1.69
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash cost
    	
 
    	
$
    	
0.61
    	
 
    	
$
    	
2.04
    	
 
    	
$
    	
(0.72
    	
)
    	
$
    	
0.99
    	
 
    

 

Reconciliation of cash costs to statements of earnings

2012 For the six months ended June 30

 

	
 
    	
 
    	
per pound of copper
    	
 
    
	
(millions of US dollars, except where
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
otherwise noted)
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
TOTAL
    	
 
    
	
GAAP   reference
    	
 
    	
page 17
    	
 
    	
page 19
    	
 
    	
page 21
    	
 
    	
 
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
46
    	
 
    	
$
    	
82
    	
 
    	
$
    	
29
    	
 
    	
$
    	
157
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
36
    	
 
    	
1
    	
 
    	
21
    	
 
    	
58
    	
 
    
	
By product sales
    	
 
    	
(51
    	
)
    	
—
    	
 
    	
(54
    	
)
    	
(105
    	
)
    
	
Adjust smelter processing and freight, and sales   to production basis
    	
 
    	
1
    	
 
    	
—
    	
 
    	
(3
    	
)
    	
(2
    	
)
    
	
Operating costs net of metal   credits
    	
 
    	
$
    	
32
    	
 
    	
$
    	
83
    	
 
    	
$
    	
(7
    	
)
    	
$
    	
108
    	
 
    
	
Inmet’s share of production (000’s)
    	
 
    	
36,600
    	
 
    	
69,700
    	
 
    	
13,700
    	
 
    	
120,000
    	
 
    
	
Cash cost (US dollars)
    	
 
    	
$
    	
0.88
    	
 
    	
$
    	
1.21
    	
 
    	
$
    	
(0.50
    	
)
    	
$
    	
0.91
    	
 
    

 

2011 For the six months ended June 30

 

	
 
    	
 
    	
per pound of copper
    	
 
    
	
(millions of US dollars, except where
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
otherwise noted)
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
TOTAL
    	
 
    
	
GAAP   reference
    	
 
    	
page 17
    	
 
    	
page 19
    	
 
    	
page 21
    	
 
    	
 
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
45
    	
 
    	
$
    	
70
    	
 
    	
$
    	
29
    	
 
    	
$
    	
144
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
35
    	
 
    	
—
    	
 
    	
28
    	
 
    	
63
    	
 
    
	
By product sales
    	
 
    	
(67
    	
)
    	
—
    	
 
    	
(69
    	
)
    	
(136
    	
)
    
	
Adjust smelter processing and freight, and sales   to production basis
    	
 
    	
4
    	
 
    	
—
    	
 
    	
—
    	
 
    	
4
    	
 
    
	
Operating costs net of metal   credits
    	
 
    	
$
    	
17
    	
 
    	
$
    	
70
    	
 
    	
$
    	
(12
    	
)
    	
$
    	
75
    	
 
    
	
Inmet’s share of production (000’s)
    	
 
    	
28,600
    	
 
    	
36,600
    	
 
    	
16,100
    	
 
    	
81,300
    	
 
    
	
Cash cost (US dollars)
    	
 
    	
$
    	
0.61
    	
 
    	
$
    	
2.04
    	
 
    	
$
    	
(0.72
    	
)
    	
$
    	
0.99
    	
 
    

 

29

 

INMET MINING CORPORATION

Supplementary financial information

 

Cash costs

2012 For the three months ended June 30

 

	
 
    	
 
    	
per pound of copper
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
(US dollars)
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
TOTAL
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
1.10
    	
 
    	
$
    	
0.98
    	
 
    	
$
    	
2.28
    	
 
    	
$
    	
1.14
    	
 
    
	
Royalties and variable compensation
    	
 
    	
0.13
    	
 
    	
0.05
    	
 
    	
—
    	
 
    	
0.07
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
0.82
    	
 
    	
0.01
    	
 
    	
0.99
    	
 
    	
0.34
    	
 
    
	
Metal credits
    	
 
    	
(1.05
    	
)
    	
—
    	
 
    	
(4.12
    	
)
    	
(0.69
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash cost
    	
 
    	
