Inmet Announces First Quarter Earnings
TORONTO, CANADA -- (Marketwire) -- 04/28/11 -- Inmet Mining Corporation (TSX: IMN) -
All amounts in Canadian dollars unless indicated otherwise
Inmet announces first quarter earnings of $2.33 per share, reflecting earnings from discontinued operations of $1.36 per share after the sale of its interest in Ok Tedi and $0.97 per share from continuing operations compared to $0.96 per share in the first quarter of 2010.
First quarter highlights
-- Strong earnings from operations
Earnings from operations were $117 million compared to $68 million in the first quarter of last year - a result of higher metal prices, the inclusion of earnings from Las Cruces and higher copper sales volumes at Cayeli.
-- Inmet reaffirms 2011 copper production objective
Copper production this quarter was lower than expected during the ramp up of Las Cruces and because Cayeli deferred the processing of higher grade ore to later this year. We remain confident that we will achieve our production guidance of 94,400 tonnes of copper this year.
-- Sale of our interest in Ok Tedi
On January 29, 2011, we sold our 18 percent equity interest in Ok Tedi for US $335 million. Our net proceeds after Papua New Guinea withholding taxes were US $307 million. As a result, we have reported the after-tax earnings relating to Ok Tedi of $83 million or $1.36 per share as discontinued operations.
-- Merger-related costs and foreign exchange losses reduce net income
We incurred approximately $6 million of expenses this quarter related to the agreement to merge with Lundin Mining Corporation which was terminated on March 29, 2011. Additionally, we recognized foreign exchange losses of $10 million on US dollar proceeds we received from the sale of our equity interest in Ok Tedi.
-- Las Cruces progressing on commissioning plan
Las Cruces produced 8,100 tonnes of copper cathode this quarter, a level affected by temporary disruptions in the supply and distribution of oxygen in the leaching process. We are in the process of installing new generation oxygen distributors that should enable a step-change increase in production. We remain confident that we will reach nameplate production rates of 6,000 tonnes of copper cathode per month by year end.
-- Temasek expected to convert subscription receipts
Panamanian law changed this quarter to allow foreign governmental bodies or authorities to hold an interest in mining concessions in Panama. We understand that Temasek is in the course of completing its legal review and we expect Temasek to convert their $500 million in subscriptions receipts into Inmet common shares well before June 30, 2011.
-- Pyhasalmi signs additional long-term pyrite agreement
In March 2011, Pyhasalmi signed a five year sales contract with a customer in the Far East for up to 400,000 tonnes of pyrite per year. Including its current European contracts, Pyhasalmi now has long-term agreements covering sales of up to 760,000 tonnes annually, and expects to produce and sell 800,000 tonnes pyrite in 2011, an increase of 200,000 tonnes from our initial objective. In total, we are expecting gross sales and contribution (net of smelter treatment charges and freight and variable costs that result from pyrite production) from pyrite and other metal sales of $67 million and $47 million respectively in 2011. For future years, prices are negotiated annually with reference to sulphur and fine iron ore prices and ocean transportation costs.
-- New higher grade Balboa discovery at Cobre Panama indicating high grade
potential
On March 8, 2011, we announced that Minera Panama S.A. (MPSA) discovered a significant new higher grade mineralized zone, the Balboa deposit, on its Cobre Panama project. MPSA drilled 10 holes on approximately 200 metre centres. Three of the drill holes have intersected sheeted quartz-bornite-chalcopyrite veins returning higher copper and gold grades than those encountered at any time previously on the Cobre Panama property in over 40 years of exploration drilling. The Balboa mineralization starts near surface and this implies that it could be mined with a low strip ratio but at generally higher copper and gold grades than the current mineral resources. Four drills continue to delineate the extents of zone on 200 metre centres. Additional drills are also being mobilized to begin infill drilling on 100 metre centres with a view to establishing resources and reserves by year-end.
Key financial data
----------------------------------------------------------------------------
----------------------------------------------------------------------------
three months ended March 31
(thousands, except per share amounts) 2011 2010 change
----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Sales
Gross sales $ 254,277 $ 161,162 58%
Net income
Net income from continuing operations $ 59,405 $ 49,371 20%
Net income from continuing operations per
share $ 0.97 $ 0.96 1%
Net income from discontinued operations $ 83,439 $ 30,718 172%
Net income from discontinued operations
per share $ 1.36 $ 0.55 147%
Net income attributable to Inmet
shareholders $ 142,844 $ 84,771 69%
Net income per share $ 2.33 $ 1.51 54%
Cash flow
Cash flow provided by operating
activities $ 118,176 $ 45,127 162%
Cash flow provided by operating
activities per share (1) $ 1.92 $ 0.80 140%
Capital spending (2) $ 40,730 $ 17,541 132%
----------------------------------------------------------------------------
OPERATING HIGHLIGHTS
Production(3)
Copper (tonnes) 17,700 14,500 22%
Zinc (tonnes) 21,200 18,700 13%
Gold (ounces) - 19,300 -100%
Pyrite (tonnes) 186,100 197,500 -6%
Copper cash cost (US $ per pound)(4) $ 0.95 $ 0.41 132%
----------------------------------------------------------------------------
as at
as at December
March 31 31
FINANCIAL CONDITION 2011 2010
Current ratio 4.4 to 1 3.4 to 1
Gross debt to total equity 1% 1%
Net working capital balance (millions) $535 $626
Liquidity balance including cash and long-term bonds
(millions) $1,083 $699
Gross debt (millions) $17 $17
Shareholders' equity (millions) $2,732 $2,555
----------------------------------------------------------------------------
(1) Cash flow provided by operating activities divided by average shares
outstanding for the period.
(2) For the three months ended March 31, 2011, this includes capital
spending of $23 million at Cobre Panama and $15 million at Las Cruces. For
the three months ended March 31, 2010, this includes capital spending of $18
million at Cobre Panama.
(3) Inmet's share. 2010 production volumes exclude our share of Ok Tedi.
(4) Copper cash cost per pound is a non-GAAP financial measure - see
Supplementary financial information on pages 31 to 32. Copper cash costs
this quarter were higher due to the impact of Las Cruces as it ramps up to
full production. In the first quarter of 2010, Las Cruces' results were not
included in cash costs as it had not yet reached commercial production.
First quarter press release
Where to find it
Our financial results 5
Key changes in 2011 5
Understanding our performance 6
Earnings from operations 8
Corporate costs 13
Results of our operations 15
Cayeli 16
Las Cruces 18
Pyhasalmi 20
Status of our development project 22
Cobre Panama 22
Managing our liquidity 24
Financial condition 28
Accounting changes 29
Supplementary financial information 31
In this press release, Inmet means Inmet Mining Corporation and we, us and our mean Inmet and/or its subsidiaries and joint ventures. This quarter refers to the three months ended March 31, 2011. Revised objective is as of April 28, 2011.
Adoption of International Financial Reporting Standards
We have prepared our first quarter 2011 consolidated financial statements and other financial information according to International Financial Reporting Standards, and restated our 2010 comparative financial statements and other financial information following our IFRS accounting policies. See Adoption of International Financial Reporting Standards on page 29 for more information.
Forward looking information
Securities regulators encourage companies to disclose forward-looking information to help investors understand a company's future prospects. This press release contains statements about our future financial condition, results of operations and business.
These are 'forward-looking' because we have used what we know and expect today to make a statement about the future. Forward-looking statements usually include words such as may, expect, anticipate, believe or other similar words. We believe the expectations reflected in these forward-looking statements are reasonable. However, actual events and results could be substantially different because of the risks and uncertainties associated with our business or events that happen after the date of this press release. You should not place undue reliance on forward-looking statements. As a general policy, we do not update forward-looking statements except as required by securities laws and regulations.
Our financial results
----------------------------------------------------------------------------
(thousands, except
per share amounts) three months ended March 31
2011 2010 change
----------------------------------------------------------------------------
EARNINGS FROM OPERATIONS (1)
Cayeli $ 51,473 $ 31,036 66%
Las Cruces 30,576 - 100%
Pyhasalmi 34,453 22,865 51%
Other - 14,178 -100%
----------------------------------------------------------------------------
116,502 68,079 71%
----------------------------------------------------------------------------
DEVELOPMENT AND EXPLORATION
Corporate development and exploration (13,411) (2,779) 383%
----------------------------------------------------------------------------
CORPORATE COSTS
General and administration (8,422) (5,421) 55%
Investment and other income (5,773) 1,204 -579%
Stand by costs - (6,753) -100%
Finance costs (2,331) (1,873) 24%
Income and capital taxes (27,160) (3,086) 780%
----------------------------------------------------------------------------
(43,686) (15,929) 174%
----------------------------------------------------------------------------
Net income from continuing operations 59,405 49,371 20%
Income from discontinued operation (net of
taxes) 83,439 30,718 172%
----------------------------------------------------------------------------
Non-controlling interest - 4,682 -100%
----------------------------------------------------------------------------
Net income attributable to Inmet
shareholders $ 142,844 $ 84,771 69%
----------------------------------------------------------------------------
Income from continuing operations per
common share $ 0.97 $ 0.96 1%
----------------------------------------------------------------------------
Diluted income from continuing operations
per common share $ 0.96 $ 0.96 -
----------------------------------------------------------------------------
Basic net income per common share $ 2.33 $ 1.51 54%
----------------------------------------------------------------------------
Diluted net income per common share $ 2.31 $ 1.51 53%
----------------------------------------------------------------------------
Weighted average shares outstanding 61,549 56,107 10%
----------------------------------------------------------------------------
(1) Gross sales less smelter processing charges and freight, cost of sales
including depreciation and provisions for mine reclamation at closed
properties.
Key changes in 2011
-------------------------------------------------------------------------
three months
ended March
(millions) 31 see page
-------------------------------------------------------------------------
EARNINGS FROM OPERATIONS
Sales
Higher copper prices denominated in Canadian
dollars $ 15 8
Other changes in prices denominated in Canadian
dollars 3 8
Higher sales volumes 14 8
Costs
Higher operating costs, including costs that vary
with income and cash flows (1) 11
Operating earnings at Las Cruces 31 19
2010 earnings from Troilus (14)
-------------------------------------------------------------------------
Higher earnings from operations compared to 2010 48
CORPORATE COSTS
Costs related to proposed merger with Lundin (6) 13
Exploration of Balboa deposit at Cobre Panama (2) 13
Standby charges in 2010 7 13
Foreign exchange changes (10) 13
Higher income taxes (24) 14
Other (3)
-------------------------------------------------------------------------
Higher net income from continuing operations
compared to 2010 10
Higher income from discontinued operation - Ok
Tedi 53 14
Non-controlling interest in 2010 (5)
-------------------------------------------------------------------------
Higher net income attributable to Inmet
shareholders compared to 2010 $ 58
-------------------------------------------------------------------------
Understanding our performance
Metal prices
The table below shows the average metal prices we realized in US dollars and Canadian dollars
(the prices we realize include finalization adjustments - see Gross sales on page 8).
-----------------------------------------------------------------------
three months ended March 31
2011 2010 change
-----------------------------------------------------------------------
US dollar metal prices
Copper (per pound) US $4.29 US $3.42 25%
Zinc (per pound) US $1.06 US $1.03 3%
-----------------------------------------------------------------------
Canadian dollar metal prices
Copper (per pound) C $4.23 C $3.56 19%
Zinc (per pound) C $1.05 C $1.07 -2%
-----------------------------------------------------------------------
Copper
Copper prices on the London Metals Exchange (LME) averaged US $4.38 per pound this quarter, an increase of 12 percent from the fourth quarter of 2010 and a 28 percent increase over the first quarter of 2010.
Zinc
Zinc prices on the LME averaged US $1.09 per pound this quarter, slightly higher than last quarter's average price of US $1.05 per pound.
Pyrite
Prices for sulphur continued to rise this quarter. The earthquake in Japan resulted in the closure of a number of sulphur and acid producing plants and higher prices at the end of the quarter. Rising sulphur prices could have a positive impact on our pyrite prices this year.
Exchange rates
Exchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter and year to date compared to 2010.
---------------------------------------------------------
three months ended March 31
2011 2010 change
---------------------------------------------------------
Exchange rates
1 US$ to C$ $ 0.99 $ 1.04 -5%
1 euro to C$ $ 1.35 $ 1.44 -6%
1 euro to US$ $ 1.37 $ 1.39 -1%
---------------------------------------------------------
Our sales are affected by the conversion of US dollar revenue to Canadian dollars. Compared to the same quarter last year, the value of the Canadian dollar appreciated 5 percent relative to the US dollar, and 6 percent relative to the euro.
Our earnings are affected by changes in foreign currency exchange rates when we:
-- translate the results of our operations from their functional currency
(US dollars or euros) to Canadian dollars
-- revalue US dollars and euros that we hold in cash and long-term bonds at
Corporate.
Treatment charges down for copper
Treatment charges are one component of smelter processing charges. We also pay smelters for content losses and price participation.
The table below shows the average charges we realized this quarter. Zinc contracts for 2011 and 2010 were not finalized in the first quarter of the respective years and therefore the average charges represent the contract prices from the relevant prior year. Adjustments to contracts will be reflected in the second quarter.
----------------------------------------------------------------------------
three months ended March 31
(US$) 2011 2010(1) change
----------------------------------------------------------------------------
Treatment charges
Copper (per dry metric tonne of concentrate) US $48 US $58 -17%
Zinc (per dry metric tonne of concentrate) US $258 US $203 27%
----------------------------------------------------------------------------
Price participation
Copper (per pound) US $0.02 US $0.02 -
Zinc (per pound) US $0.00 US $0.09 -100%
----------------------------------------------------------------------------
Freight charges
Copper (per dry metric tonne of concentrate) US $50 US $47 6%
Zinc (per dry metric tonne of concentrate) US $25 US $29 -14%
----------------------------------------------------------------------------
(1) 2010 charges exclude Ok Tedi charges.
Statutory tax rates remain consistent
The table below shows the statutory tax rates for each of our taxable operating mines.
----------------------------------------------------------------------------
2011 2010 change
----------------------------------------------------------------------------
Statutory tax rates
Cayeli 24% 24% -
Las Cruces 30% 30% -
Pyhasalmi 26% 26% -
----------------------------------------------------------------------------
Earnings from operations
---------------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010 change
---------------------------------------------------------------------------
Gross sales $ 254,277 $ 161,162 58%
Smelter processing charges and freight (31,585) (33,101) -5%
Cost of sales:
Direct production costs (71,428) (48,805) 46%
Inventory changes (7,154) (1,966) 264%
Other non-cash expenses (568) (1,495) -62%
Depreciation (27,040) (7,716) 250%
---------------------------------------------------------------------------
Earnings from operations $ 116,502 $ 68,079 71%
---------------------------------------------------------------------------
Gross sales were significantly higher
-------------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010 change
-------------------------------------------------------------------------
Gross sales by operation
Cayeli $ 99,053 $ 75,268 32%
Las Cruces 90,826 - 100%
Pyhasalmi 64,398 51,440 25%
Other (Troilus) - 34,454 -100%
-------------------------------------------------------------------------
$ 254,277 $ 161,162 58%
-------------------------------------------------------------------------
Gross sales by metal
Copper $ 191,704 $ 79,985 140%
Zinc 44,871 46,673 -4%
Gold - 23,257 -100%
Other 17,702 11,247 57%
-------------------------------------------------------------------------
$ 254,277 $ 161,162 58%
-------------------------------------------------------------------------
Key components of the change in sales: gross sales at Las Cruces, no sales at Troilus due to conclusion of operations
--------------------------------------------------------------------------
three months ended
(millions) March 31
--------------------------------------------------------------------------
Higher copper prices, denominated in Canadian dollars $ 15
Lower zinc prices, denominated in Canadian dollars (2)
Changes in other metal prices 5
Gross sales at Las Cruces 91
2010 gross sales from Troilus (34)
Higher sales volumes at our other mines 18
--------------------------------------------------------------------------
Higher gross sales, compared to 2010 $ 93
--------------------------------------------------------------------------
We record sales that settle during the reporting period using the metal price on the day they settle. For sales that have not settled, we use an estimate based on the month we expect the sale to settle and the forward price of the metal at the end of the reporting period. We recognize the difference between our estimate and the final price by adjusting our gross sales in the period when we settle the sale (finalization adjustment).
This quarter, we recorded $1 million in negative finalization adjustments from fourth quarter 2010 sales.
At the end of this quarter, the following sales had not been settled:
-- 22 million pounds of copper provisionally priced at US $4.28 per pound
-- 19 million pounds of zinc provisionally priced at US $1.07 per pound.
The finalization adjustment we record for these sales will depend on the actual price we receive when they settle, which can be up to five months from the time we initially record the sales. We expect these sales to settle in the following months:
-----------------------------------------------------
(millions of pounds) copper zinc
-----------------------------------------------------
April 2011 11 19
May 2011 5 -
June 2011 4 -
July 2011 2 -
-----------------------------------------------------
Unsettled sales at March 31, 2011 22 19
-----------------------------------------------------
Significantly higher copper and pyrite sales volumes, no gold sales volumes
Our sales volumes are directly affected by the amount of production from our mines and our ability to ship to our customers.
-- Copper production and sales volumes were up this quarter mainly because
of Las Cruces production. Copper sales volumes were higher than
production volumes mainly because of the timing of shipments at Cayeli
and Las Cruces.
-- Zinc sales volumes were consistent with 2010.
-- There were no gold production and sales volumes this quarter because
Troilus ceased production in June 2010 and Ok Tedi was sold in January
2011.
-- Pyhasalmi realized higher pyrite sales volumes this quarter because of
higher European customer demand.
Sales volumes
------------------------------------------------------------
three months ended March 31
2011 2010(1) change
------------------------------------------------------------
Copper (tonnes) 20,600 13,300 55%
Zinc (tonnes) 19,700 19,700 -
Gold (ounces) - 21,200 -100%
Pyrite (tonnes) 141,300 90,800 56%
------------------------------------------------------------
Production
----------------------------------------------------------------------
revised
three months ended March 31 objective
Inmet's share(2) 2011 2010(1) change 2011(3)
----------------------------------------------------------------------
Copper (tonnes)
Cayeli 6,000 7,100 -15% 30,900
Las Cruces 8,100 3,200 153% 50,200
Pyhasalmi 3,600 2,900 24% 13,300
Troilus - 1,300 -100% -
----------------------------------------------------------------------
17,700 14,500 22% 94,400
----------------------------------------------------------------------
Zinc (tonnes)
Cayeli 12,500 11,500 9% 48,600
Pyhasalmi 8,700 7,200 21% 31,900
----------------------------------------------------------------------
21,200 18,700 13% 80,500
----------------------------------------------------------------------
Gold (ounces)
Troilus - 19,300 -100% -
----------------------------------------------------------------------
Pyrite (tonnes)
Pyhasalmi 186,100 197,500 -6% 800,000
----------------------------------------------------------------------
(1) 2010 volumes have been revised to exclude Ok Tedi
(2) Inmet's share: 100 percent for Cayeli, Pyhasalmi and Troilus. Our share
of Las Cruces is 70 percent until December 15, 2010 and 100 percent
thereafter.
(3) 2011 objective was revised from original target to increase expected
pyrite production. All other production objectives remain unchanged.
2011 outlook for sales
We use our production objectives to estimate our sales target.
-- We expect copper production in 2011 to be 94,400 tonnes. Copper
production at Las Cruces should more than double compared to 2010 as the
operation ramps up to its nameplate capacity of 72,000 tonnes of copper
cathode and because we increased our ownership in Las Cruces from 70
percent to 100 percent in December 2010.
