Inmet stays profitable in second quarter

Continued strong earnings from its Cayeli mine in Turkey allowed Inmet Mining (IMN-T) to post earnings of $2 million, or 3 per share, on revenue of $24.9 million in the second quarter.

The profit was more than double that reported for the second quarter of 1999. Cash provided by operating activities increased to $3.7 million from the $15.7 million consumed a year earlier. Second-quarter revenue was down from 1999’s $27.1 million.

During the latest quarter, the Cayeli copper-zinc mine mined higher copper and zinc grades than in the first quarter of 2000. Cayeli produced 9,400 tonnes copper and 8,200 tonnes zinc, compared with 10,600 tonnes copper and 7,200 tonnes zinc. Total cash costs rose a penny to US47 per lb.

Exploration at Cayeli has concentrated on outlining a new zone of massive-sulphide mineralization at depth. It is believed to be the offset continuation of the Cayeli deposit below a fault. A recently completed hole cut 31.2 metres grading 10.7% copper and 1.9% zinc between the 622- and 651-metre levels.

Resources in the deep zone had previously been estimated at 3.8 million tonnes grading 3.8% copper and 7.6% zinc. A new resource estimate awaits progress of the existing decline to lower levels, which will allow underground drilling to assess the zone; that progress may yet take one to two years.

In Papua New Guinea, the Ok Tedi copper-gold mine, in which Inmet holds an 18% interest, spent heavily on new equipment in the second quarter and, consequently, paid out no dividends. Inmet expects dividend distribution to recommence in the third quarter. The company has changed its method of accounting at Ok Tedi, recording earnings only when dividends are distributed.

Copper production, at 56,000 tonnes, was up 7% from the 1999 second quarter, while gold production was up 29% at 149,600 oz. The increased production is attributed to high mill availability, softer ores, improved process controls for semi-atogenous grinding, and higher gold grades. Total cash costs fell to US64 from US71 per lb. between the two second quarters.

Broken Hill Proprietary (BHP-N), which holds a 52% interest in Ok Tedi Mining, says it would prefer to close the mine before the end of its economic life in 2010. Tailings disposal is degrading the condition of the Ok Tedi and Fly Rivers, downstream from the mine, and rehabilitation costs are a major concern for BHP.

The Papua New Guinean government, which owns a 30% interest in the mine, has stated that social and economic impacts must be carefully considered before it accepts early closure. The Ok Tedi operation is now dredging the rivers in a pilot project to determine whether downstream impacts can be mitigated.

Inmet’s Troilus open-pit gold mine, in north-central Quebec, mined slightly lower grades in the second quarter but increased its mill throughput slightly. Production fell sharply to 27,200 oz., from 44,300 oz. a year earlier.

The decrease is attributable to the pushing back of the pit’s west wall. To maintain feed to the mill, stockpiled ore was processed. Total cash costs shot up to US$311 per oz., from US$248 per oz. a year earlier.

About half of Troilus’s production was hedged, largely through cost-neutral forward sales, at US$340 per oz., which gives the mine a slight positive operating margin at its current high costs. Grades and costs are expected to improve in the third quarter as mining operations return to the southern portion of the pit.