$
    	
1.00
    	
 
    	
$
    	
1.04
    	
 
    	
$
    	
(0.85
    	
)
    	
$
    	
0.86
    	
 
    

 

2011 For the three months ended June 30

 

	
 
    	
 
    	
per pound of copper
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
(US dollars)
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
TOTAL
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
1.38
    	
 
    	
$
    	
2.07
    	
 
    	
$
    	
1.94
    	
 
    	
$
    	
1.79
    	
 
    
	
Royalties and variable compensation
    	
 
    	
0.15
    	
 
    	
0.08
    	
 
    	
—
    	
 
    	
0.09
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
1.44
    	
 
    	
0.01
    	
 
    	
1.08
    	
 
    	
0.74
    	
 
    
	
Metal credits
    	
 
    	
(2.38
    	
)
    	
—
    	
 
    	
(3.75
    	
)
    	
(1.58
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash cost
    	
 
    	
$
    	
0.59
    	
 
    	
$
    	
2.16
    	
 
    	
$
    	
(0.73
    	
)
    	
$
    	
1.04
    	
 
    

 

Reconciliation of cash costs to statements of earnings

2012 For the three months ended June 30

 

	
 
    	
 
    	
per pound of copper
    	
 
    
	
(millions of US dollars, except   where
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
otherwise noted)
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
TOTAL
    	
 
    
	
GAAP reference
    	
 
    	
page 17
    	
 
    	
page 19
    	
 
    	
page 21
    	
 
    	
 
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
23
    	
 
    	
$
    	
42
    	
 
    	
$
    	
14
    	
 
    	
$
    	
79
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
14
    	
 
    	
1
    	
 
    	
14
    	
 
    	
29
    	
 
    
	
By product sales
    	
 
    	
(21
    	
)
    	
—
    	
 
    	
(34
    	
)
    	
(55
    	
)
    
	
Adjust smelter processing and freight, and sales   to production basis
    	
 
    	
2
    	
 
    	
—
    	
 
    	
1
    	
 
    	
3
    	
 
    
	
Operating costs net of metal   credits
    	
 
    	
$
    	
18
    	
 
    	
$
    	
43
    	
 
    	
$
    	
(5
    	
)
    	
$
    	
56
    	
 
    
	
Inmet’s share of production (000’s)
    	
 
    	
$
    	
18,800
    	
 
    	
$
    	
40,300
    	
 
    	
$
    	
6,200
    	
 
    	
65,300
    	
 
    
	
Cash cost (US dollars)
    	
 
    	
$
    	
1.00
    	
 
    	
$
    	
1.04
    	
 
    	
$
    	
(0.85
    	
)
    	
$
    	
0.86
    	
 
    

 

2011 For the three months ended June 30

 

	
 
    	
 
    	
per pound of copper
    	
 
    
	
(millions of US dollars, except where
    	
 
    	
 
    	
 
    	
LAS
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
otherwise noted)
    	
 
    	
ÇAYELI
    	
 
    	
CRUCES
    	
 
    	
PYHÄSALMI
    	
 
    	
TOTAL
    	
 
    
	
GAAP   reference
    	
 
    	
page 17
    	
 
    	
page 19
    	
 
    	
page 21
    	
 
    	
 
    	
 
    
	
Direct production costs
    	
 
    	
$
    	
23
    	
 
    	
$
    	
38
    	
 
    	
$
    	
15
    	
 
    	
$
    	
76
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
18
    	
 
    	
—
    	
 
    	
15
    	
 
    	
33
    	
 
    
	
By product sales
    	
 
    	
(38
    	
)
    	
—
    	
 
    	
(36
    	
)
    	
(74
    	
)
    
	
Adjust smelter processing and freight, and sales   to production basis
    	
 
    	
6
    	
 
    	
—
    	
 
    	
—
    	
 
    	
6
    	
 
    
	
Operating costs net of metal   credits
    	
 
    	
$
    	
9
    	
 
    	
$
    	
38
    	
 
    	
$
    	
(6
    	
)
    	
$
    	
41
    	
 
    
	
Inmet’s share of production (000’s)
    	
 
    	
15,400
    	
 
    	