-- We expect 2011 zinc sales volumes to be similar to 2010 volumes because
zinc production should be approximately the same as it was in 2010.
-- With production ceasing at Troilus in 2010 and the sale of Ok Tedi in
January 2011, no gold sales are expected for 2011.
-- In March 2011, Pyhasalmi signed a five year sales contract with a
customer in the Far East for up to 400,000 tonnes of pyrite per year.
Including its current European contracts, Pyhasalmi now has long term
agreements covering sales of up to 760,000 tonnes annually, and expects
to produce and sell 800,000 tonnes of pyrite in 2011, an increase of
200,000 tonnes from our initial objective. We expect total revenues from
pyrite and other metals to be approximately $67 million and contribution
(net of smelter processing charges and freight and variable costs that
result from pyrite production) of $47 million. Prices are negotiated
annually with reference to sulphur and fine iron ore prices and ocean
transportation costs.
Our Canadian dollar sales revenues are affected by the US dollar denominated metal price we receive, and the exchange rate between the US dollar and Canadian dollar.
Lower smelter processing charges, higher freight
-------------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010 change
-------------------------------------------------------------------------
Smelter processing charges and
freight by operation
Cayeli $ 17,894 $ 18,838 -5%
Las Cruces 268 - 100%
Pyhasalmi 13,423 11,505 17%
Other (Troilus) - 2,758 -100%
-------------------------------------------------------------------------
$ 31,585 $ 33,101 -5%
-------------------------------------------------------------------------
Smelter processing charges and
freight by metal
Copper $ 11,201 $ 10,121 11%
Zinc 17,677 20,475 -14%
Other 2,707 2,505 8%
-------------------------------------------------------------------------
$ 31,585 $ 33,101 -5%
-------------------------------------------------------------------------
Smelter processing charges by type
and freight
Copper treatment and refining
charges $ 3,381 $ 3,989 -15%
Zinc treatment charges 9,762 8,069 21%
Copper price participation 386 425 -9%
Zinc price participation (200) 3,934 -105%
Content losses 11,621 11,638 -
Freight 6,307 4,958 27%
Other 328 88 273%
-------------------------------------------------------------------------
$ 31,585 $ 33,101 -5%
-------------------------------------------------------------------------
Our copper treatment and refining charges were lower than they were in 2010 because of the cessation of operations at Troilus. Zinc treatment charges were higher this quarter than they were in the same quarter of last year, but lower price participation charges decreased total zinc charges compared to the first quarter of 2010. Freight was higher this quarter mainly because of more pyrite and copper shipments.
2011 outlook for smelter processing charges and freight
We expect costs for copper treatment and refining to be higher in 2011 based on recently signed agreements with our customers. We sell approximately 90 percent of our copper concentrate under long-term contracts. In addition, we expect spot smelter processing charges to be significantly higher than 2010 because the short-term market for copper concentrates has been negatively affected by copper smelter production stoppages resulting from the earthquake in Japan in March. We expect copper price participation to be minimal.
We expect total zinc smelter processing charges, including price participation, to be lower than in 2010 because of a balanced zinc concentrate market.
We expect our ocean freight costs to be similar to rates realized in 2010.
Las Cruces sells its copper cathode production directly to buyers in the Spanish and Mediterranean markets and therefore does not incur smelter processing charges and has relatively low freight costs.
Direct production costs and cost of sales higher
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010 change
----------------------------------------------------------------------------
Direct production costs by operation
Cayeli $ 23,378 $ 21,736 8%
Las Cruces 33,488 - 100%
Pyhasalmi 14,562 14,978 -3%
Other (Troilus) - 12,091 -100%
----------------------------------------------------------------------------
Total direct production costs 71,428 48,805 46%
Inventory changes 7,154 1,966 264%
Other non-cash expenses 568 1,495 -62%
----------------------------------------------------------------------------
Total cost of sales $ 79,150 $ 52,266 51%
----------------------------------------------------------------------------
Direct production costs
Direct production costs are higher this quarter, mainly because we began recognizing operating results at Las Cruces in our consolidated income statement effective July 1, 2010, and because of higher labour, consumables and royalty costs at Cayeli as anticipated in our guidance. This was partly offset by the closure of Troilus mid-year in 2010.
Inventory changes
Copper inventories at Cayeli and Las Cruces decreased this quarter end because of the timing of shipments.
2011 outlook for cost of sales
We expect consolidated direct production costs to be higher in 2011 because we will recognize a full year of production costs in the income statement for Las Cruces. This will be somewhat offset by the planned closure of Troilus.
Our budget for 2011 assumes our costs at Cayeli and Pyhasalmi will be similar to 2010. Costs at Las Cruces will rise to reflect increased production, but will decrease significantly per pound of copper produced as this operation continues to ramp up to full production.
Certain variable costs may continue to affect our earnings, depending on metal prices:
-- royalties at Cayeli are affected by its net income
-- royalties at Las Cruces are affected by its net sales.
Higher depreciation
------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010 change
------------------------------------------------------------------
Depreciation by operation
Cayeli $ 5,226 $ 4,710 11%
Las Cruces 19,556 - 100%
Pyhasalmi 2,258 2,021 12%
Other (Troilus) - 985 -100%
------------------------------------------------------------------
$ 27,040 $ 7,716 250%
------------------------------------------------------------------
Depreciation was higher this quarter mainly because Las Cruces began to depreciate its operating assets in the income statement on July 1, 2010. There was no depreciation at Troilus this quarter because the mine concluded operations in June 2010.
2011 outlook for depreciation
We expect depreciation to be higher in 2011 mainly because we will recognize Las Cruces' operating results in earnings for the entire year. This will be offset somewhat by the closure of Troilus.
Corporate costs
Corporate costs include general and administration costs, taxes, interest and other income.
Corporate development and exploration
Costs this quarter were $11 million higher than the first quarter of 2010. We incurred approximately $6 million of expenses this quarter from the work related to the arrangement agreement to merge with Lundin Mining Corporation. Inmet and Lundin Mining Corporation agreed to mutually terminate their arrangement agreement on March 29, 2011. All of the costs incurred in connection with the proposed merger have been expensed and classified as corporate development and exploration in the consolidated statement of earnings. In addition, we incurred $2 million in expenditures this quarter to drill the Balboa deposit at Cobre Panama. See Status of development project - Cobre Panama on page 22 for more information.
Investment and other income
--------------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010
--------------------------------------------------------------------------
Interest income $ 2,772 $ 1,597
Foreign exchange losses (10,826) (1,061)
Dividend and royalty income 600 714
Other 1,681 (46)
--------------------------------------------------------------------------
$ (5,773) $ 1,204
--------------------------------------------------------------------------
Interest income
Interest income was higher this quarter compared to the same period last year because our long-term bond portfolio provided higher yields and because our cash and long-term bond balances were higher.
Foreign exchange losses
We have foreign exchange gains or losses when we revalue certain foreign denominated assets and liabilities.
Our foreign exchange losses were from:
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010
----------------------------------------------------------------------------
Translation of US dollar held-to-maturity
investments $ (1,452) $ -
Translation of US dollar cash held at
corporate (8,237) (403)
Translation of other monetary assets and
liabilities (1,137) (658)
----------------------------------------------------------------------------
$ (10,826) $ (1,061)
----------------------------------------------------------------------------
We continue to hold the proceeds we received from the sale of our equity interest in Ok Tedi in US dollars, and plan to use this money to fund our US dollar denominated capital program at Cobre Panama. This quarter, we recognized total foreign exchange losses of $9.5 million on these funds because the US dollar depreciated in value relative to the Canadian dollar.
2011 outlook for investment and other income
Investment and other income is affected by our cash and held to maturity investment balances, and by interest rates and exchange rates.
Stand-by costs
In the first quarter of 2010, we could not mine ore at Las Cruces because of the water levels in the pit. We expensed $6.8 million in operating and maintenance costs for the water purification plant because they did not relate to production activities. We recognized these expenses as stand-by costs because we were not yet at commercial production.
Income tax expense
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010 change
----------------------------------------------------------------------------
Cayeli $ 11,656 $ 6,866
Las Cruces 7,497 (7,634)
Pyhasalmi 7,803 4,959
Corporate and other 204 (1,187)
----------------------------------------------------------------------------
$ 27,160 $ 3,004
----------------------------------------------------------------------------
Consolidated effective tax rate 31% 6% 417%
----------------------------------------------------------------------------
Our tax expense changes as our earnings change.
The consolidated effective tax rate increased this quarter compared to the same quarter of last year, mainly because in 2010 Las Cruces recognized a tax recovery on a foreign exchange loss from its intercompany US dollar denominated debt. The foreign exchange eliminates on consolidation, but the tax recovery does not, since there is no corresponding tax expense on the foreign exchange gain.
2011 outlook for income tax expense
We expect statutory tax rates at our operations to remain the same as they were in 2010 unless a statutory tax rate change is enacted.
Discontinued operation
As a result of the sale of our 18 percent equity interest in Ok Tedi in January 2011, we have presented our results relating to Ok Tedi as discontinued operations retroactively. In 2011, after-tax income of $83 million from this discontinued operation includes net earnings of $17 million in January, before the sale, and a gain on sale of $66 million net of withholding taxes. Papua New Guinea withholding taxes of $28 million were paid on the sale and no Canadian taxes were payable, but we expect to reduce our tax-effected Canadian tax loss pools by about $2 million.
Results of our operations
2011 estimates
Our financial review by operation includes estimates for our 2011 operating earnings and operating cash flows. We used our 2011 objectives for production and cost per tonne of ore milled to build these estimates, as well as the following assumptions for the remaining nine months of the year:
----------------------------------------------------------------------------
Copper price US $4.30 per pound
Zinc price US $1.00 per pound
Copper treatment cost US $54 per tonne for contracts
Zinc treatment cost US $224 per tonne (basis US $2,500 per tonne)
for contracts
US $ to C$ exchange rate $1.00
euro to C$ exchange rate $1.35
Working capital Assume no changes for the year
----------------------------------------------------------------------------
Cayeli
----------------------------------------------------------------------------
revised
three months ended March 31 objective
2011 2010 change 2011
----------------------------------------------------------------------------
Tonnes of ore milled (000's) 293 289 1% 1,200
Tonnes of ore milled per day 3,300 3,200 1% 3,300
----------------------------------------------------------------------------
Grades (percent) copper 2.9 3.1 -6% 3.2
zinc 6.3 5.6 13% 5.9
----------------------------------------------------------------------------
Mill recoveries (percent) copper 71 79 -10% 80
zinc 68 72 -6% 68
----------------------------------------------------------------------------
Production (tonnes) copper 6,000 7,100 -15% 30,900
zinc 12,500 11,500 9% 48,600
----------------------------------------------------------------------------
Cost per tonne of ore milled (C$) $80 $75 7% $81
----------------------------------------------------------------------------
Copper production down due to lower grades and recoveries
Copper grades this quarter were lower than 2010 and plan, while zinc grades were higher, because we produced from different areas of the mine containing high grade zinc bornite ore.
Ore containing bornite minerals posed significant challenges to the process plant, resulting in lower metallurgical recoveries this quarter for both copper and zinc. The lower grade copper ore additionally lead to lower overall copper recoveries.
The result was lower copper production compared to 2010 and compared to what we expected, and zinc production slightly ahead of expectations. Higher copper grade ore deferred this quarter should be produced in the coming months and we continue to expect to meet our original target this year.
Cost per tonne of ore milled this quarter was higher than the same quarter last year mainly because royalties were higher, pushed up by higher realized metals prices, and the cost of labour and consumables increased. This change was consistent with our expectations and the objective for the year.
2011 outlook
In 2011, production levels should remain at approximately 1.2 million tonnes. We expect copper grades to be 3.2 percent consistent with our original target and zinc grades to increase to 5.9 percent from 5.6 percent. Bornite containing ore is expected to continue in the mill feed; therefore we have reduced our objective for zinc recoveries from 73 percent to 68 percent. However, because we anticipate higher zinc grades than our original objective we have not revised our objective for zinc production. Copper production is also expected to remain consistent with our original objective.
Financial review
Higher copper sales volumes and lower zinc sales volumes due to timing of shipments
----------------------------------------------------------------------------
(millions of Canadian dollars revised
unless three months ended March 31 objective
otherwise stated) 2011 2010 2011
----------------------------------------------------------------------------
Sales analysis
Copper sales (tonnes) 7,500 5,600 30,900
Zinc sales (tonnes) 10,000 12,300 48,600
------------------------------------------
Gross copper sales $ 70 $ 43 $ 294
Gross zinc sales 23 29 109
Other metal sales 6 3 13
------------------------------------------
Gross sales 99 75 416
Smelter processing charges and
freight (18) (19) (83)
----------------------------------------------------------------------------
Net sales $ 81 $ 56 $ 333
----------------------------------------------------------------------------
Cost analysis
Tonnes of ore milled (thousands) 293 289 1,200
Direct production costs ($ per
tonne) $ 80 $ 75 $ 81
----------------------------------------------------------------------------
Direct production costs $ 23 $ 22 $ 97
Change in inventory 1 (2) -
Depreciation and other non-cash
costs 6 5 18
----------------------------------------------------------------------------
Operating costs $ 30 $ 25 $ 115
----------------------------------------------------------------------------
Operating earnings $ 51 $ 31 $ 218
----------------------------------------------------------------------------
Operating cash flow $ 54 $ 30 $ 189
----------------------------------------------------------------------------
The objective for 2011 uses the assumptions listed on page 15.
The table below shows what contributed to the change in operating earnings and operating cash flow between 2011 and 2010.
-------------------------------------------------------------------------
three months
ended March
(millions) 31
-------------------------------------------------------------------------
Higher copper prices, denominated in Canadian dollars $ 11
Higher copper sales volumes 8
Lower zinc sales volumes (1)
Other 2
-------------------------------------------------------------------------
Higher operating earnings, compared to 2010 20
Change in tax expense because of change in taxable income (1)
Changes in working capital (see note 17 on page 71) 4
Other 1
-------------------------------------------------------------------------
Higher operating cash flow, compared to 2010 $ 24
-------------------------------------------------------------------------
Capital spending
---------------------------------------------------------------------------
three months ended March 31 objective
(thousands) 2011 2010 change 2011
---------------------------------------------------------------------------
Capital spending $ 2,400 $ 1,800 33% $ 19,000
---------------------------------------------------------------------------
2011 outlook for capital spending
We expect to spend $19 million on capital in 2011, for underground development, ore pass rehabilitation, mobile equipment, a shotcrete delivery line extension, a new concrete batch plant and additional mill improvements.
Las Cruces
----------------------------------------------------------------------------
revised
three months ended March 31 objective
(100 percent) 2011 2010 change 2011
----------------------------------------------------------------------------
Tonnes of ore processed
(000's) 173 77 125% 981
----------------------------------------------------------------------------
Copper grades (percent) 6.1 6.9 -12% 6.0
----------------------------------------------------------------------------
Plant recoveries
(percent) 77 85 -9% 85
----------------------------------------------------------------------------
Cathode copper production
(tonnes) 8,100 4,500 80% 50,200
----------------------------------------------------------------------------
Cost per pound of cathode
produced (C$) $ 1.88 n/a n/a $ 1.15
----------------------------------------------------------------------------
Progress update
Since October 2010, we have focused on the efficiency of oxygen distribution and its chemical reaction with the ferrous and ferric iron in solution to leach copper. Our challenge has been to keep the ferric iron level high enough to leach the copper, requiring gradual increases to throughput to avoid sacrificing recoveries. We believe that by early May 2011, we will have substantially improved this part of the leaching process to the point where we will then be able to ramp up throughput rates over the balance of the year to achieve nameplate production levels by year end.
In January 2011, there was a failure in the oxygen plant supplying oxygen to our reactors and delivery was intermittent for the two weeks that followed. During our investigation and reactor maintenance, we discovered that oxygen was only being dispersed properly in two of the eight reactors. Since early March, we have repaired broken and plugged oxygen lines, installed new generation oxygen distributors in seven of the reactors and will install the remaining distributor in early May.
The oxygen supply disruption and distribution problems caused recoveries to drop to 76 percent in January and 70 percent in February. After our repairs and replacement of the oxygen distributors, recoveries have increased and remained near the plant design level of 90 percent. Our success in leaching copper is directly related to our ability to generate ferric iron through effective oxidation in the reactors. The proper distribution and use of oxygen is critical to improving plant performance by creating and maintaining the proper level of ferric iron in the leach reactors while we increase the copper feed to the plant.
As a result of the issues with oxygen distribution, Las Cruces produced 8,100 tonnes copper cathode this quarter, lower than the 9,000 tonnes produced in the fourth quarter of 2010. Las Cruces sold 9,700 tonnes of copper cathode this quarter as it drew down its cathode copper inventory.
In March, we began mining ore in the pit again after the rainy season. Our ability to dewater the bottom of the pit was delayed this quarter while we waited for permits for the permanent water treatment plant, which have since been granted for one of the three purification trains. Pit dewatering is now on track to facilitate consistent uninterrupted feed to the plant. Mining operations this quarter focused on overburden removal in Phase 3 of the pit, and we have mined ore as it has become exposed from the pit dewatering program.
We commissioned the contact water section of the permanent water treatment plant this quarter and we also commenced operation of the first of the three sections of the Dewatering and Reinjection System (DRS) purification system. Although the construction and commissioning of these water purification systems have not directly limited our copper production, they are critical to our continued operation under our authorizations from the local and provincial regulatory authorities. The progress made this quarter on receiving the required permits and on commissioning the water treatment facilities are significant to our ongoing water management activities.
2011 outlook
We consider the ability to substantially improve the efficiency of oxygen dispersion to be a major breakthrough in the ramp up process, following the changes already made that have addressed mechanical bottlenecks. Now that we've taken steps that directly impact the oxygen efficiency, and its reaction with iron to leach copper, we expect throughput to continue to improve and a step-change increase in production to result. Additionally, we will take steps to monitor the status of each reactor individually so we can take quick action to address any leaching performance issues. We have decreased our expected copper grade for 2011 to 6 percent. This should enhance stability through constant copper feed rates during ramp up, a better alignment of stockpiles and our mining plan as well as conforming to the plant design for iron-copper ratios in the feed. Consistent with lower grades, we have increased our throughput objective for 2011 from 750,000 tonnes of ore processed to 981,000 tonnes as the plant is driven by the leaching of contained copper as opposed to ore grades. Crushing and grinding has continued to function well and is not seen as limiting plant capacity. The planned modifications to the grinding thickener scheduled in June will also mitigate any potential capacity issues that we may have with feeding the ground ore to leaching. We have not revised our production objective for 2011, despite a shortfall of 2,500 tonnes this quarter as we expect to make this up with an improved production rate coming in the latter half of the year. We are back on track and estimate that production for the month of April will be 3,500 tonnes based on results to date. Second quarter production will be impacted by a scheduled 15 day shutdown in June to modify the grinding thickener which is anticipated in our projections. We will also install the remaining stainless steel agitators in the reactors as they are received with the final reactor expected in October. By the end of the year, we expect to be producing at a rate of 6,000 tonnes per month - full plant production capacity - and we expect to produce a total of 50,200 tonnes of copper cathode in 2011.
