Inmet spreads the wealth

Sharply higher third quarter earnings have prompted copper and zinc miner Inmet Mining (IMN-T) to institute a 20-per-share annual dividend, with the first semi-annual payment of 10 due on Dec. 15.

During the three months ended Sept. 30, Inmet saw its earnings jump by nearly 60% from a year earlier to $36.8 million (or 82 a share). Likewise, gross sales climbed by a third to $178.2 million and cash flow from operations more than doubled to $41.5 million.

The latest quarter’s earnings and cash flow benefited as the company’s average realized for copper jumped by 31% to US$1.81 per lb., and zinc by 40% to US45 per lb. from the corresponding period of 2004. Both increases were partially offset by higher copper smelting charges.

Third quarter copper production totalled 19,300 tonnes at a total cash cost of US52 per lb., up from the year-ago 16,500 tonnes at US57 per lb. The improved costs reflect higher credits for zinc. The company expects to produce around 80,000 tonnes of copper during 2005. The company has trimmed its projected 2005 copper cash costs by US7 per lb. to US55, owing mostly to higher zinc credits.

Meanwhile, higher grades at the Pyhasalmi mine in Finland and Cayeli in Turkey saw zinc production exceeded expectations and nearly double to 25,000 tonnes. The company has boosted its full-year production estimate by 8,000 tonnes to 81,000 tonnes.

Cayeli saw the biggest increase in production owing to the consolidation of ownership of the mine late last year, mining of the centre pillar, and increased mill throughput.

Following a deepening of the shaft at Cayeli, the company has begun lateral development of the conveyor drift to connect the shaft to one of the ore passes. Plans call for one ore pass to be available early in the third quarter of 2006.

Inmet also took home 64,200 oz. of gold (down from 68,400 oz. a year earlier) from the Troilus mine in Quebec and Ok Tedi mine in Papua New Guinea. Inmet owns 18% of the OK Tedi copper-gold mine; BHP Billiton (BHP-N) owns 52%, and the PNG government, 30%.

The lower gold output is attributed to lower grades at Troilus, and lower grades and mill throughput at Ok Tedi. Cash costs averaged US$336 per oz., up from US$225 per oz. a year earlier. The company realized price climbed by US429 to average US$396 per oz.

At quarter’s end, the company had $254 million in cash and equivalents; long-term debt stood at around $27.2 million.

Inmet expects to cover the new dividend payment, which would run around $9.6 million per year, via internal cash flow. Inmet CEO Richard Ross says the new dividend policy provides superior returns to shareholders while allowing the company to continue its strategy of sustainable growth.