18,800
    	
 
    	
8,100
    	
 
    	
42,300
    	
 
    
	
Cash cost (US dollars)
    	
 
    	
$
    	
0.59
    	
 
    	
$
    	
2.16
    	
 
    	
$
    	
(0.73
    	
)
    	
$
    	
1.04
    	
 
    

 

30

 

INMET MINING CORPORATION

Quarterly review

(unaudited)

 

Latest Four Quarters

 

	
 
    	
 
    	
2012
    	
 
    	
2012(1)
    	
 
    	
2011(1)
    	
 
    	
2011(1)
    	
 
    
	
 
    	
 
    	
Second
    	
 
    	
First
    	
 
    	
Fourth
    	
 
    	
Third
    	
 
    
	
(thousands of US dollars, except per share amounts)
    	
 
    	
quarter
    	
 
    	
quarter
    	
 
    	
quarter
    	
 
    	
quarter
    	
 
    
	
STATEMENTS OF EARNINGS
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross sales
    	
 
    	
$
    	
251,395
    	
 
    	
$
    	
285,527
    	
 
    	
$
    	
233,392
    	
 
    	
$
    	
253,432
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
(28,480
    	
)
    	
(29,338
    	
)
    	
(27,330
    	
)
    	
(35,865
    	
)
    
	
Cost of sales (excluding depreciation)
    	
 
    	
(84,634
    	
)
    	
(79,624
    	
)
    	
(90,176
    	
)
    	
(78,563
    	
)
    
	
Depreciation
    	
 
    	
(29,193
    	
)
    	
(30,067
    	
)
    	
(26,834
    	
)
    	
(26,452
    	
)
    
	
 
    	
 
    	
109,088
    	
 
    	
146,498
    	
 
    	
89,052
    	
 
    	
112,552
    	
 
    
	
Corporate development and exploration
    	
 
    	
(10,290
    	
)
    	
(8,801
    	
)
    	
(6,333
    	
)
    	
(4,539
    	
)
    
	
General and administration
    	
 
    	
(15,899
    	
)
    	
(9,745
    	
)
    	
(7,488
    	
)
    	
(9,669
    	
)
    
	
Investment and other income
    	
 
    	
45,103
    	
 
    	
(6,263
    	
)
    	
(3,883
    	
)
    	
34,640
    	
 
    
	
Finance costs
    	
 
    	
(2,379
    	
)
    	
(2,596
    	
)
    	
(2,314
    	
)
    	
(2,301
    	
)
    
	
Income tax expense
    	
 
    	
(31,444
    	
)
    	
(26,012
    	
)
    	
(22,490
    	
)
    	
(32,696
    	
)
    
	
Net income
    	
 
    	
$
    	
94,179
    	
 
    	
$
    	
93,081
    	
 
    	
$
    	
46,544
    	
 
    	
$
    	
97,987
    	
 
    
	
Net income attributable to:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Inmet equity holders
    	
 
    	
$
    	
94,458
    	
 
    	
$
    	
93,081
    	
 
    	
$
    	
46,544
    	
 
    	
$
    	
97,987
    	
 
    
	
Non-controlling interest
    	
 
    	
(279
    	
)
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
$
    	
94,179
    	
 
    	
$
    	
93,081
    	
 
    	
$
    	
46,544
    	
 
    	
$
    	
97,987
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net Income per share
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
$
    	
1.36
    	
 
    	
$
    	
1.35
    	
 
    	
$
    	
0.67
    	
 
    	
$
    	
1.41
    	
 
    
	
Diluted
    	
 
    	
$
    	
1.35
    	
 
    	
$
    	
1.34
    	
 
    	
$
    	
0.67
    	
 
    	
$
    	
1.41
    	
 
    

 

(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.