Financial review
New operating earnings and operating cash flow at Las Cruces this year
----------------------------------------------------------------------------
(millions of Canadian dollars unless otherwise three months revised
stated) ended March 31 objective
-----------------------------
2011 2011
-----------------------------
Sales analysis
Copper sales (tonnes) 9,700 50,200
-----------------------------
Gross copper sales $ 91 $ 481
Smelter processing charges and freight - (1)
----------------------------------------------------------------------------
Net sales $ 91 $ 480
----------------------------------------------------------------------------
Cost analysis
Pounds of copper produced (millions) 18 111
Direct production costs ($ per pound) $ 1.88 $ 1.15
----------------------------------------------------------------------------
Direct production costs $ 33 $ 127
Change in inventory 7 -
Depreciation and other non-cash costs 20 86
----------------------------------------------------------------------------
Operating costs $ 60 $ 213
----------------------------------------------------------------------------
Operating earnings $ 31 $ 267
----------------------------------------------------------------------------
Operating cash flow $ 58 $ 354
----------------------------------------------------------------------------
The objective for 2011 uses the assumptions listed on page 15.
Capital spending
---------------------------------------------------------------------------
(100 percent and millions of
Canadian dollars) three months ended March 31 objective
2011 2010 change 2011
---------------------------------------------------------------------------
Capital $ 15 $ 10 50% $ 52
Pre-operating costs
capitalized, net of sales,
working capital and other - (13) -100% -
---------------------------------------------------------------------------
Capital spending $ 15 $ (3) -600% $ 52
---------------------------------------------------------------------------
Capital spending this year was mainly on plant improvements, the permanent water purification plant and mine development. In 2010 it was mainly for the permanent water purification plant.
2011 outlook for capital spending
We expect to spend $52 million on capital projects in 2011, including $15 million for mine development and $37 million for plant improvements.
Pyhasalmi
----------------------------------------------------------------------------
revised
three months ended March 31 objective
2011 2010 change 2011
----------------------------------------------------------------------------
Tonnes of ore milled (000's) 335 345 -3% 1,370
Tonnes of ore milled per day 3,700 3,800 -3% 3,750
----------------------------------------------------------------------------
Grades (percent) copper 1.1 0.9 22% 1.0
zinc 2.9 2.3 26% 2.6
sulphur 42 43 -2% 43
----------------------------------------------------------------------------
Mill recoveries (percent) copper 96 96 - 95
zinc 91 91 - 90
----------------------------------------------------------------------------
Production (tonnes) copper 3,600 2,900 24% 13,300
zinc 8,700 7,200 21% 31,900
pyrite 186,100 197,500 -6% 800,000
----------------------------------------------------------------------------
Cost per tonne of ore milled (C$) $43 $43 - $40
----------------------------------------------------------------------------
Higher copper and zinc grades this quarter
Pyhasalmi processed at an annualized rate in-line with its annual objective. The operation maintained its strong production record and achieved copper recoveries of 96 percent and zinc recoveries of 91 percent. Copper and zinc grades were significantly higher than in the first quarter of 2010 and were also higher than target as we mined in different areas of the mine than planned. Copper and zinc production this quarter were therefore higher than the comparative quarter of 2010.
The backfill raise system functioned well this quarter. The total volume of underground voids at the end of March was well below plan.
2011 outlook
We expect to mine 1.4 million tonnes of 1 percent copper and 2.6 percent zinc in 2011, and produce 13,300 tonnes of copper and 31,900 tonnes of zinc.
In March 2011, Pyhasalmi signed a five year sales contract with a customer in the Far East for up to 400,000 tonnes of pyrite per year. Including its current European contracts, Pyhasalmi now has long term agreements covering sales of up to 760,000 tonnes annually, and expects to produce and sell 800,000 tonnes pyrite in 2011, an increase of 200,000 tonnes from our initial objective. Prices are negotiated annually with reference to sulphur and fine iron ore prices and ocean transportation costs. As a result, we have increased our full year objective for other metal sales (which includes pyrite) to $67 million from previous guidance of $44 million.
Financial review
Higher earnings because of higher copper prices and sales volumes
----------------------------------------------------------------------------
(millions of Canadian dollars revised
unless three months ended March 31 objective
otherwise stated) 2011 2010 2011
----------------------------------------------------------------------------
Sales analysis
Copper sales (tonnes) 3,500 3,300 13,300
Zinc sales (tonnes) 9,700 7,400 31,900
Pyrite sales (tonnes) 141,300 90,800 800,000
------------------------------------------
Gross copper sales $ 31 $ 26 $ 127
Gross zinc sales 22 18 72
Other metal sales 11 8 67
------------------------------------------
Gross sales 64 52 266
Smelter processing charges and
freight (13) (12) (50)
----------------------------------------------------------------------------
Net sales $ 51 $ 40 $ 216
----------------------------------------------------------------------------
Cost analysis
Tonnes of ore milled (thousands) 335 345 1,370
Direct production costs ($ per
tonne) $ 43 $ 43 $ 40
----------------------------------------------------------------------------
Direct production costs $ 15 $ 15 $ 54
Depreciation and other non-cash
costs 2 2 8
----------------------------------------------------------------------------
Operating costs $ 17 $ 17 $ 62
----------------------------------------------------------------------------
Operating earnings $ 34 $ 23 $ 154
----------------------------------------------------------------------------
Operating cash flow $ 40 $ 15 $ 125
----------------------------------------------------------------------------
The objective for 2011 uses the assumptions listed on page 15.
The table below shows what contributed to the change in operating earnings and operating cash flow between 2011 and 2010.
---------------------------------------------------------------------------
three months ended
(millions) March 31
---------------------------------------------------------------------------
Higher copper prices, denominated in Canadian dollars $ 4
Lower zinc prices, denominated in Canadian dollars (2)
Higher sales volumes 7
Other 2
---------------------------------------------------------------------------
Higher operating earnings, compared to 2010 11
Change in tax expense because of change in earnings (3)
Changes in working capital (see note 17 on page 71) 16
Other 1
---------------------------------------------------------------------------
Higher operating cash flow, compared to 2010 $ 25
---------------------------------------------------------------------------
Capital spending
--------------------------------------------------------------------------
three months ended March 31 objective
(thousands) 2011 2010 change 2011
--------------------------------------------------------------------------
Capital spending $ 300 $ 500 -40% $ 8,000
--------------------------------------------------------------------------
2011 outlook for capital spending
Capital spending in 2011 is mainly to replace underground mobile equipment.
Status of our development project
Cobre Panama
Engineering, infrastructure and power
Basic engineering progressed as scheduled this quarter. Metallurgical test work is currently underway to confirm improvements in overall process performance, including the potential to increase copper recoveries and grades, particularly in the first 10 to 15 years of mine life.
There are several projects underway that must be completed before we can begin site capture and construction (expected to begin in the first quarter of 2012). These include access road improvements, a road to access the future tailings management facility and preparation of fuel storage facilities and campsites. We need environmental permits before we can begin some of these projects which we hope to receive during the second quarter. Construction of bridges over the San Juan de Turbe and Coclecito rivers is now complete and access to the property during storm events is greatly improved. Engineering, acquisition of rights-of-way and permitting activities are progressing as planned.
We continue to work with GDF Suez Energy Central America to select an Engineering, Procurement and Construction (EPC) contractor for the development of a 300 megawatt coal-fired power plant to supply power for the project. The plant is designed to exceed IFC and Panamanian environmental standards. Based on current information, we continue to believe that a coal-fired power plant is the best option; however, we will pursue other options in parallel.
Environmental and social impact assessment review and approval process
The review of the environmental and social impact assessment (ESIA) for the project progressed as expected during the quarter. We received the first round of questions and clarifications from the Autoridad Nacional del Ambiente (ANAM) and provided our responses in early February. There was nothing unexpected in the questions from ANAM. The review process calls for one or two additional rounds of questions and we expect approval of the ESIA to be received in the third quarter. Once this is received, permitting will begin to facilitate project construction.
Drilling
We continued with resource drilling this quarter. On March 8, 2011, we announced the discovery of a significantly higher grade mineralized zone, the Balboa deposit, on the project property. We drilled 10 holes on approximately 200 metre centres. Three of the drill holes have intersected sheeted quartz-bornite-chalcopyrite veins returning higher copper and gold grades than those encountered at any time previously on the Cobre Panama property in over 40 years of exploration drilling. The Balboa mineralization starts near surface and this implies that it could be mined with a low strip ratio but at generally higher copper and gold grades than the current mineral resources. The March 8, 2011 press release is available at www.inmetmining.com. Four drills continue to delineate the extents of zone on 200 metre centres. Additional drills are also being mobilized to begin infill drilling on 100 metre centres with a view to establishing resources and reserves by year-end.
2011 outlook for development
We plan to:
-- continue our dialogue with stakeholders at the community, regional and
national levels, to increase their understanding of the project and its
benefits to Panama, and our understanding of stakeholder concerns
-- continue to work with ANAM to ensure a thorough ESIA review process
-- continue to improve site access and infrastructure
-- complete additional drilling for geotechnical and hydrological purposes
and to improve our understanding of mineralization not currently
included in the project base case
-- complete basic engineering and prepare to begin site capture when we
receive the main permits
-- select an EPC contractor and award a contract for the development of a
300 megawatt thermal power plant to supply power for the project
-- spend $224 million to carry out the work described.
After we receive the required ESIA approval and permitting, site capture, preparation and construction should take approximately 48 months.
We are proceeding with our partnering and financing strategy for the project to reduce our interest in the project to between 40 percent and 60 percent. We also continue to advance and evaluate other financing alternatives, including project debt and corporate debt instruments.
Managing our liquidity
We develop our financing strategy by looking at our long-term capital requirements and deciding on the optimal mix of cash, future operating cash flow, credit facilities and project financing.
Our capital structure includes a liquidity cushion that gives us the flexibility to deal with operational disruptions or general market downturns.
----------------------------------------------------------------------------
three months ended March 31
(millions) 2011 2010
----------------------------------------------------------------------------
CASH FROM OPERATING ACTIVITIES
Cayeli $ 54 $ 30
Las Cruces 58 (7)
Pyhasalmi 40 15
Other (Troilus) - 19
Corporate development and exploration not
incurred by operations (12) (2)
General and administration (8) (6)
Foreign exchange losses on US dollar funds (10) -
Other (4) (4)
----------------------------------------------------------------------------
118 45
----------------------------------------------------------------------------
CASH FROM INVESTING AND FINANCING
Purchase of property, plant and equipment (41) (18)
Purchase and maturing of long-term investments,
net (267) (102)
Foreign exchange on cash held in foreign
currency 3 (14)
Other (2) 5
---------------------------------------------------------------------------
(307) (129)
----------------------------------------------------------------------------
CASH FROM DISCONTINUED OPERATION (OK TEDI) 307 39
----------------------------------------------------------------------------
Increase (decrease) in cash 118 (45)
Cash and short-term investments
Beginning of period 326 534
----------------------------------------------------------------------------
End of period $ 444 $ 489
----------------------------------------------------------------------------
Our available liquidity also includes $639 million of held to maturity investments ($373 million at December 31, 2010), providing a total of $1,083 million in capital available to finance our growth strategy as at March 31, 2011.
OPERATING ACTIVITIES
Key components of the change in operating cash flows
----------------------------------------------------------------------------
three
months
ended
(millions) March 31
----------------------------------------------------------------------------
Higher earnings from operations (see page 5) $ 48
Add back higher depreciation included in earnings from operations 19
Higher tax expense (3)
Changes in working capital (see note 17 on page 71) 21
Realized foreign exchange loss on cash (7)
Higher corporate development and exploration (11)
Stand-by costs in 2010 7
Other (1)
----------------------------------------------------------------------------
Higher operating cash flow, compared to 2010 $ 73
----------------------------------------------------------------------------
Operating cash flows this year were higher than 2010 because our operating earnings before depreciation was higher. The large inflow of cash related to working capital this quarter mainly reflects lower accounts receivable at Cayeli and Pyhasalmi due to the timing of collections from customers.
2011 outlook for cash from operating activities
The table below shows expected operating cash flow from our key operations, based on our outlook for metal prices and production listed on page 15, and the assumptions in Results of our operations, which starts on page 15.
2011 estimated operating cash flow by operation
----------------------------------------------------------------------------
(millions)
----------------------------------------------------------------------------
Cayeli $ 189
Las Cruces 354
Pyhasalmi 125
----------------------------------------------------------------------------
$ 668
----------------------------------------------------------------------------
INVESTING AND FINANCING
Capital spending
----------------------------------------------------------------------------
three months ended March 31 objective
(millions) 2011 2010 2011
----------------------------------------------------------------------------
Cayeli $ 2 $ 2 $ 19
Las Cruces 15 (3) 52
Pyhasalmi - 1 8
Cobre Panama 24 18 224
----------------------------------------------------------------------------
$ 41 $ 18 $ 303
----------------------------------------------------------------------------
Please see Results of our operations and Status of our development project for a discussion of actual results and our 2011 objective. Capital spending this quarter was mainly for Cobre Panama and for plant improvements at Las Cruces.
Cash from discontinued operation
In January 2011, we sold our 18 percent equity interest in Ok Tedi for net proceeds of $307 million after Papua New Guinea withholding taxes.
Purchase of long-term investments
We used the US dollar proceeds from the sale of Ok Tedi to purchase US $273.9 million in US Treasury bonds with AAA credit ratings. The bonds mature between March 2012 and January 2016 and have a weighted average annual yield to maturity of 1.2 percent. In the first quarter of 2010, we purchased $102 million in medium-term Canadian government and corporate bonds.
2011 outlook for investing and financing
Capital spending
We expect capital spending to be $303 million in 2011. The more significant items include:
-- $224 million for work on the development at Cobre Panama, including
basic engineering, advance payments for mill equipment and other costs
to advance development
-- $52 million at Las Cruces, including $18 million for mine development
and $25 million for plant improvements.
Subscription receipts
Last year, we entered into a subscription agreement with a subsidiary of Temasek Holdings (Private) Limited (Temasek), under which Temasek received 7.78 million subscription receipts for total proceeds of $500 million. The subscription receipts are exchangeable into Inmet common shares, subject to the satisfaction of certain conditions, including the coming into effect of legislation passed by the legislative assembly of the Republic of Panama amending Panama's Mineral Resources Code (the 'Code') to permit entities in which foreign governmental bodies or authorities have an interest to hold direct or indirect interests in mining concessions in Panama.
The legislation to amend the Code passed final reading in the Panamanian Assembly and came into effect in February 2011. However, these modifications were subsequently repealed by the National Assembly of Panama and given legal effect on March 18. The repeal recognized concerns from indigenous communities over mining within semi-autonomous areas known as Comarcas that are recognized under Panamanian law. The Cobre Panama project is neither situated on nor adjacent to any Comarcas. As part of the repeal, the Government of Panama appointed a special commission to consider and recommend to the National Assembly of Panama future modifications to the Code in consultation with affected parties. This consultation process is currently ongoing.
We have received written confirmation from the Government of Panama that our ability to continue with development of the Cobre Panama project under Law 9, the legal regime that establishes the Cobre Panama mineral concession, remains unaffected by the repeal. In addition, under operation of Panamanian law, the repeal of the modified Code did not reinstate certain provisions of the Code that contained impediments to the ability of foreign state-owned entities from owning interests in mining concessions. It is our view, based on the legal opinions received, that Panamanian law allows for the conversion of the subscription receipts. We understand that Temasek is in the course of completing its legal review and we expect Temasek to convert their subscriptions receipts well before June 30, 2011 as provided for in the relevant agreement.
Financial condition
Our strategy is to make sure we have sufficient liquidity (including cash and committed credit facilities) to finance our operating requirements as well as our growth projects. At March 31, 2011, we had $1,083 million in total funds, including $444 million of cash and short-term investments and $639 million invested in long-term bonds.
Cash
At March 31, 2011 our cash and short-term investments of $444 million included cash and money market instruments that mature in 90 days or less.
Our policy is to invest excess cash in highly liquid investments of the highest credit quality, and to limit our exposure to individual counterparties to minimize the risk associated with these investments. We base our decisions about the length of maturities on our cash flow requirements, rates of return and other factors.
The economic downturn appears to have reversed, but we are still monitoring the potential for a second downturn. At March 31, 2011, we held cash and short-term investments in the following:
-- A to AAA rated treasury funds and money market funds managed by leading
international fund managers, who are investing in money market and
short-term debt securities and fixed income securities issued by leading
international financial institutions and their sponsored securitization
vehicles.
-- Cash, term and overnight deposits with leading Canadian and
international financial institutions that are benefiting directly and
indirectly from support programs by various governments and central
banks.
See note 7 on page 65 in the consolidated financial statements for more details about where our cash is invested.
Medium-term bonds
We have created a bond portfolio that should provide better yields with little change to our investment risk. As at March 31, 2011, the portfolio was $639 million (Held to maturity investments): 52 percent US Treasury bonds, 4 percent Government of Canada bonds, 38 percent Provincial Government bonds and 6 percent corporate bonds. The bonds mature between June 2011 and January 2016. Although our intention is to hold these investments to maturity, there is a liquid market for them and they are available at any time to us.
Restricted cash
Our restricted cash balance of $75 million as at March 31, 2011 included:
-- $17 million in cash collateralized letters of credit for Inmet
-- $56 million at Las Cruces related to a reclamation bond, issuing letters
of credit to suppliers and the local water authority and for its labour
bond to the government
-- $2 million for future reclamation at Pyhasalmi.
COMMON SHARES
----------------------------------------------------------------------------
Common shares outstanding as of March 31, 2011 61,549,172
----------------------------------------------------------------------------
Deferred share units outstanding as of March 31, 2011
(redeemable on a one-for-one basis for common shares) 112,285
----------------------------------------------------------------------------
Dividend declaration
The board of directors has declared an eligible dividend of $0.10 per common share payable on June 15, 2011 to common shareholders of record as at May 31, 2011.
Accounting changes
Adoption of International Financial Reporting Standards
The Accounting Standards Board incorporated International Financial Reporting Standards (IFRS) into the Canadian Institute of Chartered Accountants Accounting Handbook effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The first quarter of 2011 is the first presentation of our results under IFRS, with an effective transition date of January 1, 2010. While the adoption of IFRS did not change our business activities, it has significantly changed our reported financial position. Our key controls over financial reporting did not change as a result of our transition to IFRS. For all changes to policies and procedures that have been identified, the effectiveness of internal controls over financial reporting and disclosure controls and procedures has been assessed and any changes have been implemented. In addition, controls over the IFRS changeover process have been implemented as necessary.
A complete list of our significant accounting policies followed on adoption of IFRS is included in note 3 to our first quarter consolidated financial statements. Additionally, see note 6 to the financial statements for a detailed description of our conversion to IFRS, including a line-by-line reconciliation of our financial statements previously prepared under Canadian GAAP to those under IFRS for the three months ended March 31, 2010 and for the year ended December 31, 2010.
The table below reconciles total equity under Canadian GAAP to total equity under IFRS, and illustrates the after-tax effect of each of the most significant adjustments had on equity.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
January 1, March 31, December 31,
Notes 2010 2010 2010
----------------------------------------------------------------------------
Canadian GAAP equity $ 2,238,145 $2,206,829 $ 2,758,484
IFRS adjustments:
Reclassification of non-
controlling interest to equity 78,005 66,758 -
Revenue recognition i 14,210 16,164 30,023
Reversal of impairment of assets
- Cayeli ii 42,395 39,357 34,005
Provision for asset retirement
obligations iii (38,349) (36,334) (41,310)
Acquisition of the non-
controlling interest in Las
Cruces iv - - (254,056)
Property, plant and equipment
associated with asset
retirement obligations v 8,304 9,853 12,175
Other 18,702 17,027 15,218
----------------------------------------------------------------------------
IFRS equity $ 2,361,412 $2,319,654 $ 2,554,539
----------------------------------------------------------------------------
i) Revenue
Under Canadian GAAP, we recognized revenue when title was legally transferred to the purchaser. For certain shipments at Cayeli, Pyhasalmi and Ok Tedi, we transfer title when we receive the first provisional payment, which is later than the transfer point for risks and rewards of ownership.
