Higher prices spell profit for Inmet

Higher metal prices and a strong performance by the Pyhasalmi copper-zinc mine in Finland propelled Inmet Mining (IMN-T) to a profit in the third quarter.

The company earned $3.7 million (or 7 per share) in the 3-month period, compared with a profit of $574,000 (minus a penny a share). Sales revenue between the two periods climbed to $52.9 million from $29.4 million.

For the first nine months of 2002, Inmet earned $6.7 million (10 a share) on revenue of $151.5 million, compared with a loss of $1.1 million (10 a share) on $78.8 million in the corresponding period of 2001. The improvement is attributed to increased sales at the Cayeli and Troilus mines, in Turkey and Canada respectively, and the addition of Pyhasalmi.

Grades and recoveries at Pyhasalmi continue to exceed expectations. The mine produced 4,000 tonnes copper in concentrate during the recent quarter, plus 7,600 tonnes zinc in concentrate. For the year, the mine is expected to crank out 13,000 tonnes copper in concentrate and 32,000 tonnes zinc in concentrate.

Pyhasalmi also produced 120,100 tonnes pyrite during the quarter, with 600,000 tonnes projected for the entire year. The cash cost worked out to US25 per lb. copper.

At the Cayeli mine, copper production in the quarter slipped 800 tonnes to 10,200 tonnes on lower recoveries. Zinc production was boosted by 1,000 tonnes, to 9,500 tonnes. Cash costs were US41 per lb. copper — a penny better than in the third quarter of 2001.

Over the 9-month period, 28,300 tonnes copper were produced, compared with 22,900 tonnes a year earlier. The mine also surrendered 30,500 tonnes zinc, compared with 17,100 tonnes a year earlier, when the effects of a labour strike were still being felt.

On October 25, Cayeli experienced a series of ground falls in the upper levels of the mine, though Inmet reports that there were no injuries or damage to equipment or mine infrastructure.

Production has been suspended while Cayeli performs rehabilitation work on the impacted areas, with production expected to resume by the end of November.

Cayeli had been expected to treat more than 1 million tonnes of ore to produce 38,000 tonnes copper for the year. Cayeli’s zinc production had been pegged at 38,000 tonnes, down from the original target of 43,000 tonnes. Inmet has a 55% stake in Cayeli.

Back in Canada, the Troilus mine produced 40,200 oz. gold at a cash cost of US$270 apiece during the quarter, down from the 45,400 oz. at US$212 per oz. a year earlier. Production suffered as mining targeted lower-grade ore as the north pit wall was pushed back.

However, production for the 9-month period climbed to 123,300 oz. at US$247 per oz., from 118,100 oz. at US$230 each. Full-year production is projected at 161,000 oz. (lower than the original target of 163,000 oz.) at US$255 per oz. Mining will continue in the northern part of the pit during the fourth quarter.

At the Ok Tedi copper-gold mine in Papua New Guinea, where Inmet has an 18% stake, concentrate shipments were curtailed, owing to drought conditions on the Fly River. Still, the mine continued to operate and stockpile concentrates.

Projected 2002 production has climbed to 215,000 tonnes from 208,000 tonnes on higher mill throughput and improved recoveries. However, gold production estimates are now pegged below the original projection of 525,000 oz.

The company plans to replace the shell in one of Ok Tedi’s two semi-autogenous-grinding mills, cutting mill throughput in half for seven weeks.

At quarter’s end, Inmet had cash and short-term investments of $71 million, up about $4.4 million from a year earlier. Long-term debt stood at $69.2 million.