Inmet boosts Cayeli stake (December 13, 2001)

Toronto-based Inmet Mining (IMN-T) has agreed to buy Gama Endustri’s 6% interest in the Cayeli copper-zinc in Turkey for about $13 million.

The deal would boost Inmet’s stake in Cayeli to 55%, subject to government approval.

Inmet’s CEO Richard Ross said, “We have always viewed the potential for increasing our stake in Cayeli as an excellent investment opportunity. We are looking forward to continuing with our partner, Eti Holding, to expand Cayeli’s position as a world-class mining operation.”

During the third quarter of 2001, Cayeli, situated in Turkey’s Rize province, produced 11,000 tonnes of copper and 8,500 tonnes of zinc at US42 and US$47 per lb., respectively. The results are little changed from a year earlier.

Production of each metal for the first nine months of the year (22,900 tonnes copper and 17,100 tonnes zinc) is off just less than 20% from a year earlier. Cash costs were slightly higher. Results for the first three quarters of 2001 were negatively affected by lower metal prices and a labour strike that ran from December 2000 to March 15, 2001.

Cayeli’s unit costs per pound continue to rank it as one of the lowest cost underground copper mines in the world even though unit costs were negatively impacted by decreased by-product credits from lower zinc prices.

Inmet also announced that the legislature of Papua New Guinea had passed a government bill, the Ninth Supplemental Agreement, approving the withdrawal of BHP Billiton (BHP-N) from the Ok Tedi copper project. The bill legalizes a series of agreements the Ok Tedi operating company (held 52% by BHP Billiton, 30% by the government, and 18% by Inmet) made with local landholders and community groups.

The agreements release the operating company and its shareholders from any future claims arising from the environmental impact of the mine, in exchange for prescribed compensation.

BHP is scheduled to transfer its share of the operating company to a new company, the PNG Sustainable Development Program Company. Dividends that accrue from Ok Tedi to the new company will go into a fund that will finance development programs, mainly in the Western Province. The new company will have one seat on Ok Tedi’s six-member board and for three years the company will be financially supported by BHP.

The Ok Tedi operating company will also begin contributing to a reclamation reserve fund to bankroll cleanup and closure work after the mine is depleted. The chief environmental concern at Ok Tedi has been the buildup of mill tailings in the Ok Tedi River and in the Fly River downstream. The operation has been dredging both rivers to decrease the impact of the silting as an interim measure, and the new agreement makes the dredging program permanent.