Under IFRS, we recognize revenue when all significant risks and rewards of ownership of our products are transferred to the purchaser.
ii) Impairment of assets
Under Canadian GAAP, we used a two-step approach to impairment testing:
-- first comparing asset carrying values with undiscounted future cash
flows to determine whether impairment exists
-- then measuring any impairment by comparing asset carrying values with
fair values (generally assessed using a discounted cash flow valuation
process).
Under IFRS we use a one step approach to test for and measure impairment, and compare asset carrying values directly with the higher of fair value less costs to sell and value in use (which uses discounted future cash flows). IFRS also requires a full or partial reversal of previous impairment losses when circumstances have changed and the impairments have been reduced. Impairment losses were not reversed under Canadian GAAP.
We increased January 1, 2010 property plant and equipment at Cayeli by approximately $50 million to reverse an impairment charge we recognized for this operation in 1996. The increase is the IFRS carrying amount we would have calculated, net of depreciation, if we had not recognized the original impairment. This will also result in a higher ongoing depreciation expense for Cayeli, including an increase of $8 million for the year ended December 31, 2010.
iii) Asset retirement obligations
Under Canadian GAAP, we used a credit adjusted risk free interest rate and were not required to update the rate when market rates change.
Under IFRS, we measure asset retirement obligations using a risk free interest rate and revalue when market risk free interest rates change.
iv) Business combinations
Under Canadian GAAP, companies that acquired an additional interest in an entity they already controlled accounted for it as a step acquisition. Under IFRS, acquiring a non-controlling interest is not considered a business combination, and is instead accounted for as an equity transaction.
Under IFRS, we have accounted for our acquisition of the remaining 30 percent interest in Las Cruces in December 2010 as an equity transaction, because we already controlled it. We recognized the difference between the non-controlling interest (as determined under IFRS) and the fair value of the consideration paid, in retained earnings.
v) First time adoption of IFRS: property, plant and equipment associated with asset retirement obligations
First time adoption of International Financial Reporting Standards (IFRS 1) provides specific exemptions that we used when we adopted IFRS.
IFRS and Canadian GAAP both require us to recognize a corresponding change in asset retirement obligations in the carrying value of the related property, plant and equipment (where we identify an asset) and depreciate this amount prospectively. The amount under IFRS was different from the amount determined under Canadian GAAP because of the different way IFRS determines asset retirement obligations.
We used an optional transitional calculation to determine the property, plant and equipment associated with our provision for asset retirement obligations. Under the transitional calculation, we measured the provision at the transition date and discounted it to the date the liability first arose. The result became the initial asset value. Depreciation was applied to this value. We applied this exemption to certain mines instead of determining property, plant and equipment associated with asset retirement obligations retrospectively.
Supplementary financial information
Page 32 includes supplementary financial information about cash costs. These measures do not fall into the category of International Financial Reporting Standards.
We use unit cash cost information as a key performance indicator, both on a segmented and consolidated basis. We have included cash costs as supplementary information because we believe our key stakeholders use these measures as a financial indicator of our profitability and cash flows before the effects of capital investment and financing costs, such as interest.
Since cash costs are not recognized financial measures under International Financial Reporting Standards, they should not be considered in isolation of earnings or cash flows. There is also no standard way to calculate cash costs, so they are not a reliable way to compare us to other companies.
About Inmet
Inmet is a Canadian-based global mining company that produces copper and zinc. We have interests in three mining operations in locations around the world: Cayeli, Las Cruces and Pyhasalmi. We also have a 100 percent interest in Cobre Panama, a development property in Panama.
This press release is also available at www.inmetmining.com
First quarter conference call
Will be held on
-- Friday, April 29, 2011
-- 8:30 a.m. Eastern Time
-- webcast available at
http://events.digitalmedia.telus.com/inmet/042911/index.php or
www.inmetmining.com
You can also dial in by calling
-- Local or international: 1.416.695.6616
-- Toll-free within North America: 1.800.952.6845
Starting at approximately 10:30 a.m. (ET) Friday, April 29, 2011, a conference call replay will be available
-- Local or international: 1.905.694.9451 passcode 1388402
-- Toll-free within North America: 1.800.408.3053 passcode 1388402
INMET MINING CORPORATION
Supplementary financial information
Cash costs
2011 For the three months ended
March 31
per pound of copper
---------------------------------------------
CAYELI LAS CRUCES PYHASALMI TOTAL
----------------------------------------------------------------------------
(US dollars)
Direct production costs $ 1.62 $ 1.83 $ 1.87 $ 1.77
Royalties and variable
compensation 0.18 0.09 - 0.10
Smelter processing charges and
freight 1.83 0.01 1.30 0.89
Metal credits (3.02) - (3.86) (1.81)
---------------------------------------------
Cash cost $ 0.61 $ 1.93 ($0.69) $ 0.95
---------------------------------------------
---------------------------------------------
2010 For the three months ended March 31
per pound of copper
----------------------------------------------------
LAS CRUCES
CAYELI (1) PYHASALMI TOTAL
----------------------------------------------------------------------------
(US dollars)
Direct production costs $ 1.19 $ - $ 2.21 $ 1.49
Royalties and variable
compensation 0.13 - - 0.09
Smelter processing
charges and freight 1.35 - 1.44 1.38
Metal credits (2.04) - (3.79) (2.55)
----------------------------------------------------
Cash cost $ 0.63 $ - ($0.14) $ 0.41
----------------------------------------------------
----------------------------------------------------
Reconciliation of cash costs to statements of
earnings
2011 For the three
months ended March 31
per pound of copper
---------------------------------------------------
(millions of Canadian
dollars, except where
otherwise noted) CAYELI LAS CRUCES PYHASALMI TOTAL
-------------------------------------------------------------- ------------
GAAP reference page 17 page 19 page 21
Direct production costs $ 23 $ 33 $ 15 $ 71
Smelter processing
charges and freight 18 - 13 31
By product sales (30) - (33) (63)
Adjust smelter
processing and freight,
and sales to production
basis (3) - - (3)
-------------------------------------- -------------
Operating costs net of
metal credits $ 8 $ 33 ($5) $ 36
US $ to C$ exchange rate $ 0.99 $ 0.99 $ 0.99 $ 0.99
Inmet's share of
production (000's) 13,200 17,800 8,000 39,000
-------------------------------------- -------------
Cash cost $ 0.61 $ 1.93 ($0.69) $ 0.95
-------------------------------------- -------------
-------------------------------------- -------------
2010 For the three months ended
March 31
per pound of copper
--------------------------------- ---------
(millions of Canadian dollars,
except where otherwise noted) CAYELI LAS CRUCES (1) PYHASALMI TOTAL
--------------------------------- ---------
GAAP reference page 17 page 19 page 21
Direct production costs $ 22 $ - $ 15 $ 37
Smelter processing charges and
freight 19 - 12 31
By product sales (32) - (26) (58)
Adjust smelter processing and
freight, and sales to production
basis 1 - (2) (1)
--------------------------------- ---------
Operating costs net of metal
credits $ 10 $ - ($1) $ 9
US $ to C$ exchange rate $ 1.04 $ - $ 1.04 $ 1.04
Inmet's share of production 15,70 22,10
(000's) 0 - 6,400 0
--------------------------------- ---------
Cash cost $ 0.63 $ - ($0.14) $ 0.41
--------------------------------- ---------
--------------------------------- ---------
(1) Las Cruces' results were included
from July 1, 2010
INMET MINING CORPORATION
Quarterly review
(unaudited)
Latest Four Quarters
----------------------------------------------------------------------------
(thousands of Canadian 2011 2010(1) 2010(1) 2010(1)
dollars, except per share First Fourth Third Second
amounts) quarter quarter quarter quarter
----------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $ 254,277 $ 230,269 $ 225,960 $ 161,165
Smelter processing charges and
freight (31,585) (35,733) (34,358) (35,272)
Cost of sales (excluding
depreciation) (79,150) (82,967) (70,503) (48,123)
Depreciation (27,040) (18,882) (19,062) (10,328)
----------------------------------------------
116,502 92,687 102,037 67,442
Corporate development and
exploration (13,411) (5,434) (2,758) (2,524)
General and administration (8,422) (4,758) (3,985) (6,200)
Investment and other income (5,773) 50,622 3,197 3,321
Finance costs (2,331) (4,294) (5,239) (1,770)
Capital tax expense - (127) (82) (82)
Income tax expense (27,160) (31,833) (25,184) (8,693)
----------------------------------------------
Income from continuing
operations 59,405 96,863 67,986 51,494
Income from discontinued
operation (net of taxes) 83,439 47,993 33,569 12,475
----------------------------------------------
Net income $ 142,844 $ 144,856 $ 101,555 $ 63,969
----------------------------------------------
Net income attributable to:
Inmet equity holders $ 142,844 $ 146,932 $ 91,678 $ 68,495
Non-controlling interest - (2,076) 9,877 (4,526)
----------------------------------------------
$ 142,844 $ 144,856 $ 101,555 $ 63,969
----------------------------------------------
Income from continuing
operations per share
Basic $ 0.97 $ 1.73 $ 1.04 $ 1.00
Diluted $ 0.96 $ 1.73 $ 1.03 $ 1.00
Income from discontinuing
operations per share
Basic $ 1.36 $ 0.84 $ 0.60 $ 0.22
Diluted $ 1.35 $ 0.84 $ 0.60 $ 0.22
Net Income per share
Basic $ 2.33 $ 2.57 $ 1.64 $ 1.22
Diluted $ 2.31 $ 2.57 $ 1.63 $ 1.22
(1) Information from 2010 restated in accordance with IFRS, including
presentation of our share of Ok Tedi as discontinued operations.
(unaudited)
Previous Four Quarters
----------------------------------------------------------------------------
(thousands of Canadian 2010(1) 2009(2) 2009(2) 2009(2)
dollars, except per share First Fourth Third Second
amounts) quarter quarter quarter quarter
----------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $ 161,162 $ 290,570 $241,121 $213,042
Smelter processing charges
and freight (33,101) (53,696) (41,607) (40,589)
Cost of sales (excluding
depreciation) (52,266) (74,995) (72,706) (73,827)
Depreciation (7,716) (17,911) (14,558) (13,604)
--------------------------------------------------
68,079 143,968 112,250 85,022
Corporate development and
exploration (2,779) (2,915) (1,963) (2,727)
General and administration (5,421) (9,836) (5,147) (4,785)
Investment and other
income 1,204 280 3,588 16,466
Asset impairment - (3,496) - -
Stand-by costs (6,753) - - -
Finance costs (1,873) (496) (496) (493)
Capital tax expense (82) 69 (744) (125)
Income tax expense (3,004) (38,668) (39,244) (24,052)
--------------------------------------------------
Income from continuing
operations 49,371 88,906 68,244 69,306
Income from discontinued
operation (net of taxes) 30,718 - - -
--------------------------------------------------
Net income $ 80,089 $ 88,906 $ 68,244 $ 69,306
--------------------------------------------------
Net income attributable
to:
Inmet equity holders $ 84,771 $ 89,763 $ 61,551 $ 66,528
Non-controlling interest (4,682) (857) 6,693 2,778
--------------------------------------------------
$ 80,089 $ 88,906 $ 68,244 $ 69,306
--------------------------------------------------
Income from continuing
operations per share
Basic $ 0.96 $ 1.60 $ 1.10 $ 1.37
Diluted $ 0.96 $ 1.60 $ 1.09 $ 1.36
Income from discontinuing
operations per share
Basic $ 0.55 $ - $ - $ -
Diluted $ 0.55 $ - $ - $ -
Net Income per share
Basic $ 1.51 $ 1.60 $ 1.10 $ 1.37
Diluted $ 1.51 $ 1.60 $ 1.09 $ 1.36
(1) Information from 2010 restated in accordance with IFRS, including
presentation of our share of Ok Tedi as discontinued operations.
(2) Information from 2009 is presented in accordance with Canadian GAAP
and was not required to be restated to IFRS.
Consolidated financial statements
INMET MINING CORPORATION
Consolidated statements of financial position
(unaudited)
(thousands of Note March 31, December 31, January 1,
Canadian dollars) reference 2011 2010(1) 2010(1)
----------------------------------------------------------------------------
Assets
Current assets:
Cash and short term
investments 7 $ 444,260 $ 326,425 $ 533,913
Restricted cash 8 695 617 15,130
Accounts receivable 108,510 119,426 155,761
Inventories 61,154 72,154 98,324
Current portion of
held to maturity
investments 9 75,425 53,915 9,993
Assets held for
sale 10 92 319,082 -
---------------------------------------------
690,136 891,619 813,121
Restricted cash 8 73,848 70,059 101,589
Property, plant and
equipment 1,766,671 1,736,065 1,945,669
Investments in
equity securities 5,636 2,694 42,411
Held to maturity
investments 9 563,266 318,615 89,891
Deferred income tax
assets 3,372 8,721 2,360
Other assets 2,379 2,335 1,903
---------------------------------------------
Total assets $ 3,105,308 $ 3,030,108 $ 2,996,944
----------------------------------------------------------------------------
Liabilities
Current liabilities:
Accounts payable
and accrued
liabilities $ 137,778 $ 136,345 $ 170,524
Provisions 11 17,588 17,668 17,417
Derivatives - - 1,543
Liabilities
associated with
assets held for
sale 10 - 111,896 -
---------------------------------------------
155,366 265,909 189,484
Long-term debt 17,361 16,619 200,026
Provisions 11 165,475 162,399 196,430
Other liabilities 18,833 18,117 20,695
Derivatives - - 3,165
Deferred income tax
liabilities 15,830 12,525 25,732
---------------------------------------------
Total liabilities 372,865 475,569 635,532
---------------------------------------------
Commitments and
contingencies 18
Equity
Share capital 1,089,576 1,089,576 669,952
Contributed surplus 66,282 66,131 64,809
Share based
compensation 7,583 6,542 5,170
Retained earnings 1,720,351 1,577,507 1,527,109
Accumulated other
comprehensive
income (loss) 12 (151,349) (185,217) 19,093
---------------------------------------------
Total equity
attributable to
Inmet equity
holders 2,732,443 2,554,539 2,286,133
Non-controlling
interest - - 75,279
---------------------------------------------
Total equity 2,732,443 2,554,539 2,361,412
---------------------------------------------
Total liabilities
and equity $ 3,105,308 $ 3,030,108 $ 2,996,944
----------------------------------------------------------------------------
(1) Refer to note 6 for effects of
adoption of IFRS
(See accompanying notes)
INMET MINING CORPORATION
Segmented statements of financial position
(unaudited)
2011 As at March
31
CORPORATE &
OTHER CAYELI LAS CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland)
Assets
Cash and short-
term
investments $ 54,172 $ 155,255 $ 87,572 $ 142,899
Other current
assets 82,975 48,754 53,757 59,287
Restricted cash 16,692 - 55,468 1,688
Property, plant
and equipment 847 146,257 975,666 67,304
Investments in
equity
securities 5,636 - - -
Held to maturity
investments 499,829 63,437 - -
Other non-
current assets 1,028 4,723 - -
------------------------------------------------------------
------------------------------------------------------------
$ 661,179 $ 418,426 $ 1,172,463 $ 271,178
------------------------------------------------------------
------------------------------------------------------------
Liabilities
Current
liabilities $ 26,695 $ 37,177 $ 52,957 $ 32,571
Long-term debt 17,361 - - -
Provisions 55,902 21,511 60,089 27,973
Other
liabilities 676 - 18,157 -
Deferred income
tax liabilities 54 - 3,160 12,616
------------------------------------------------------------
$ 100,688 $ 58,688 $ 134,363 $ 73,160
------------------------------------------------------------
2011 As at March
31
DISCONTINUED
OPERATIONS -
COBRE PANAMA OK TEDI TOTAL
-------------------------------------------------------------
(thousands of
Canadian (Papua New
dollars) (Panama) Guinea)
Assets
Cash and short-
term
investments $ 4,362 $ - $ 444,260
Other current
assets 1,103 - 245,876
Restricted cash - - 73,848
Property, plant
and equipment 576,597 - 1,766,671
Investments in
equity
securities - - 5,636
Held to maturity
investments - - 563,266
Other non-
current assets - - 5,751
---------------------------------------------
---------------------------------------------
$ 582,062 $ - $ 3,105,308
---------------------------------------------
---------------------------------------------
Liabilities
Current
liabilities $ 5,966 $ - $ 155,366
Long-term debt - - 17,361
Provisions - - 165,475
Other
liabilities - - 18,833
Deferred income
tax liabilities - - 15,830
---------------------------------------------
$ 5,966 $ - $ 372,865
---------------------------------------------
2010 As at CORPORATE &
December 31 OTHER CAYELI LAS CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland)
Assets
Cash and short-
term
investments $ 53,184 $ 107,750 $ 59,866 $ 97,056
Other current
assets 60,785 58,959 59,602 66,193
Restricted cash 16,906 - 51,521 1,632
Property, plant
and equipment 779 152,653 941,434 66,984
Investments in
equity
securities 2,694 - - -
Held to maturity
investments 253,749 64,866 - -
Other non-
current assets 952 5,754 4,350 -
------------------------------------------------------------
$ 389,049 $ 389,982 $ 1,116,773 $ 231,865
------------------------------------------------------------
Liabilities
Current
liabilities $ 30,286 $ 39,654 $ 47,220 $ 28,913
Long-term debt 16,619 - - -
Provisions 57,536 21,607 56,439 26,817
Other
liabilities 676 - 17,441 -
Deferred income
tax liabilities 176 - - 12,349
------------------------------------------------------------
$ 105,293 $ 61,261 $ 121,100 $ 68,079
------------------------------------------------------------
DISCONTINUED
2010 As at OPERATIONS -
December 31 COBRE PANAMA OK TEDI TOTAL
-------------------------------------------------------------
(thousands of
Canadian (Papua New
dollars) (Panama) Guinea)
Assets
Cash and short-
term
investments $ 8,569 $ - $ 326,425
Other current
assets 686 318,969 565,194
Restricted cash - - 70,059
Property, plant
and equipment 574,215 - 1,736,065
Investments in
equity
securities - - 2,694
Held to maturity
investments - - 318,615
Other non-
current assets - - 11,056
---------------------------------------------
$ 583,470 $ 318,969 $ 3,030,108
---------------------------------------------
Liabilities
Current
liabilities $ 7,940 $ 111,896 $ 265,909
Long-term debt - - 16,619
Provisions - - 162,399
Other
liabilities - - 18,117
Deferred income
tax liabilities - - 12,525
---------------------------------------------
$ 7,940 $ 111,896 $ 475,569
---------------------------------------------
INMET MINING CORPORATION
Segmented statements of financial position (continued)
(unaudited)
2010 As at CORPORATE &
January 1 OTHER CAYELI LAS CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland)
Assets
Cash and short-
term
investments $ 251,570 $ 158,631 $ 10,039 $ 66,314
Other current
assets 37,591 40,341 73,501 49,882
Restricted cash 16,492 - 56,878 1,854
Property, plant
and equipment 13,508 168,389 1,034,947 72,183
Investments in
equity
securities 42,411 - - -
Held to maturity
investments 89,891 - - -
Other non-
current assets 729 2,196 412 -
------------------------------------------------------------
$ 452,192 $ 369,557 $ 1,175,777 $ 190,233
------------------------------------------------------------
Liabilities
Current
liabilities $ 42,278 $ 35,144 $ 29,173 $ 27,665
Long-term debt 18,094 - 181,932 -
Provisions 56,281 21,214 55,929 21,522
Other
liabilities 676 - 20,019 -
Derivatives - - - -
Deferred income
tax liabilities 3,128 - - 11,448
------------------------------------------------------------
$ 120,457 $ 56,358 $ 287,053 $ 60,635
------------------------------------------------------------
DISCONTINUED
2010 As at OPERATIONS -
January 1 COBRE PANAMA OK TEDI TOTAL
-------------------------------------------------------------
(thousands of
Canadian (Papua New
dollars) (Panama) Guinea)
Assets
Cash and short-
term
investments $ 10,728 $ 36,631 $ 533,913
Other current
assets 468 77,425 279,208
Restricted cash - 26,365 101,589
Property, plant
and equipment 537,251 119,391 1,945,669
Investments in
equity
securities - - 42,411
Held to maturity
investments - - 89,891
Other non-
