More strong medicine for Inmet Mining

Another year of restructuring has left Inmet Mining (IMN-T) with a healthier balance sheet and a net profit of 25 cents a share.

The Toronto-based company earned $31 million on revenue of $106 million in 1998, an improvement over 1997’s net loss of $186 million on $141 million in revenue. Lower operating costs and amortization charges, and a recovery of income taxes all contributed to a smaller loss on continuing operations, which shrank to $16 million from $199 million in 1997.

Gains on the sale of the Antamina copper project ($8 million) and of Inmet’s holdings in Teck (TEK-T) ($11 million) and Norddeutsche Affinerie ($31 million) brought Inmet into black ink for the year.

A share buyback program, mounted to thwart a takeover bid by industrial minerals producer Zemex (ZMX-N), depleted a large cash reserve the company had held. Inmet now has assets of $239 million, including $173 million in cash and short-term deposits, down from $541 million (including $294 million in cash) at the end of 1997.

The bad news in Inmet’s year-end statements is a writedown of $36 million, the carrying value of the Winston Lake zinc mine in north-central Ontario.

Inmet suspended production at Winston Lake in December and began a review of the operation’s feasibility. Reserves in the Lower Pick Lake deposit, originally thought to be 1.2 million tonnes grading 16% zinc, turned out to be lower once development workings reached the zone. Also, difficult ground conditions meant that the zone could not be mined safely or efficiently without severe dilution.

Inmet’s review concluded that, despite the high grade, Lower Pick Lake would be uneconomic at current metal prices, and plans are now under way to close and rehabilitate the mine site.

Both the Cayeli copper-zinc mine in Turkey and the Troilus gold mine in northern Quebec showed profits for the year, though a strike that shut down Cayeli for two months left the mine with a loss in the fourth quarter.

Inmet’s investment in the Ok Tedi copper mine in Papua New Guinea provided a modest profit.

Inmet sold Wolfram Begbau und Hutten, its Austrian tungsten subsidiary, for $50 million in the last quarter of the year, registering a $400,000 gain on the sale. On balance, the company’s restructuring, which included the sale of WBH and the Antamina project, divestment of its Norddeutsche Affinerie and Teck interests, and the share buyback, cost a net $57 million, offset by $50 million in gains on the sales.