Inmet earnings up despite higher costs

Inmet Mining (IMN-T) reported earnings of $27.6 million in the first quarter of 2005 benefiting from increased gold, copper and zinc prices at its operations in Papua New Guinea, Turkey, Finland and Canada.

Earnings were up $5.7 million compared with the same quarter of last year, despite an $8 million increase in smelting and freight charges, a $5 million increase in operating costs, a $6.6 million charge in January of this year because of Inmet redeeming a convertible debenture and a $4 million loss due to foreign exchange rate changes when compared with the 2004 quarter.

The company realized metal prices of US$1.49 per lb. copper, US61 per lb. zinc and US$396 per oz. gold (up US20 per lb. copper, US11 per lb. for zinc and US$25 per oz. gold when compared with the realized price during the same quarter of 2004).

Increased metal prices accounted for an increase of $15 million in revenue over the period when compared with the equivalent period in 2004.

Inmet owns 18% of the OK Tedi mine in the Star Mountains region of Papua New Guinea (BHP Billiton (BHP-N) owns 52% and the Papua New Guinea government has a 30% stake).

Inmet’s share of earnings from this operation totalled $21.4 million (accounting for about 40% of lnmet’s total operating earnings) up from $14.6 million during the same period last year.

These earnings are from Inmet’s 18% share of total production of 45,600 tonnes of copper and 133,400 oz. gold in the first quarter (up from 36,000 tonnes copper and 112,400 oz. gold in the same period last year).

OK Tedi processed six million tonnes of ore grading 0.93% copper and 0.94 gram gold per tonne during the first quarter. Last year the average grade over the same period was 0.86% copper and 0.85 gram gold per tonne and 5.3 million tonnes of ore were processed. Mill throughput was down last year compared with this year because during the first quarter of last year, one of the two grinding mills was shut down for eight weeks.

Inmet’s earnings from ayeli were down significantly totalling $14.2 million in 2005, compared with $22.5 million during the first quarter of 2004.

Inmet bought the Turkish government’s 45% share of the ayeli mine in northeastern Turkey at the end of September, thereby securing a 100%-interest in the mine.

ayeli produced 6,800 tonnes of copper and 8,700 tonnes of zinc during the quarter, significantly lower than in the same quarter of 2004 when 9,500 tonnes of copper and 9,700 tonnes of zinc were produced.

The mill processed 190,000 tonnes of ore grading 4.2% copper and 6.1% zinc, whereas one year earlier 250,000 tonnes had been milled with the same copper grade, but only 5.5% zinc.

Total cash costs per lb. of copper produced rose to US 89, up from a total cost of US59 during the same period of 2004.

Changes have been made to the management team and the mine plan and production in the first quarter of this year is an improvement over the fourth quarter results from last year.

The Pyhsalmi mine in central Finland brought in $10.7 million, down from $13.2 million during the same period last year.

Pyhsalmi produced 3,700 tonnes of copper, 8,500 tonnes of zinc and 200 million tonnes of pyrite during the period. The mill processed 340,000 tonnes of ore grading 1.1% copper, 2.7% zinc and 41% sulphur. In 2004 during the same period 336,000 tonnes were processed at slightly higher grade (1.3% copper and 2.9% zinc).

The company managed to decrease its total cash cost per lb. of copper produced at Pyhsalmi by US2, to US29, when compared with the previous year. This was due to higher by-product revenue.

Inmet’s Canadian operation, Troilus, produced 51,300 oz. gold and 2,100 tonnes of copper in the first quarter, up substantially from 2004 when 37,300 oz. gold and 1,400 tonnes of copper were produced.

The mill was expanded last year so throughput averaged 19,400 tonnes per day during the first quarter of this year compared with 15,700 tonnes per day during the fourth quarter of last year.

Over the period ended March 31, Troilus processed 1.7 million tonnes grading 1.13 grams gold per tonne and 0.1% copper. Gold was produced at a total cash cost of US$279 per oz.

Troilus earnings were $5.6 million over the period, up from $3.1 million earned during the first quarter of last year.

On May 3 of this year Inmet had 41.4 million shares outstanding. In addition about 1 million stock options and share units have been issued. During the past three months the stock has closed in trading as high as $19.85, but at press time trading was in the range of $16.40 to $16.75.