current assets - 926 4,263
---------------------------------------------
$ 548,447 $ 260,738 $ 2,996,944
---------------------------------------------
Liabilities
Current
liabilities $ 10,855 $ 44,369 $ 189,484
Long-term debt - - 200,026
Provisions - 41,484 196,430
Other
liabilities - - 20,695
Derivatives - 3,165 3,165
Deferred income
tax liabilities - 11,156 25,732
---------------------------------------------
$ 10,855 $ 100,174 $ 635,532
---------------------------------------------
INMET MINING CORPORATION
Consolidated statements of changes in equity
(unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to Inmet equity holders
----------------------------------------------------------------------------
(thousands of
Canadian Retained Contributed Share based
dollars) Share Capital earnings surplus compensation
----------------------------------------------------------------------------
Balance as at
January 1,
2010(1) $ 669,952 $ 1,527,109 $ 64,809 $ 5,170
Comprehensive
income - 84,771 - -
Equity settled
share-based
compensation
plans - - 324 658
Other - - - -
------------------------------------------------------------
Balance as at
March 31,
2010(1) $ 669,952 $ 1,611,880 $ 65,133 $ 5,828
------------------------------------------------------------
Comprehensive
income - 307,105 - -
Equity settled
share-based
compensation
plans - - 998 714
Dividends on
common shares - (11,210) - -
Acquisition of
non-controlling
interest in Las
Cruces 419,624 (330,268) - -
Other - - - -
------------------------------------------------------------
Balance as at
December 31,
2010(1) $ 1,089,576 $ 1,577,507 $ 66,131 $ 6,542
------------------------------------------------------------
Comprehensive
income - 142,844 - -
Equity settled
share-based
compensation
plans - - 151 1,041
------------------------------------------------------------
Balance as at
March 31, 2011 $ 1,089,576 $ 1,720,351 $ 66,282 $ 7,583
------------------------------------------------------------
(1) Refer to
note 6 for
effects of
adoption of
IFRS
(See
accompanying
notes)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-
Attributable to Inmet equity controlling
holders interest Total equity
----------------------------------------------------------------------------
Accumulated
other
(thousands of comprehensive
Canadian income (loss)
dollars) (note 13) Total
----------------------------------------------------------------------------
Balance as at
January 1,
2010(1) $ 19,093 $ 2,286,133 $ 75,279 $ 2,361,412
Comprehensive
income (117,575) (32,804) (9,907) (42,711)
Equity settled
share-based
compensation
plans - 982 - 982
Other - - (29) (29)
------------------------------------------------------------
Balance as at
March 31,
2010(1) ($98,482) $ 2,254,311 $ 65,343 $ 2,319,654
------------------------------------------------------------
Comprehensive
income (79,830) 227,275 1,595 228,870
Equity settled
share-based
compensation
plans - 1,712 - 1,712
Dividends on
common shares - (11,210) - (11,210)
Acquisition of
non-controlling
interest in Las
Cruces (6,905) 82,451 (66,847) 15,604
Other - - (91) (91)
------------------------------------------------------------
Balance as at
December 31,
2010(1) ($185,217) $ 2,554,539 $ - $ 2,554,539
------------------------------------------------------------
Comprehensive
income 33,868 176,712 - 176,712
Equity settled
share-based
compensation
plans - 1,192 - 1,192
------------------------------------------------------------
Balance as at
March 31, 2011 ($151,349) $ 2,732,443 $ - $ 2,732,443
------------------------------------------------------------
(1) Refer to
note 6 for
effects of
adoption of
IFRS
(See accompanying notes)
INMET MINING CORPORATION
Consolidated statements of earnings
(unaudited)
Three Months Ended March 31
(thousands of Canadian dollars Note
except per share amounts) reference 2011 2010(1)
----------------------------------------------------------------------------
Gross sales $ 254,277 $ 161,162
Smelter processing charges and
freight (31,585) (33,101)
Cost of sales (excluding
depreciation) (79,150) (52,266)
Depreciation (27,040) (7,716)
----------------------------------------------------------------------------
Earnings from operations 116,502 68,079
Corporate development and
exploration (13,411) (2,779)
General and administration (8,422) (5,421)
Investment and other income 13 (5,773) 1,204
Stand-by charges - (6,753)
Finance costs 14 (2,331) (1,873)
----------------------------------------------------------------------------
Income before taxation 86,565 52,457
Capital tax expense - (82)
Income tax expense 15 (27,160) (3,004)
----------------------------------------------------------------------------
Income from continuing
operations $ 59,405 $ 49,371
Income from discontinued
operation (net of taxes) 10 83,439 30,718
----------------------------------------------------------------------------
Net income $ 142,844 $ 80,089
----------------------------------------------------------------------------
Net income attributable to:
Inmet equity holders $ 142,844 $ 84,771
Non-controlling interest - (4,682)
----------------------------------------------------------------------------
$ 142,844 $ 80,089
----------------------------------------------------------------------------
Earnings per common share 16
Income from continuing
operations
Basic $ 0.97 $ 0.96
Diluted $ 0.96 $ 0.96
----------------------------------------------------------------------------
Income from discontinued
operation
Basic $ 1.36 $ 0.55
Diluted $ 1.35 $ 0.55
----------------------------------------------------------------------------
Net income
Basic $ 2.33 $ 1.51
Diluted $ 2.31 $ 1.51
----------------------------------------------------------------------------
(1) Refer to note 6 for effects of adoption
of IFRS
(See accompanying notes)
2011 For the
three months CORPORATE
ended March 31 & OTHER CAYELI LAS CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland)
Gross sales $ - $ 99,053 $ 90,826 $ 64,398
Smelter
processing
charges and
freight - (17,894) (268) (13,423)
Cost of sales
(excluding
depreciation) - (24,460) (40,426) (14,264)
Depreciation - (5,226) (19,556) (2,258)
------------------------------------------------------------
Earnings from
operations - 51,473 30,576 34,453
Corporate
development and
exploration (9,969) (478) (5) (730)
General and
administration (8,422) - - -
Investment and
other income (6,995) 850 248 124
Finance costs (941) (147) (1,024) (219)
Income tax
expense (204) (11,656) (7,497) (7,803)
------------------------------------------------------------
Net income from
continuing
operations ($26,531) $ 40,042 $ 22,298 $ 25,825
Income from
discontinued
operation (net
of taxes) - - - -
------------------------------------------------------------
Net income
(loss) ($26,531) $ 40,042 $ 22,298 $ 25,825
------------------------------------------------------------
2011 For the DISCONTINUED
three months COBRE OPERATIONS -
ended March 31 PANAMA OK TEDI TOTAL
-------------------------------------------------------------
(thousands of
Canadian (Papua New
dollars) (Panama) Guinea)
Gross sales $ - $ - $ 254,277
Smelter
processing
charges and
freight - - (31,585)
Cost of sales
(excluding
depreciation) - - (79,150)
Depreciation - - (27,040)
---------------------------------------------
Earnings from
operations - - 116,502
Corporate
development and
exploration (2,229) - (13,411)
General and
administration - - (8,422)
Investment and
other income - - (5,773)
Finance costs - - (2,331)
Income tax
expense - - (27,160)
--------------------------------------------
Net income from
continuing
operations ($2,229) $ - $ 59,405
Income from
discontinued
operation (net
of taxes) - 83,439 83,439
--------------------------------------------
Net income
(loss) ($2,229) $ 83,439 $ 142,844
--------------------------------------------
2010 For the
three months CORPORATE LAS
ended March 31 & OTHER CAYELI CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland)
Gross sales $ 34,454 $ 75,268 $ - $ 51,440
Smelter
processing
charges and
freight (2,758) (18,838) - (11,505)
Cost of sales
(excluding
depreciation) (16,533) (20,684) - (15,049)
Depreciation (985) (4,710) - (2,021)
------------------------------------------------------------
Earnings from
operations 14,178 31,036 - 22,865
Corporate
development and
exploration (1,878) (66) - (835)
General and
administration (5,421) - - -
Investment and
other income 1,129 119 (44) -
Stand-by charges - - (6,753) -
Finance costs (969) (149) (569) (186)
Capital tax
expense (82) - - -
Income tax
expense 1,187 (6,866) 7,634 (4,959)
------------------------------------------------------------
Net income from
continuing
operations $ 8,144 $ 24,074 $ 268 $ 16,885
Income from
discontinued
operation (net
of taxes) - - - -
------------------------------------------------------------
Net income $ 8,144 $ 24,074 $ 268 $ 16,885
------------------------------------------------------------
2010 For the DISCONTINUED
three months COBRE OPERATIONS -
ended March 31 PANAMA OK TEDI TOTAL
-----------------------------------------------------------
(thousands of
Canadian (Papua New
dollars) (Panama) Guinea)
Gross sales $ - $ - $ 161,162
Smelter
processing
charges and
freight - - (33,101)
Cost of sales
(excluding
depreciation) - - (52,266)
Depreciation - - (7,716)
-------------------------------------------
Earnings from
operations - - 68,079
Corporate
development and
exploration - - (2,779)
General and
administration - - (5,421)
Investment and
other income - - 1,204
Stand-by charges - - (6,753)
Finance costs - - (1,873)
Capital tax
expense - - (82)
Income tax
expense - - (3,004)
-------------------------------------------
Net income from
continuing
operations $ - $ - $ 49,371
Income from
discontinued
operation (net
of taxes) - 30,718 30,718
-------------------------------------------
Net income $ - $ 30,718 $ 80,089
-------------------------------------------
INMET MINING CORPORATION
Consolidated statements of comprehensive income (loss)
(unaudited)
Three months ended March 31
Note
(thousands of Canadian dollars) reference 2011 2010(1)
------------------------------------------------------------ --------------
Net income $ 142,844 $ 80,089
-------------- --------------
Other comprehensive income (loss)
for the period:
Continuing operations
Changes in fair value of
investments (540) 172
Currency translation adjustments 17,956 (117,730)
Income tax recovery related to
investments - other
comprehensive income 77 605
-----------------------------
17,493 (116,953)
-----------------------------
Other comprehensive income from
discontinued operation (net of
taxes) 16,375 (5,847)
-----------------------------
Comprehensive income (loss) $ 176,712 ($42,711)
---------------------------------------------------------------------------
Comprehensive income (loss)
attributable to:
Inmet equity holders $ 176,712 ($32,804)
Non-controlling interests - (9,907)
-----------------------------
$ 176,712 ($42,711)
---------------------------------------------------------------------------
(1) Refer to note 6 for effects of adoption of IFRS
(See accompanying notes)
INMET MINING CORPORATION
Consolidated statements of cash flows
(unaudited)
Three months ended March 31
Note
(thousands of Canadian dollars) reference 2011 2010(1)
----------------------------------------------------------------------------
Cash provided by (used in)
operating activities(2)
Net income from continuing
operations $ 59,405 $ 49,371
Add (deduct) items not affecting
cash:
Depreciation 27,040 7,716
Deferred income taxes 15 8,389 (12,906)
Accretion expense on asset
retirement obligations and
capital leases 1,891 1,420
Foreign exchange loss 4,225 545
Other (418) 739
Settlement of asset retirement
obligations (1,666) (573)
Net change in non-cash working
capital 17 19,310 (1,185)
------------------------------
118,176 45,127
------------------------------
Cash provided by (used in)
investing activities
Purchase of property, plant and
equipment (40,730) (17,541)
Acquisition of long term
investments 9 (275,456) (102,380)
Maturing of held to maturity
investments 8,000 -
Funding received under Cobre Panama
option 3,944 2,139
Purchase of equity securities (3,493) -
Sale of short-term investments 7,278 26,996
Other 126 -
------------------------------
(300,331) (90,786)
------------------------------
Cash provided by (used in)
financing activities
Financial assurance payments (1,952) (31)
Funding by non-controlling
shareholder - 2,795
Other (884) (127)
------------------------------
(2,836) 2,637
------------------------------
Foreign exchange on cash held
in foreign currencies 3,140 (13,957)
------------------------------
Cash provided by discontinued
operation 10 306,982 39,342
------------------------------
Increase (decrease) in cash: 125,131 (17,637)
Cash:
Beginning of period 319,129 506,917
------------------------------
End of period $ 444,260 $ 489,280
Short term investments - -
------------------------------
Cash and short-term investments $ 444,260 $ 489,280
----------------------------------------------------------------------------
(1) Refer to note 6 for effects of
adoption of IFRS
(See accompanying notes)
(2) Supplementary cash flow
information:
Cash interest paid $ 562 $ 600
Cash taxes paid $ 17,509 $ 19,831
----------------------------------------------------------------------------
INMET MINING CORPORATION
Segmented statements of cash flows
(unaudited)
2011 For the CORPORATE
three months & LAS
ended March 31 OTHER CAYELI CRUCES PYHASALMI
----------------------------------------------------------------------------
(thousands of
Canadian
dollars) (Turkey) (Spain) (Finland)
Cash provided by
(used in)
operating
activities
Before net
change in non-
cash working
capital ($26,890) $ 46,882 $ 52,264 $ 28,329
Net change in
non-cash
working capital (4,331) 7,115 5,426 11,610
------------------------------------------------------------
(31,221) 53,997 57,690 39,939
------------------------------------------------------------
Cash provided by
(used in)
investing
activities
Purchase of
property, plant
and equipment (182) (2,416) (14,834) (326)
Funding received
under Cobre
Panama option
agreement - - - -
Purchase of
held-to-
maturity
investments (274,979) (477) - -
Maturity of
held-to-
maturity
investments 8,000 - - -
Purchase of
equity
securities (3,493) - - -
Sale of short-
term
investments - - 7,278 -
Other 126 - - -
------------------------------------------------------------
(270,528) (2,893) (7,556) (326)
------------------------------------------------------------
Cash provided by
(used in)
financing
activities 139 - (2,975) -
------------------------------------------------------------
Foreign exchange
on cash held in
foreign
currencies - (3,520) 2,433 4,320
------------------------------------------------------------
Cash provided by
discontinued
operation - - - -
------------------------------------------------------------
Intergroup
funding
(distributions) 302,598 (79) (14,590) 1,910
------------------------------------------------------------
Increase
(decrease) in
cash 988 47,505 35,002 45,843
Cash:
Beginning of
year 53,184 107,750 52,570 97,056
------------------------------------------------------------
End of period 54,172 155,255 87,572 142,899
Short term
investments - - - -
------------------------------------------------------------
Cash and short-
term
investments $ 54,172 $ 155,255 $ 87,572 $ 142,899
------------------------------------------------------------
------------------------------------------------------------
2011 For the DISCONTINUED
three months COBRE OPERATIONS - OK
ended March 31 PANAMA TEDI TOTAL
----------------------------------------------------------
(thousands of
Canadian (Panama) (Papua New
dollars) Guinea)
Cash provided by
(used in)
operating
activities
Before net
change in non-
cash working
capital ($2,229) $ - $ 98,356
Net change in
non-cash
working capital - - 19,820
-----------------------------------------
(2,229) - 118,176
-----------------------------------------
Cash provided by
(used in)
investing
activities
Purchase of
property, plant
and equipment (22,972) - (40,730)
Funding received
under Cobre
Panama option
agreement 3,944 - 3,944
Purchase of
held-to-
maturity
investments - - (275,456)
Maturity of
held-to-
maturity
investments - - 8,000
Purchase of
equity
securities - - (3,493)
Sale of short-
term
investments - - 7,278
Other - - 126
-----------------------------------------
(19,028) - (300,331)
-----------------------------------------
Cash provided by
(used in)
financing
activities - - (2,836)
-----------------------------------------
Foreign exchange
on cash held in
foreign
currencies (93) - 3,140
-----------------------------------------
Cash provided by
discontinued
operation - 306,982 306,982
-----------------------------------------
Intergroup
funding
(distributions) 17,143 (306,982) -
-----------------------------------------
Increase
(decrease) in
cash (4,207) - 125,131
Cash:
Beginning of
year 8,569 - 319,129
-----------------------------------------
End of period 4,362 - 444,260
Short term
investments - - -
-----------------------------------------
Cash and short-
term
investments $ 4,362 $ - $ 444,260
-----------------------------------------
2010 For the CORPORATE
three months &
ended March 31 OTHER CAYELI LAS CRUCES PYHASALMI
----------------------------------------------------------------------------
(Turkey) (Spain) (Finland)
(thousands of
Canadian
dollars)
Cash provided by
(used in)
operating
activities
Before net
change in non-
cash working
capital $ 7,643 $ 26,139 ($6,753) $ 19,283
Net change in
non-cash
working capital (524) 3,605 - (4,266)
------------------------------------------------------------
7,119 29,744 (6,753) 15,017
------------------------------------------------------------
Cash provided by
(used in)
investing
activities
Purchase of
property, plant
and equipment (8) (1,819) 2,652 (457)
Acquisition of
long term
investments (102,380) - - -
Funding received
under Cobre
Panama option
agreement - - - -
Sale of short-
term
investments 26,996 - - -
------------------------------------------------------------
(75,392) (1,819) 2,652 (457)
------------------------------------------------------------
Cash provided by
(used in)
financing
activities (55) - 2,692 -
------------------------------------------------------------
Foreign exchange
on cash held in
foreign
currencies - (6,026) (1,335) (6,392)
------------------------------------------------------------
Cash provided by
discontinued
operation - - - -
------------------------------------------------------------
Intergroup
funding
(distributions) 15,983 (19) 4,175 (4,122)
------------------------------------------------------------
Increase
(decrease) in
cash (52,345) 21,880 1,431 4,046
Cash:
Beginning of
year 224,574 158,631 10,039 66,314
------------------------------------------------------------
End of period 172,229 180,511 11,470 70,360
Short term
investments - - - -
------------------------------------------------------------
Cash and short-
term
investments $ 172,229 $ 180,511 $ 11,470 $ 70,360
------------------------------------------------------------
2010 For the DISCONTINUED
three months OPERATIONS - OK
ended March 31 COBRE PANAMA TEDI TOTAL
-----------------------------------------------------------
(Papua New
(Panama) Guinea)
(thousands of
Canadian
dollars)
Cash provided by
(used in)
operating
activities
Before net
change in non-
cash working
capital $ - $ - $ 46,312
Net change in
non-cash
working capital - - (1,185)
-------------------------------------------
- - 45,127
-------------------------------------------
Cash provided by
(used in)
investing
activities
Purchase of
property, plant
and equipment (17,909) - (17,541)
Acquisition of
long term
investments - - (102,380)
Funding received
under Cobre
Panama option
agreement 2,139 - 2,139
Sale of short-
term
investments - - 26,996
-------------------------------------------
(15,770) - (90,786)
-------------------------------------------
Cash provided by
(used in)
financing
activities - - 2,637
-------------------------------------------
Foreign exchange
on cash held in
foreign
currencies (204) - (13,957)
-------------------------------------------
Cash provided by
discontinued
operation - 39,342 39,342
-------------------------------------------
Intergroup
funding
(distributions) 17,149 (33,166) -
-------------------------------------------
Increase
(decrease) in
cash 1,175 6,176 (17,637)
Cash:
Beginning of
year 10,728 36,631 506,917
-------------------------------------------
End of period 11,903 42,807 489,280
Short term
investments - - -
-------------------------------------------
Cash and short-
term
investments $11,903 $ 42,807 $ 489,280
-------------------------------------------
Notes to the consolidated financial statements
1. Corporate information
Inmet Mining Corporation is a publicly traded corporation listed on the Toronto stock exchange. Our registered and head office is in Toronto, Canada. Our principal activities are the exploration, development and mining of base metals.