 

31

 

INMET MINING CORPORATION

Quarterly review (continued)

(unaudited)

 

Previous Four Quarters

 

	
 
    	
 
    	
2011
    	
 
    	
2011(1)
    	
 
    	
2010(1)
    	
 
    	
2010(1)(2)
    	
 
    
	
 
    	
 
    	
Second
    	
 
    	
First
    	
 
    	
Fourth
    	
 
    	
Third
    	
 
    
	
(thousands of US dollars, except per share amounts)
    	
 
    	
quarter
    	
 
    	
quarter
    	
 
    	
quarter
    	
 
    	
quarter
    	
 
    
	
STATEMENTS OF EARNINGS
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gross sales
    	
 
    	
$
    	
214,894
    	
 
    	
$
    	
246,191
    	
 
    	
$
    	
222,945
    	
 
    	
$
    	
218,773
    	
 
    
	
Smelter processing charges and freight
    	
 
    	
(32,793
    	
)
    	
(30,581
    	
)
    	
(34,597
    	
)
    	
(33,265
    	
)
    
	
Cost of sales (excluding depreciation)
    	
 
    	
(71,302
    	
)
    	
(76,633
    	
)
    	
(80,328
    	
)
    	
(68,261
    	
)
    
	
Depreciation
    	
 
    	
(25,802
    	
)
    	
(26,180
    	
)
    	
(18,281
    	
)
    	
(18,456
    	
)
    
	
 
    	
 
    	
84,997
    	
 
    	
112,797
    	
 
    	
89,739
    	
 
    	
98,791
    	
 
    
	
Corporate development and exploration
    	
 
    	
(4,417
    	
)
    	
(12,984
    	
)
    	
(5,261
    	
)
    	
(2,670
    	
)
    
	
General and administration
    	
 
    	
(7,995
    	
)
    	
(8,155
    	
)
    	
(4,607
    	
)
    	
(3,858
    	
)
    
	
Investment and other income
    	
 
    	
4,581
    	
 
    	
(5,590
    	
)
    	
49,012
    	
 
    	
3,095
    	
 
    
	
Finance costs
    	
 
    	
(2,310
    	
)
    	
(2,257
    	
)
    	
(4,157
    	
)
    	
(5,072
    	
)
    
	
Income tax expense
    	
 
    	
(20,588
    	
)
    	
(26,296
    	
)
    	
(30,944
    	
)
    	
(24,462
    	
)
    
	
Income from continuing operations
    	
 
    	
54,268
    	
 
    	
57,515
    	
 
    	
93,782
    	
 
    	
65,824
    	
 
    
	
Income from discontinued operation (net of taxes)
    	
 
    	
—
    	
 
    	
80,786
    	
 
    	
46,467
    	
 
    	
32,501
    	
 
    
	
 
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
138,301
    	
 
    	
$
    	
140,249
    	
 
    	
$
    	
98,325
    	
 
    
	
Net income attributable to:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Inmet equity holders
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
138,301
    	
 
    	
$
    	
142,259
    	
 
    	
$
    	
88,762
    	
 
    
	
Non-controlling interest
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(2,010
    	
)
    	
9,563
    	
 
    
	
 
    	
 
    	
$
    	
54,268
    	
 
    	
$
    	
138,301
    	
 
    	
$
    	
140,249
    	
 
    	
$
    	
98,325
    	
 
    
	
Income from continuing operations per share
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
0.94
    	
 
    	
$
    	
1.67
    	
 
    	
$
    	
1.01
    	
 
    
	
Diluted
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
0.93
    	
 
    	
$
    	
1.67
    	
 
    	
$
    	
1.01
    	
 
    
	
Income from discontinuing operations per share
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
$
    	
—
    	
 
    	
$
    	
1.32
    	
 
    	
$
    	
0.81
    	
 
    	
$
    	
0.58
    	
 
    
	
Diluted
    	
 
    	
$
    	
—
    	
 
    	
$
    	
1.31
    	
 
    	
$
    	
0.81
    	
 
    	
$
    	
0.58
    	
 
    
	
Net Income per share
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
2.26
    	
 
    	
$
    	
2.49
    	
 
    	
$
    	
1.59
    	
 
    
	
Diluted
    	
 
    	
$
    	
0.83
    	
 
    	
$
    	
2.24
    	
 
    	
$
    	
2.49
    	
 
    	
$
    	
1.59
    	
 
    

 

(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) Information from 2010 restated in accordance with IFRS, including presentation of our share of Ok Tedi as discontinued operations.

 

32

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