2. Basis of presentation and statement of compliance
International Financial Reporting Standards (IFRS) require us to make an explicit and unreserved statement that our financial statements are in compliance with IFRS. We will make this statement when we issue our 2011 annual financial statements. These condensed interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and using the accounting policies we expect to adopt in our consolidated financial statements for the year ending December 31, 2011.
This is the first year we have prepared our financial statements in accordance with IFRS. See note 6, First time adoption of IFRS, for information about our transition from Canadian GAAP. You should read our interim statements in conjunction with our annual statements which you can find in our 2010 Annual Report.
We have prepared the consolidated financial statements under the historical cost convention, modified by the revaluation of certain financial instruments we have measured in accordance with IFRS. The financial statements are in Canadian dollars and all values are rounded to the nearest thousand except where otherwise indicated. These statements have been approved by Inmet's board of directors and have been reviewed by our external auditors.
Our segmented statements reflect the management structure of our company, where each operation retains its own management team and compiles its own financial information, following the accounting policies outlined here.
-- Cayeli - a mine in Turkey that produces copper and zinc concentrates.
Cayeli is a wholly-owned subsidiary.
-- Las Cruces - a high grade copper mine and plant operation in Spain that
produces cathode copper. Las Cruces is a wholly-owned subsidiary.
-- Pyhasalmi - a mine in Finland that produces copper and zinc
concentrates. Pyhasalmi is a wholly-owned subsidiary.
-- Cobre Panama - a copper, gold and molybdenum deposit currently under
development in Panama. We have a 100 percent interest in Cobre Panama.
Korea Panama Mining Corp owns an option to acquire a 20 percent interest
in Cobre Panama.
-- Corporate and other - our head office and closed properties. As a result
of the closure of Troilus, we no longer consider it to be a separate
reportable operating segment and included its results in Corporate and
other retroactively.
3. Summary of significant accounting policies
Basis of consolidation
Entities we control
We have control of an entity when we have the right to govern its operating and financial policies (usually when we have more than 50 percent voting power through ownership or agreements), unless a non-controlling interest is able to prevent us from exercising control.
We consolidate the results of entities we control and eliminate all intercompany balances and transactions. When we acquire a new entity, we consolidate from the day that control passes to us. We consolidate those we sell until the day control passes to the acquirer.
Interests in jointly controlled entities
We jointly control an entity when we hold a long-term interest in it, and share joint control over its operating and financial decisions with one or more other parties under a contractual arrangement.
We proportionately consolidate our share of any entity we jointly control, combining its line-by-line results with similar line items in our financial statements.
Foreign exchange
Functional and presentation currency
Inmet Mining's functional currency is the Canadian dollar. We report our consolidated financial statements in Canadian dollars.
Our entities measure the items in their financial statements in their functional currency (the currency of the primary economic environment they operate in). Cayeli, Ok Tedi and Cobre Panama use the US dollar and Pyhasalmi and Las Cruces use the euro.
Foreign currency transactions
Monetary items denominated in foreign currencies are translated into each entity's functional currency at the rate of exchange on the balance sheet date, and gains and losses on translation are recognized in the statement of earnings for the period. We recognize all other transactions in foreign currencies at the exchange rate at the time of the transaction.
Financial statements of foreign operations
For operations that have a functional currency other than the Canadian dollar, we translate the statement of earnings and balance sheet as follows:
-- assets and liabilities: translated at the closing rate at the end of the
financial period.
-- revenues and expenses: translated for each statement of earnings at
rates approximating the exchange rates at the time of the transactions
-- resulting differences: recognized as a separate component of accumulated
other comprehensive income.
We also recognize exchange differences relating to long-term intercompany loan balances with foreign operations that form part of the net investment in the foreign operation in this separate component of accumulated other comprehensive income.
When we sell all or part of a foreign operation, or repay its share capital or intercompany debt considered part of the net investment, we recognize exchange differences arising from the translation of the net investment in the statement of earnings.
Business combinations
When we acquire a subsidiary, we account for it using the purchase method.
The cost of the business combination is the fair value at the date of exchange of:
-- the assets we gave
-- the liabilities we incurred or assumed, and
-- the equity instruments we issued in exchange for control.
We allocate total consideration paid to the identifiable assets, liabilities and contingent liabilities (identifiable net assets) we acquired, at their fair value on the date of the acquisition, including mineral reserves and resources that can be reliably valued.
We expense transaction costs related to an acquisition as incurred.
If the fair value of our share of the identifiable net assets acquired is greater than the fair value of the consideration paid, we recognize the difference in the statement of earnings on the acquisition date.
Non controlling interest is the portion of an entity that we do not own (the profit or loss and net assets we are not entitled to). We record non controlling interests in equity, separate from our shareholders' equity.
Revenue
Gross sales includes the sale of all concentrate, cathode copper and gold dore. It does not include smelter processing charges and freight, which are presented as a separate line item in the statement of earnings.
We recognize revenue when all significant risks and rewards of ownership of our products have been transferred to the customer - usually when the customer takes on the insurance risk and the goods have been delivered to the shipping agent.
Most of our sales contracts set the sales price at the commodity's market price on a specified future date. To calculate our revenue from the sale of our products, we use the forward price of the commodity for the day we expect the contract to settle. Variations between the price we record on the date of initial revenue recognition and the final price we receive due to changes in market prices represents an embedded derivative in our sales contracts. We adjust our revenue every period for any change in the value of the contract using the period end forward price for the day the contract is expected to settle. When it settles, we record the difference between the forward price and the final price we receive in revenue.
We recognize interest income in investment and other income, based on the principal outstanding and the effective interest rate.
We recognize dividends and royalties in investment and other income when we have established the right to receive payment.
Inventories
Inventories include:
-- stockpiled ore, materials and supplies: ore, goods and supplies that
will be consumed directly or indirectly in the production process
-- work in process: inventory in an intermediate state that has not yet
passed through all stages of the production process
-- finished goods: concentrate, cathode copper and gold dore that are ready
for sale.
We measure inventory at the lower of cost or net realizable value, as follows:
-- cost: a weighted average that includes all costs directly related to
bringing the inventory to its current location and condition, such as
mining and milling costs and an allocation of production overheads and
depreciation based on normal capacity
-- net realizable value: the estimated selling price less any additional
costs we expect to incur for completion and sale of the related
inventory.
We classify inventories of stockpiled ore that we do not expect to process in the next year as Other assets.
Property, plant and equipment
On initial acquisition, we recognize property, plant and equipment at cost. Cost includes the purchase price, costs that can be directly attributed to acquiring it, and the cost required to bring the asset to the location and the condition necessary to operate in the way we intended it to.
In subsequent periods, we recognize it at cost less accumulated depreciation and any impairment in value.
We depreciate the cost, less estimated residual values of property, plant and equipment, as follows:
-- property: depreciated in proportion to the depletion of proven and
probable reserves on a unit of production basis.
-- plant and equipment: depreciated using a straight-line method based on
estimated useful life. The expected useful lives of plant and equipment
range from 5 to 15 years, but do not exceed the life of mine.
When different parts (or components) of an asset are significant and have different useful lives, we depreciate the individual components separately, considering both a component's physical life, and the present estimated mineral reserves at the mine where the component is located.
We review estimates in remaining useful lives and residual values at least annually and account for any changes prospectively.
When we carry out a major maintenance refit, we may replace or overhaul assets or parts of assets. When we replace an asset or a component that we have been depreciating separately, we capitalize these costs if this extends its useful life and it is probable that this will result in future economic benefits to the operation. In addition, we write off the asset or component that has been replaced. If we replace part of an asset that was not considered a component, we use the replacement value to estimate the carrying amount of the replaced asset and immediately write that off. We expense all other regular maintenance costs as incurred.
Exploration and evaluation expenditures
We expense the costs of exploration and evaluation as incurred, except for the following:
-- in areas currently under development
-- where we can reasonably expect to convert existing mineral resources
into mineral reserves or add additional mineral resources with further
drilling and evaluations
-- the cost to acquire an early stage entity conducting primarily
exploration and evaluation activities.
In the first two instances, we capitalize costs as development expenditures. In the third instance, we capitalize costs as exploration and evaluation assets.
Development expenditures
We capitalize the costs of acquiring and developing mineral reserves and resources on the balance sheet as we incur them. These costs include accessing the ore body, designing and constructing the production infrastructure, interest and financing relating to construction, and costs that can be directly attributed to bringing the assets to the condition necessary for their intended use. This includes costs during the commissioning period when required before the asset can operate at normal levels.
Development expenditures are not depreciated. When production begins, we reclassify these costs to the appropriate category of property, plant and equipment and depreciate them according to our accounting policy.
Capitalized stripping
In open pit mining operations, we remove overburden and other waste in order to access the ore body (stripping). During development, we capitalize the cost of stripping as part of the cost of mine development and reclassify it to property when production begins.
During the production phase, we capitalize these costs to property when stripping activity gives us access to reserves that would not otherwise have been accessible, and that we expect will be mined in the future. We amortize production phase stripping costs over the reserves that are directly affected by the stripping activity on a units-of-production basis.
Leasing
We determine whether an arrangement is, or contains, a lease based on the substance of the arrangement, considering whether the arrangement is dependent on the use of a specific asset or whether the arrangement conveys a right to use the asset.
We classify a lease as financial when we carry substantially all of the risks and rewards of owning the asset. We capitalize assets under financial leases at either the fair value of the leased asset or the present value of the minimum lease payments over the lease term using the interest rate in the lease agreement - whichever is lower. We determine these amounts at the inception of the lease and depreciate the corresponding asset over its estimated useful life or the lease term - whichever is shorter. We recognize a corresponding amount representing our future obligation for finance leases in Other liabilities in the balance sheet, and recognize the associated accretion expense over time in finance costs in the statement of earnings.
We classify a lease as operating when we do not have substantially all the risks and rewards of ownership. We recognize rentals payable under operating leases in the statement of earnings on a straight line basis over the term of the lease.
Impairment of assets
At each reporting date, we look for indications of impairment of our non-current assets. If there are indicators of impairment, we carry out a formal test to see whether the asset's carrying amount exceeds its recoverable amount.
An asset's recoverable amount is its fair value less costs to sell or its value-in-use - whichever is higher.
-- Fair value less costs to sell is the amount we would receive from the
sale of the asset in an arm's-length transaction between knowledgeable
and willing parties. For our mining assets, we generally use the present
value of future cash flows we expect from their continued use, including
any expansion prospects, and from their eventual disposal. When
assessing cash flows and discounting them to present value, we use
assumptions that we believe an arm's length party would consider
appropriate.
-- We calculate the value-in-use of an asset by using the present value of
cash flows we expect from its continued use in its present form, and
from its disposal, without taking into account any future development.
Value-in-use is likely to be different from fair value because we use
different assumptions.
If the carrying amount of the asset exceeds its recoverable amount, we recognize an impairment loss in the statement of earnings to reflect the lower amount of the asset. We recognize impairment losses related to continuing operations in the statement of earnings in the expense category that relates to the asset's function.
We carry out these reviews for each asset, unless the asset does not generate cash flows on its own. In this case, we will carry out the review at the cash-generating unit level. Cash generating units are the smallest identifiable group of assets and liabilities that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. This generally results in an evaluation of assets at the mine entity level.
We reverse an impairment loss in the statement of earnings if the estimates we used to calculate the recoverable amount have changed since we recognized the impairment. We increase the carrying amount to the recoverable amount, net of the depreciation or amortization that would have arisen if we had not recognized the original impairment loss.
After a reversal, we recognize depreciation over the asset's remaining useful life based on its revised carrying amount, less any residual value.
Government subsidies
We recognize government subsidies when there is reasonable assurance we will receive the subsidy and will comply with all of the associated conditions. We credit government subsidies related to a capital expenditure against the carrying amount of the related asset, and amortize the subsidy over the expected useful life of the asset. We credit subsidies that are not associated with an asset to income, to match them with the expenses they relate to.
Provisions for asset retirement obligations
Our mines, closed properties and joint ventures are subject to environmental laws and regulations in Canada and the other countries we operate in. Mining companies are legally obligated to rehabilitate land and other property that has been damaged or contaminated in the course of their business activities. While rehabilitation activities usually happen after the site has been closed, companies are required to estimate reclamation costs from both operating sites and closed sites.
We incur obligations to restore and rehabilitate land and the environment as we carry out the regular construction and operation of our mines. Costs can include, among other things, the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas. We recognize a provision for these costs as the related disturbances occur, using our best estimate of future costs based on information available at the balance sheet date, including an adjustment for risk when there is significant variability in possible outcomes. We discount the provision using a current inflation adjusted pre-tax risk free interest rate and include the accretion of the discounted amount over time in finance costs in the statement of earnings.
When we recognize a provision, we record a corresponding increase in the carrying amount of the related asset (where we can identify one) and recognize depreciation following our accounting policies for property, plant and equipment.
We review these provisions annually for changes to our obligations, legislation or discount rates that affect our cost estimates or lives of operations. We adjust the provision and the cost of the related asset (where we can identify one) when there is a change in the estimated cash flows or discount rate, and depreciate the adjusted cost of the asset prospectively.
When we do not identify an asset, such as at our closed sites, we record a provision or a change in provision in cost of sales.
Other provisions
We recognize a provision when we have a legal or constructive obligation because of past events, and it is probable that, to settle the obligation, we will be required to make a payment that we can reliably estimate. If its effect is material, we discount the provision to net present value using a pre-tax risk free interest rate. We recognize the accretion of discounted provisions over the time of the obligation in finance costs in the statement of earnings.
Income taxes
We calculate current income tax expense for each of our taxable entities based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the balance sheet date, and include adjustments to income taxes payable or recoverable for previous periods.
We calculate deferred tax assets and liabilities based on temporary differences between the carrying amounts in our balance sheet and their tax bases, using income tax rates we expect to be in effect when the temporary differences are likely to be settled. We present all deferred taxes as non-current assets and liabilities on the balance sheet.
We only recognize deferred tax assets when it is probable that we will have enough taxable income in the future to recover them. We include the effects of changes in tax rates in income when the change is enacted or substantively enacted.
We recognize deferred tax assets or liabilities for all temporary differences, except for:
-- a deferred tax liability on the initial recognition of goodwill
-- a deferred tax asset or liability arising from the initial recognition
of an asset or liability in a transaction that is not a business
combination and that, at the time of the transaction, does not affect
accounting profit or loss, or taxable profit or loss
-- a deferred tax liability related to investments in subsidiaries,
branches, associates and interests in joint ventures, when we can
control the timing of the reversal of the temporary difference and when
it is probable that the temporary difference will not reverse in the
foreseeable future.
We review the carrying amount of deferred income tax assets at each balance sheet date and adjust it if:
-- an asset not previously recognized meets the criteria for recognition
-- our estimate of future taxable income available to recover them changes.
We recognize current and deferred tax that relates to equity items in equity, and not in the statement of earnings.
Assets held for sale and discontinued operations
Assets held for sale
We classify assets and disposal groups as held for sale if we will recover their carrying amounts through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the assets or disposal groups are available for immediate sale in their present condition. We must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year of the date of classification.
We carry assets (or disposal groups) held for sale at the lower of the carrying amount before being classified as held for sale, and the fair value less costs to sell. We present the assets and liabilities of a disposal group classified as held for sale separately as one line in the assets and liabilities sections on the statement of financial position.
Discontinued operations
A discontinued operation is a component of an entity that has been disposed of or classified as held for sale, with operations and cash flows that are clearly distinguished both operationally and for financial reporting purposes from the rest of the entity. To be classified as a discontinued operation, an operation must:
-- represent a separate major line of business or geographical area of
operations
-- be part of a single coordinated plan to dispose of a separate major line
of business or geographical area of operations, or
-- be a subsidiary acquired only for resale.
When the operation is discontinued at the balance sheet date, the results are presented in one line on the statement of earnings, and prior period results are represented as discontinued.
See note 10 for a breakdown of our results from discontinued operations.
Cash and short-term investments
Cash includes cash and money market instruments that mature in 90 days or less from the date of acquisition. Short-term investments mature in 91 days to a year.
In the consolidated statements of cash flows, we disclose:
-- short-term investments we buy with cash during the year as cash used in
investing activities
-- short-term investments we sell to generate cash as a source of cash from
investing activities
See note 7 for a breakdown of our cash and short-term investments.
Restricted cash
Restricted cash includes cash that has been pledged for other uses, such as reclamation, and is not available for immediate disbursement.
See note 8 for a breakdown of our restricted cash.
Financial instruments
Financial instruments include cash, as well as any contract that gives rise to a financial asset to one party and a financial liability or equity instrument to another party. We classify financial instruments at their initial recognition. We initially recognize financial instruments at their fair value.
Fair value is the value a financial instrument can be closed out or sold at, in a transaction with a willing and knowledgeable counterparty. It is usually the instrument's quoted market price. If a quoted market price is not available, we determine fair value with models using market-based or independent information and assumptions.
Cash and short-term investments, accounts receivable from metal sales, restricted cash and accounts payable and accrued liabilities
These financial instruments have been designated as fair value through profit and loss and are recorded at fair value. We record any changes in their fair value in net income. We record interest and dividends earned on cash, short-term investments and restricted cash in Investment and other income. For cash, we calculate fair value using published price quotations in an active market where there is one. Otherwise fair value represents cost plus accrued interest, which is reasonable given its short-term nature. We record accounts receivable related to metal sales at fair value based on forward market metal prices on the date of the balance sheet (see our Revenue policy above). We record accounts payable and accrued liabilities at amortized cost, which approximates fair value because of their short-term nature.
Investments
Our investments in equity securities are designated as available-for-sale and recorded at fair value. We calculate fair value using the bid price of the investment as quoted in an active market. We record changes in the fair value of our investments in Other comprehensive income. The change in fair value of an investment in an equity security appears in Investment and other income only when it is sold or impaired.
Our investments in long-term government and corporate bonds are designated as held to maturity. We initially recognize these investments at fair value and subsequently at amortized cost with the related interest income recorded in Investment and other income. We only designate investments as held to maturity when we intend, and have the ability, to hold them to maturity.
We capitalize transaction costs related to investments we make and include these in the investment's initial carrying value.
Loans and receivables
All non-metal receivables are designated as loans and receivables. We initially measure these assets at fair value. In subsequent periods, we measure them at amortized cost using the effective interest rate method.
Long-term debt
Our long-term debt is designated as other liabilities and is accounted for at amortized cost. We record interest expense on long-term debt in finance costs in the statement of earnings unless it relates specifically to a development project, and has been accounted for using our accounting policy for borrowing costs.
Derecognition of financial instruments
We will derecognize a financial asset when:
-- our rights to receive cash flows from the asset have expired
-- our right to receive cash flows has been retained, but we have assumed
an obligation to pay them in full to a third party without material
delay, or
-- our right to receive cash flows has been transferred, together with
substantially all the risks and rewards of ownership.
We derecognize financial liabilities when the associated obligation is discharged, cancelled or has expired.
Impairment of financial assets
We review our investments for impairment at the end of each reporting period based on both quantitative and qualitative criteria, including the extent that cost exceeds market value, the length of a market decline and the financial health of the issuer.
For loans and receivables and our investments in long-term bonds, we measure the amount of the loss as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the asset's original effective interest rate. We reduce the carrying amount of the asset and recognize the amount of the loss in the income statement in investment and other income. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, we reverse the previously recognized impairment loss. We recognize any subsequent reversal of an impairment loss in the income statement, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.
If our investments in equity securities are impaired, we transfer the difference between its cost and its current fair value, less any impairment loss previously recognized in the income statement, from accumulated other comprehensive income to the income statement in investment and other income.
Embedded derivatives
When we enter into a contract, we determine whether it contains an embedded derivative. We separate an embedded derivative from its host contract if the derivative is not measured at fair value through profit and loss, and when its economic characteristics and risks are not closely related to the host contract. In these circumstances, we recognize the embedded derivative according to our accounting policy for derivatives.
Derivatives and hedging
We designate non-financial derivative contracts as held-for-trading and record them at fair value on the balance sheet. We include mark-to-market adjustments on these instruments in net income, unless the instruments are designated as part of a hedge relationship.
We record derivatives on the balance sheet at fair value. On the date we enter into a derivative, we designate it as a hedging instrument or a non-hedge derivative. A hedging instrument is designated in either:
-- a fair value hedge relationship with a recognized asset or liability, or
-- a cash flow hedge relationship with either a forecasted transaction, the
variable future cash flows arising from a recognized asset or liability,
or a foreign currency risk in an unrecognized firm commitment.
When we enter into a hedging contract, we formally document the relationship between the hedging instrument and the items it hedges, and the related risk-management strategy. This documentation:
-- links the hedging instrument to a specific asset or liability, specific
forecasted transaction, firm commitment or variable future cash flows
-- defines how we assess retrospective and prospective hedge effectiveness.
At the end of every quarter, we determine whether we expect a hedging instrument to be highly effective in offsetting risk in the future. If we do not expect it to be highly effective, we stop hedge accounting prospectively, and keep accumulated gains or losses in other comprehensive income until the hedged item affects earnings.
We also stop hedge accounting prospectively if:
-- a derivative is settled
-- it is no longer highly probable that a forecasted transaction will occur
-- we de-designate a hedging relationship.
If we conclude that it is probable that a forecasted transaction will not happen within the documented time frame, we immediately transfer all gains and losses accumulated in other comprehensive income to earnings. When hedge accounting stops, we reclassify the derivative as a non-hedge derivative prospectively.
We classify cash flows from a derivative in the same category as the cash flows from the item it hedges. We record cash flows from non-hedge derivatives as operating cash flows.
We record derivatives on the balance sheet at fair value and record changes in the fair value of derivatives at the end of every period:
-- fair value hedges: we record the change in the fair value of the
derivative and the item it hedges in earnings
-- cash flow hedges: we record the change in the fair value of the
derivative in other comprehensive income until earnings are affected by
the item it hedges, except for any hedge ineffectiveness which we
immediately record in earnings
-- non-hedge derivatives: we record the change in the fair value of the
derivative in investment and other income.
Gold forward sales contracts
We use the dollar offset method to assess the prospective and retrospective effectiveness of a hedging relationship:
-- prospective effectiveness: we compare the effect of theoretical shifts
in forward gold prices on the fair value of the actual derivative and a
hypothetical derivative.
-- retrospective effectiveness: we compare the effect of historical changes
in gold prices each period on the fair value of the actual and the
hypothetical derivative.
We record the effective portion of a change in a gold contract's fair value in other comprehensive income until forecasted gold sales affect earnings.
Borrowing costs
When we can attribute borrowing costs directly to the acquisition, construction or production of an asset that takes a substantial period of time to get ready for its intended use, we capitalize these costs as part of the asset's carrying value and amortize them over its useful life. Otherwise, we capitalize borrowing costs related to the establishment of a loan facility as long-term debt, and amortize them over the life of the loan facility.
We recognize other borrowing costs as an expense when we incur them.
Share capital
When we issue common shares, we recognize them in share capital at the net proceeds received (the fair value of the consideration we received, less costs we incurred to issue the shares).
Share based compensation plans
We currently have only equity settled awards. We recognize an expense for the fair value of an award in general and administration on a straight line basis over the applicable vesting period. This expense reflects the estimated number of awards we expect to vest based on management performance to date.
Fair value is determined based on the closing trading price of our common shares on the grant date. We calculate the cumulative expense at each balance sheet date before vesting, basing it on the vesting period remaining and our best estimate of the awards that we ultimately expect to vest, and recognize any change in the statement of earnings.
Net income per share
We calculate basic net income per share by dividing net income available to the common shareholders of Inmet Mining by the weighted average number of common shares outstanding for the year.
We calculate diluted net income per share by taking into consideration the dilutive effects of Deferred Share Units (DSU's) and Long Term Incentive Plan (LTIP) units. We adjust the weighted average number of common shares by the number of DSU's outstanding and the number of LTIP units that are expected to vest.
See note 16 for our calculation of basic and diluted net income per share.
Employee future benefits
We provide a defined contribution retirement benefit to employees in Canada.
Employees in the other jurisdictions where we operate either have state pension arrangements or do not receive pension benefits.
Certain employees take part in the defined contribution employee benefit plans. Our cost for these plans is the required contributions based on specified percentages of salaries we are required to make.
For certain executives, our total contribution to the defined contribution component of the registered plan, including the annual cash payment in lieu of a supplementary pension plan, is equivalent to 9 to 12 percent of their salary and bonus.
We expense contributions as they come due.
4. Application of critical accounting judgements and estimates
Preparing our consolidated financial statements in conformity with IFRS requires us to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated financial statements, and reported amounts of revenues and expenses during the reporting period. Our estimates and assumptions are based on our experience and other factors, including expectations of future events that we believe to be reasonable under the circumstances. We continuously evaluate these estimates, but actual outcomes could be different.
The most critical judgements, estimates and assumptions are described below.
Estimated mineral reserves
Our mineral reserves are estimates of the amount of ore that can be economically and legally extracted from our mining properties. To calculate reserves, we use estimates and assumptions about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production and freight costs, commodity prices and exchange rates. Our reserves for all operations are estimated based on information compiled by or under the supervision of a qualified person as defined under National Instrument 43-101.
Changes in our reserve estimates can affect:
-- asset carrying values due to changes in estimated future cash flows and
impairment analysis
-- depreciation in the statement of earnings, when depreciation is based on
units of production, or when the useful economic life of an asset
changes
-- asset retirement obligations where changes in estimated reserves affect
expectations about the timing or cost of these activities.
Provision for asset retirement obligations
Our closed mines, operations and joint ventures are subject to environmental laws and regulations in Canada, the United States and the other countries in which we operate.
Our provision for asset retirement obligations is our best estimate of the present value of the future costs of mine closure, and involves a significant number of technical issues, estimates and assumptions, with many uncertainties, including changes to the relevant legal and regulatory framework, the magnitude of possible contamination and the timing and extent of the cost of required restoration activities. We will record any changes that arise prospectively, as follows:
-- operating mines: we record changes in the balance sheet by adjusting the
reclamation asset and provision, which affects both future depreciation
and finance costs
-- closed properties: we immediately recognize changes to estimated costs
in the statement of earnings as finance costs.
Impairment of assets
If we believe an asset may be impaired, we calculate its recoverable amount as either its fair value less costs to sell, or its value in use (whichever is higher), following our Impairment of assets accounting policy described in note 3.
When following this policy, we make estimates and assumptions about future production and sales volumes, future commodity prices, recoverable mineral reserves, discount rates, foreign exchange rates, future operating and capital costs. We may also make assumptions about our ability to obtain financing for a project or to recover costs by selling an asset. Actual outcomes could be different.
Income taxes
We operate in a number of countries around the world and are subject to, and pay annual income taxes under the regimes in countries in which we operate. These tax regimes are determined under general corporate income tax laws in those countries. We file all required income tax returns and pay the taxes reasonably determined to be due.
The tax laws in many countries can be complex and subject to interpretation. From time to time, there may be disagreement with the taxing authorities over our interpretation of the country's income tax rules. The final outcome of these disputes could be materially different from our estimated tax liabilities.
We have significant Canadian tax benefits from capital losses, capital cost allowances and mining resource pools. We only recognize deferred tax assets arising from tax loss carry forwards, capital losses and temporary differences when it is probable that we will have enough taxable income in the future to recover them, therefore this is dependent on the generation of sufficient future taxable income.
Our estimates of future taxable income include assumptions about interest rates, foreign currency exchange rates and other factors. Our future income tax asset could be reduced if future taxable income is reduced resulting in a corresponding charge to income tax expense in the statement of earnings.
Plant construction
In the construction of plant and equipment, we capitalize costs that can be directly attributed to bringing the asset into working condition for its intended use, including costs during a commissioning period, before the asset is able to operate at normal levels.
We use several criteria to determine when an asset is able to operate at normal levels. These are complex, and depend on each development property's plan and its economic, political and environmental condition. Criteria can include:
-- producing saleable material
-- completing a reasonable period of testing of the plant and equipment in
the mine, mill and/or plant
-- achieving certain level of recoveries from the ore mined and processed
-- sustaining ongoing production and reaching a certain level of
production.
Once these criteria are met, we stop capitalizing the costs related to the commissioning period, and begin to recognize production costs in the statement of earnings.
5. Standards issued but not yet effective
The IASB has issued the following standard. This standard is not yet effective at March 31, 2011, and could have an impact in future periods:
IFRS 9 Financial January 1, IFRS 9 simplifies the current measurement
instruments 2013 model for financial instruments under IFRS
and establishes two measurement categories
for financial assets: amortized cost and
fair value. Existing IAS 39 categories of
loans and receivables, held-to-maturity
investments, and available- for-sale
financial assets will be eliminated.
A financial asset can be measured at
amortized cost when:
- the objective of the business model is to
hold assets in order to collect contractual
cash flows, and
- the contractual terms give rise, on
contractual dates, to cash flows that are
solely payments of principal and interest on
principal outstanding.
All other financial assets are measured at
fair value.
We are currently assessing the impact these changes in accounting will have on our consolidated financial statements.
6. First time adoption of IFRS
We have adopted IFRS from January 1, 2011, as required for publicly accountable enterprises in Canada.
Our transition date is January 1, 2010 and we have adjusted 2010 comparative information from what was previously reported under Canadian GAAP to conform to IFRS.
Under IFRS 1 - First time adoption of International Financial Reporting Standards, we must apply IFRS retrospectively at the transition date, changing retained earnings to incorporate all adjustments to assets and liabilities as stated previously under Canadian GAAP, except where we apply any exemptions that are available. We have applied the following significant exemptions:
-- we did not restate acquisitions we made before January 1, 2010 in
accordance with IFRS 3 - Business combinations
-- we reset the cumulative translation gains and losses in accumulated
other comprehensive income to nil at January 1, 2010 and made the
corresponding adjustment to retained earnings
-- we applied IFRS 2 - Share based payments only to equity settled share
based payment awards we granted after November 7, 2002 and that had not
vested by January 1, 2010
-- for certain mines, we used a transitional calculation to determine the
property, plant and equipment associated with our provision for asset
retirement obligations. Under this calculation, we measured the
provision at the transition date and discounted to the date the
liability first arose. The result became the initial asset value we
applied depreciation to.
Balance sheet reconciliations
The schedule below reconciles our Canadian GAAP and IFRS balance sheets as at January 1, 2010 (our transition date to IFRS).
Canadian
GAAP Reclassifications Subtotal
----------------------------------------- ----------------- ---------------
Assets
Current assets:
Cash and short-term
investments $ 533,913 $ - $ 533,913
Restricted cash 15,130 - 15,130
Accounts receivable 129,987 - 129,987
Inventories 103,108 - 103,108
Current portion of held
to maturity investments 9,993 - 9,993
Deferred income tax asset 8,466 (8,466) -
----------------------------------------------------------------------------
800,597 (8,466) 792,131
Restricted cash 101,589 - 101,589
Property, plant and
equipment 1,860,616 - 1,860,616
Investments in equity
securities 42,411 - 42,411
Held to maturity
investments 89,891 - 89,891
Deferred income tax assets 6,151 5,076 11,227
Other assets 2,894 - 2,894
----------------------------------------------------------------------------
$ 2,904,149 ($3,390) $ 2,900,759
----------------------------------------------------------------------------
Liabilities
Current liabilities:
Accounts payable and
accrued liabilities $ 185,145 ($15,047) $ 170,098
Provisions - 17,417 17,417
Derivatives 1,543 - 1,543
Deferred income tax
liabilities 4,612 (4,612) -
----------------------------------------------------------------------------
191,300 (2,242) 189,058
Long-term debt 200,026 - 200,026
Asset retirement
obligations 145,038 (145,038) -
Provisions - 156,456 156,456
Other liabilities 32,113 (11,418) 20,695
Derivatives 3,165 - 3,165
Deferred income tax
liabilities 16,357 (1,148) 15,209
Non-controlling interest 78,005 (78,005) -
----------------------------------------------------------------------------
666,004 (81,395) 584,609
Equity
Share capital 669,952 - 669,952
Contributed surplus 63,296 - 63,296
Stock based compensation 5,170 - 5,170
Retained earnings 1,541,803 - 1,541,803
Accumulated other
comprehensive income
(loss) (42,076) - (42,076)
----------------------------------------------------------------------------
Total equity attributable
to Inmet equity holders 2,238,145 - 2,238,145
----------------------------------------------------------------------------
Non-controlling interest - 78,005 78,005
----------------------------------------------------------------------------
Total equity 2,238,145 78,005 2,316,150
----------------------------------------------------------------------------
Total liabilities and
equity $ 2,904,149 ($3,390) $ 2,900,759
----------------------------------------------------------------------------
Adjustments Notes IFRS
----------------------------------------- -------------------------------
Assets
Current assets:
Cash and short-term
investments $ - $ 533,913
Restricted cash - 15,130
Accounts receivable 25,774 i 155,761
Inventories (4,784) i, ii 98,324
Current portion of held
to maturity investments - 9,993
Deferred income tax asset - -
-------------------------------------------------------------------------
20,990 813,121
Restricted cash - 101,589
Property, plant and
equipment 85,053 ii, iii, iv, v 1,945,669
Investments in equity
securities - 42,411
Held to maturity
investments - 89,891
Deferred income tax assets (8,867) vii, viii 2,360
Other assets (991) 1,903
-------------------------------------------------------------------------
$ 96,185 $ 2,996,944
-------------------------------------------------------------------------
Liabilities
Current liabilities:
Accounts payable and
accrued liabilities $ 426 $ 170,524
Provisions - 17,417
Derivatives - 1,543
Deferred income tax
liabilities - -
-------------------------------------------------------------------------
426 189,484
Long-term debt - 200,026
Asset retirement
obligations - -
Provisions 39,974 vi 196,430
Other liabilities - 20,695
Derivatives - 3,165
Deferred income tax
liabilities 10,523 vii, viii 25,732
Non-controlling interest - -
-------------------------------------------------------------------------
50,923 635,532
Equity
Share capital - 669,952
Contributed surplus 1,513 64,809
Stock based compensation - 5,170
Retained earnings (14,694) 1,527,109
Accumulated other
comprehensive income
(loss) 61,169 ix 19,093
-------------------------------------------------------------------------
Total equity attributable
to Inmet equity holders 47,988 2,286,133
-------------------------------------------------------------------------
Non-controlling interest (2,726) 75,279
-------------------------------------------------------------------------
Total equity 45,262 2,361,412
-------------------------------------------------------------------------
Total liabilities and
equity $ 96,185 $ 2,996,944
-------------------------------------------------------------------------
The schedule below reconciles our Canadian GAAP and IFRS balance sheets as at March 31, 2010.
Canadian
GAAP Reclassifications Subtotal
----------------------------------------------------------------------------
Assets
Current assets:
Cash and short-term
investments $ 489,280 $ - $ 489,280
Restricted cash 12,225 - 12,225
Accounts receivable 125,386 - 125,386
Inventories 80,879 - 80,879
Current portion of held to
maturity investments 25,952 - 25,952
Deferred income tax assets 9,325 (9,325) -
----------------------------------------------------------------------------
743,047 (9,325) 733,722
Restricted cash 97,975 - 97,975
Property, plant and
equipment 1,750,566 - 1,750,566
Investments in equity
securities 42,583 - 42,583
Held to maturity investments 177,812 - 177,812
Deferred income tax assets 13,961 6,064 20,025
Other assets 2,801 - 2,801
----------------------------------------------------------------------------
$ 2,828,745 ($3,261) $ 2,825,484
----------------------------------------------------------------------------
Liabilities
Current liabilities:
Accounts payable and
accrued liabilities $ 182,770 ($16,610) $ 166,160
Provisions - 17,558 17,558
Derivatives 1,300 - 1,300
Deferred income tax
liabilities 1,281 (1,281) -
----------------------------------------------------------------------------
185,351 (333) 185,018
Long-term debt 187,986 - 187,986
Asset retirement obligations 139,611 (139,611) -
Provisions - 150,997 150,997
Other liabilities 30,128 (11,386) 18,742
Derivatives 2,766 - 2,766
Deferred income tax
liabilities 9,316 (2,928) 6,388
Non-controlling interest 66,758 (66,758) -
----------------------------------------------------------------------------
621,916 (70,019) 551,897
Equity
Share capital 669,952 - 669,952
Contributed surplus 63,709 - 63,709
Stock based compensation 5,828 - 5,828
Retained earnings 1,621,674 - 1,621,674
Accumulated
Other comprehensive income
(loss) (154,334) - (154,334)
----------------------------------------------------------------------------
Total equity attributable
to Inmet equity holders 2,206,829 - 2,206,829
----------------------------------------------------------------------------
Non-controlling interest - 66,758 66,758
----------------------------------------------------------------------------
Total equity 2,206,829 66,758 2,273,587
----------------------------------------------------------------------------
Total liabilities and equity $ 2,828,745 ($3,261) $ 2,825,484
----------------------------------------------------------------------------
Adjustments Notes IFRS
-------------------------------------------------------------------------
Assets
Current assets:
Cash and short-term
investments $ - $ 489,280
Restricted cash - 12,225
Accounts receivable 29,314 i 154,700
Inventories (5,210) i, ii 75,669
Current portion of held to
maturity investments - 25,952
Deferred income tax assets - -
-------------------------------------------------------------------------
24,104 757,826
Restricted cash - 97,975
Property, plant and
equipment 80,882 ii, iii, iv, v 1,831,448
Investments in equity
securities - 42,583
Held to maturity investments - 177,812
Deferred income tax assets (7,655) vii, viii 12,370
Other assets (991) 1,810
-------------------------------------------------------------------------
$ 96,340 $ 2,921,824
-------------------------------------------------------------------------
Liabilities
Current liabilities:
Accounts payable and
accrued liabilities $ - $ 166,610
Provisions - 17,558
Derivatives - 1,300
Deferred income tax
liabilities - -
-------------------------------------------------------------------------
- 185,018
Long-term debt - 187,986
Asset retirement obligations - -
Provisions 37,882 vi 188,879
Other liabilities - 18,742
Derivatives - 2,766
Deferred income tax
liabilities 12,391 vii, viii 18,779
Non-controlling interest - -
-------------------------------------------------------------------------
50,273 602,170
Equity
Share capital - 669,952
Contributed surplus 1,424 65,133
Stock based compensation - 5,828
Retained earnings (9,794) 1,611,880
Accumulated
other comprehensive income
(loss) 55,852 ix (98,482)
-------------------------------------------------------------------------
Total equity attributable
to Inmet equity holders 47,482 2,254,311
-------------------------------------------------------------------------
Non-controlling interest (1,415) 65,343
-------------------------------------------------------------------------
Total equity 46,067 2,319,654
-------------------------------------------------------------------------
Total liabilities and equity $ 96,340 $ 2,921,824
-------------------------------------------------------------------------
The schedule below reconciles our Canadian GAAP and IFRS balance sheets as at December 31, 2010.
Canadian
GAAP Reclassifications Subtotal
----------------------------------------------------------------------------
Assets
Current assets:
Cash and short-term
investments $ 326,425 $ - $ 326,425
Restricted cash 617 - 617
Accounts receivable 91,893 - 91,893
Inventories 84,077 - 84,077
Current portion of held
to maturity
investments 53,915 - 53,915
Deferred income tax
assets 27,614 (27,614) -
Assets held for sale 282,255 - 282,255
----------------------------------------------------------------------------
866,796 (27,614) 839,182
Restricted cash 70,059 - 70,059
Property, plant and
equipment 1,921,843 - 1,921,843
Investments in equity
securities 2,694 - 2,694
Held to maturity
investments 318,615 - 318,615
Deferred income tax
assets 1,336 12,782 14,118
Goodwill 76,368 - 76,368
Other assets 4,865 - 4,865
----------------------------------------------------------------------------
$ 3,262,576 ($14,832) $ 3,247,744
----------------------------------------------------------------------------
Liabilities
Current liabilities:
Accounts payable and
accrued liabilities $ 153,111 ($17,668) $ 135,443
Provisions - 17,668 17,668
Liabilities associated
with assets held for
sale 102,447 - 102,447
----------------------------------------------------------------------------
255,558 - 255,558
Long-term debt 16,619 - 16,619
Asset retirement
obligations 108,592 (108,592) -
Provisions - 118,598 118,598
Other liabilities 28,123 (10,006) 18,117
Deferred income tax
liabilities 95,200 (14,832) 80,368
----------------------------------------------------------------------------
504,092 (14,832) 489,260
Equity
Share capital 1,015,698 - 1,015,698
Contributed surplus 64,972 - 64,972
Stock based compensation 6,542 - 6,542
Retained earnings 1,889,491 - 1,889,491
Accumulated other
comprehensive income
(loss) (218,219) - (218,219)
----------------------------------------------------------------------------
Total equity 2,758,484 - 2,758,484
----------------------------------------------------------------------------
Total liabilities and
equity $ 3,262,576 ($14,832) $ 3,247,744
----------------------------------------------------------------------------
Adjustments Notes IFRS
---------------------------------------------------------------------
Assets
Current assets:
Cash and short-term
investments $ - $ 326,425
Restricted cash - 617
Accounts receivable 27,533 i 119,426
Inventories (11,923) i, x 72,154
Current portion of held
to maturity
investments - 53,915
Deferred income tax
assets - -
Assets held for sale 36,827 xi 319,082
--------------------------------------------------------------------
52,437 891,619
Restricted cash - 70,059
Property, plant and ii, iii,
equipment (185,778) iv, v, x 1,736,065
Investments in equity
securities - 2,694
Held to maturity
investments - 318,615
Deferred income tax
assets (5,397) vii, viii 8,721
Goodwill (76,368) x -
Other assets (2,530) 2,335
---------------------------------------------------------------------
($217,636) $ 3,030,108
---------------------------------------------------------------------
Liabilities
Current liabilities:
Accounts payable and
accrued liabilities $ 902 i $ 136,345
Provisions - 17,668
Liabilities associated
with assets held for
sale 9,449 111,896
---------------------------------------------------------------------
10,351 265,909
Long-term debt - 16,619
Asset retirement
obligations - -
Provisions 43,801 vi 162,399
Other liabilities - 18,117
Deferred income tax
liabilities (67,843) vii, viii 12,525
---------------------------------------------------------------------
(13,691) 475,569
Equity
Share capital 73,878 x 1,089,576
Contributed surplus 1,159 66,131
Stock based compensation - 6,542
Retained earnings (311,984) 1,577,507
Accumulated other
comprehensive income
(loss) 33,002 ix (185,217)
---------------------------------------------------------------------
Total equity (203,945) 2,544,539
-------------------------------------- ------------------------------
Total liabilities and
equity ($217,636) $ 3,030,108
---------------------------------------------------------------------
Notes to the balance sheet reconciliations as at January 1, 2010, March 31, 2010 and December 31, 2010:
Reclassifications
We reclassified several items to conform to IFRS. The following are the most significant:
-- non-controlling interests are under a separate component of equity.
Under Canadian GAAP, we reported these as a liability.
-- current deferred income tax assets and liabilities are under long term
assets and liabilities. Under IFRS, all deferred income taxes assets and
liabilities must be classified as long term.
-- asset retirement obligations are under provisions. We previously
reported these as a separate long term liability.
-- certain employee compensation obligations are under current and long
term provisions. Under Canadian GAAP, we reported them in accounts
payable if they were current obligations, or as other liabilities if
they were long term obligations.
Adjustments
(i) Revenue recognition - at January 1, 2010 we increased accounts receivable by $25.8 million (March 31, 2010 - $29.3 million, December 31, 2010 - $27.5 million) and reduced inventory by $5.6 million (March 31, 2010 - $6.2 million, December 31, 2010 - $6.3 million).
Under IFRS, we recognize revenue when all significant risks and rewards of ownership of our products are transferred to the purchaser. Under Canadian GAAP, title also had to legally transfer to the purchaser before revenue was recognized. For certain shipments at Cayeli, Pyhasalmi and Ok Tedi, we transfer title when we receive the first provisional payment, which is later than the transfer point for risks and rewards of ownership.
(ii) Reversal of impairment of assets - at January 1, 2010, we increased property plant and equipment by $51.9 million (March 31, 2010 - $48.0 million, December 31, 2010 - $41.1 million) to reverse an impairment charge we recognized for Cayeli in 1996. The increase is the IFRS carrying amount we would have calculated, net of depreciation, if we had not recognized the original impairment.
Canadian GAAP did not allow for reversal of impairment charges after they were initially recognized. Under IFRS, we must reverse an impairment loss if there is a change in the estimates we used to determine the recoverable amount. In 1996, after Cayeli's first two years of operations, we recognized an impairment charge of $128 million against property, plant and equipment. At the time, zinc and copper recoveries were significantly lower than feasibility levels, and were continuing to deteriorate. The complex mineralogy of the Cayeli ore body, continuing poor metallurgical results and the possibility that no improvements may have been achievable were the main reasons for the impairment. After many initiatives and capital improvements, and many years of significantly improved production performance since that time, we concluded that the extensive uncertainties underlying the original impairment no longer apply, and that Cayeli's recoverable amount exceeded its carrying value on our transition to IFRS.
(iii) Plant and equipment at Ok Tedi - at January 1, 2010, we increased property, plant and equipment by $14.5 million (March 31, 2010 - $14.0 million). For plant and equipment that was purchased after our initial proportionate consolidation of Ok Tedi, we used Ok Tedi's accumulated depreciation, which Ok Tedi has used historically under IFRS.
(iv) Property, plant and equipment associated with asset retirement obligations - at January 1, 2010, we increased property, plant and equipment by $8.8 million (March 31, 2010 - $10.5 million, December 31, 2010 - $12.1 million).
Under both IFRS and Canadian GAAP, we recognize a corresponding change in the provision for asset retirement obligations in the carrying value of the related property, plant and equipment and depreciate this amount prospectively. The amount of our asset retirement obligations under IFRS is different from the amount under Canadian GAAP as described in (vi) below, and therefore has an impact on our related assets.
(v) Foreign exchange forward contract - at January 1, 2010, we increased property, plant and equipment by $13.4 million on our transition to IFRS (March 31, 2010 - $12.2 million, December 31, 2010 - $11.5 million).
To fix the amount of euros under its credit facility upon conversion to a US dollar denominated loan, Las Cruces entered into a forward contract to exchange US $215 million for EUR171.1 million. In 2008, this derivative settled on a net basis with Las Cruces receiving cash of EUR32.6 million ($52.3 million).
Under Canadian GAAP, we applied hedge accounting for this contract. While the credit facility was outstanding, Las Cruces capitalized the related interest under its credit facility as a cost of deferred development. We amortized the gain in property, plant and equipment, as a reduction of this capitalized interest. Under IFRS, this instrument does not qualify as a hedge for accounting purposes, and we reclassified the amount we had recognized against property, plant and equipment to retained earnings.
(vi) Provision for asset retirement obligations - at January 1, 2010, we increased our provision for asset retirement obligations by $39.8 million (March 31, 2010 - $37.7 million, December 31, 2010 - $43.6 million).
Under IFRS, we measure asset retirement obligations using a risk free interest rate, and revalue for changes in market risk free interest rates. Under Canadian GAAP, we used a credit adjusted risk free interest rate and were not required to remeasure for changes in market rates.
(vii) Deferred income taxes - translation of non-monetary items - at January 1, 2010, we increased deferred income tax assets by $3.3 million (March 31, 2010 - $2.6 million, December 31, 2010 - $1.0 million).
Under IFRS, when an entity's taxes are denominated in a currency that is not its functional currency (Cayeli and Ok Tedi), we are required to recognize deferred income taxes and liabilities related to the foreign exchange gains and losses for foreign non-monetary assets and liabilities that are re-measured into the functional currency, using historical foreign exchange rates. This was not allowed under Canadian GAAP.
(viii) Deferred income taxes - as a result of the tax effect of changes to our opening balances under IFRS, we decreased deferred income tax assets by $12.2 million at January 1, 2010 (March 31, 2010 - $10.2 million, December 31, 2010 - $6.4 million) and increased deferred income tax liabilities by $10.7 million (March 31, 2010 - $12.9 million, December 31, 2010 - decrease of $65.9 million).
(ix) Cumulative translation adjustment - at January 1, 2010, we reset the cumulative translation gains and losses in accumulated other comprehensive income to nil, and recognized a corresponding decrease of $61.2 million in retained earnings, using an election under IFRS 1.
(x) Acquisition of non-controlling interest in Las Cruces - at December 31, 2010, we decreased inventory by $6.8 million, deceased property, plant and equipment by $247.0 million, decreased goodwill by $76.4 million and increased share capital by $73.9 million.
Under Canadian GAAP, companies that acquire an additional interest in an entity they already control must account for it as a step acquisition. Under IFRS, acquiring a non-controlling interest is not considered a business combination, and is instead accounted for as an equity transaction. Under IFRS, we have accounted for our acquisition of the remaining 30 percent interest in Las Cruces which closed in December 2010, as an equity transaction, because we already controlled it.
(xi) Assets and liabilities held for sale for Ok Tedi - on January 29, 2011, Ok Tedi Mining Limited repurchased our 18 percent equity interest in Ok Tedi for US $335 million, and we classified it as held for sale at December 31, 2010 (consistent to our Canadian GAAP presentation). Our share of Ok Tedi's assets and liabilities classified as held for sale under IFRS were $36.8 million and $9.4 million higher respectively than they were under Canadian GAAP because of the adjustments outlined above.
(xii) Equity reconciliation - The table below reconciles total equity under Canadian GAAP to total equity under IFRS, and illustrates the after-tax effect of each of the most significant adjustments had on equity.
January 1, March 31, December 31,
Notes 2010 2010 2010
----------------------------------------------------------------------------
Canadian GAAP equity $ 2,238,145 $ 2,206,829 $ 2,758,484
IFRS adjustments:
Reclassification of
non-controlling
interest to equity 78,005 66,758 -
Revenue recognition i 14,210 16,164 30,023
Reversal of impairment
of assets - Cayeli ii 42,395 39,357 34,005
Plant and equipment -
Ok Tedi iii 10,184 9,819 11,179
Property, plant and
equipment associated
with asset retirement
obligations iv 8,304 9,853 12,175
Foreign exchange
forward contract -
Las Cruces v 9,386 8,558 8,034
Provision for asset
retirement
obligations vi (38,349) (36,334) (41,310)
Deferred income taxes vii 3,481 3,107 2,870
Acquisition of the
non-controlling
interest in Las
Cruces x - - (254,056)
Other (4,349) (4,457) (6,865)
----------------------------------------------------------------------------
IFRS equity $ 2,361,412 $ 2,319,654 $ 2,554,539
----------------------------------------------------------------------------
The schedule below reconciles our Canadian GAAP and IFRS net income for the three months ended March 31, 2010. The Canadian GAAP statement of earnings is presented in an IFRS format.(1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canadian
GAAP Reclassifications Ok Tedi
----------------------------------------------------------------------------
Gross sales $ 251,559 $ - ($94,626)
Smelter processing
charges
and freight (44,329) - 10,523
Cost of sales
(excluding
depreciation) (80,980) 1,119 27,963
Depreciation (15,224) 6,789
----------------------------------------------------------------------------
Earnings from
operations 111,026 1,119 (49,351)
Corporate
development and
exploration (2,779) - -
General and
administration (5,510) - -
Investment and other
income (78) - (77)
Stand-by costs (6,753) - -
Finance costs (452) (1,330) 254
----------------------------------------------------------------------------
Income before
taxation 95,454 (211) (49,174)
Capital tax expense (82) - -
Income tax expense (20,063) 211 18,456
----------------------------------------------------------------------------
Income from
continuing 75,309 - ($30,718)
operations $ $
Income from
discontinued
operation (net of - 30,718
taxes)
----------------------------------------------------------------------------
Net income $ 75,309 $ - $ -
----------------------------------------------------------------------------
Attributable to:
Inmet equity holders $ 79,871 $ - $ -
Non-controlling
interest (4,562) - -
----------------------------------------------------------------------------
$ 75,309 $ - $ -
----------------------------------------------------------------------------
Adjustments Notes IFRS
------------------------------------------------------------------
Gross sales $ 4,229 i $ 161,162
Smelter processing
charges
and freight 705 i (33,101)
Cost of sales
(excluding
depreciation) (368) i (52,266)
Depreciation 719 i, iii, iv (7,716)
------------------------------------------------------------------
Earnings from
operations 5,285 68,079
Corporate
development and
exploration - (2,779)
General and
administration 89 (5,421)
Investment and other
income 1,359 ii 1,204
Stand-by costs - (6,753)
Finance costs (345) (1,873)
------------------------------------------------------------------
Income before
taxation 6,388 52,457
Capital tax expense - (82)
Income tax expense (1,608) vi (3,004)
------------------------------------------------------------------
Income from
continuing 4,780 49,371
operations $ $
Income from
discontinued
operation (net of - 30,718
taxes) $
-----------------------------------------------------------------
Net income $ 4,780 $ 80,089
-----------------------------------------------------------------
Attributable to:
Inmet equity holders $ 4,900 $ 84,771
Non-controlling
interest (120) (4,682)
-----------------------------------------------------------------
$ 4,780 $ 80,089
-----------------------------------------------------------------
(1) Under Canadian GAAP, we deducted the non-controlling interest's share of Las Cruces' income when calculating net income. Under IFRS, no deduction for this is made and net income is presented as separately attributable to the equity holders of Inmet Mining and to the non-controlling interest.
The schedule below reconciles our Canadian GAAP and IFRS net income for the year ended December 31, 2010. The Canadian GAAP statement of earnings is presented in an IFRS format.(1)
Canadian
GAAP Reclassifications Ok Tedi
---------------------------------------------------------------------------
Gross sales $ 1,098,087 $ - ($356,629)
Smelter processing
charges
and freight (166,754) - 36,448
Cost of sales
(excluding
depreciation) (345,764) 6,343 95,871
Depreciation (81,844) - 27,513
---------------------------------------------------------------------------
Earnings from
operations 503,725 6,343 (196,797)
Corporate development
and
exploration (12,036) - -
General and
administration (20,638) - -
Investment and other
income 35,416 - (32)
Stand-by costs (6,753) - -
Finance costs (6,873) (7,148) 910
---------------------------------------------------------------------------
Income before
taxation 492,841 (805) (195,919)
Capital tax expense (373) - -
Income tax expense (134,682) 805 71,164
---------------------------------------------------------------------------
Income from
continuing
operations $ 357,786 $ - ($124,755)
Income from
discontinued
operation - - 124,755
---------------------------------------------------------------------------
Net income $ 357,786 $ - $ -
---------------------------------------------------------------------------
Net income
attributable to:
Inmet equity holders $ 358,898 $ - $ -
Non-controlling
interest (1,112) - -
---------------------------------------------------------------------------
$ 357,786 $ - $ -
Adjustments Notes IFRS
---------------------------------------------------------------
Gross sales $ 37,098 i $ 778,556
Smelter processing
charges
and freight (8,158) i (138,464)
Cost of sales
(excluding
depreciation) (10,309) i, v (253,859)
Depreciation (1,657) i, iii,iv (55,988)
---------------------------------------------------------------
Earnings from
operations 16,974 330,245
Corporate development
and
exploration (1,459) (13,495)
General and
administration 274 (20,364)
Investment and other
income 22,960 58,344
Stand-by costs - (6,753)
Finance costs (65) (13,176)
---------------------------------------------------------------
Income before
taxation 38,684 334,801
Capital tax expense - (373)
Income tax expense (6,001) (68,714)
---------------------------------------------------------------
Income from
continuing
operations $ 32,683 265,714
Income from
discontinued
operation - $ 124,755
---------------------------------------------------------------
Net income $ 32,683 $ 390,469
---------------------------------------------------------------
Net income
attributable to:
Inmet equity holders $ 32,978 $ 391,876
Non-controlling
interest (295) (1,407)
---------------------------------------------------------------
$ 32,683 $ 390,469
(1)Under Canadian GAAP, we deducted the non-controlling interest's share of
Las Cruces' income when calculating net income. Under IFRS, no deduction
for this is made and net income is presented as separately attributable
to the equity holders of Inmet Mining and to the non-controlling
interest.
Notes to the reconciliation of the statement of earnings for three months ended March 31, 2010 and the year ended December 31, 2010:
Reclassifications
When we adopted IFRS, we reclassified accretion of asset retirement obligations and capital lease obligations to finance costs. We recognized it as part of cost of sales under Canadian GAAP.
Ok Tedi
In January 2011, we sold our 18 percent equity interest in Ok Tedi. As the operations and cash flows for Ok Tedi have been eliminated as a result of this disposal and we have no continuing involvement with this operation, we have presented our proportionately consolidated results from Ok Tedi as discontinued operations retroactively. The sale of our investment in Ok Tedi did not qualify for treatment as discontinued operations under Canadian GAAP. This change affects our entire income statement so we have disclosed it separately.
Adjustments
(i) Revenue - for the three months ended March 31, 2010 we increased revenue by $4.2 million (year ended December 31, 2010 - $37.1 million) and made associated adjustments to smelter processing charges and freight, cost of sales and depreciation.
Under IFRS, we recognize revenue when all significant risks and rewards of ownership of our products are transferred to the purchaser. Under Canadian GAAP, title also had to legally transfer to the purchaser before revenue was recognized. For certain shipments at Cayeli, Pyhasalmi and Ok Tedi, we transfer title when we receive the first provisional payment, which is later than the transfer point for risks and rewards of ownership.
(ii) Foreign exchange gains and losses - for the three months ended March 31, 2010, we reversed foreign exchange losses recognized under Canadian GAAP, which increased investment and other income by $1.3 million (year ended December 31, 2010 - $22.7 million).
Under IFRS, only dividends that represent a return on capital invested in a foreign operation require recognition of previously deferred foreign exchange gains or losses. Under Canadian GAAP, dividends, including those related to the accumulation of earnings are considered a return on investment, and we recognized the deferred foreign exchange gains or losses on these amounts in investment and other income.
(iii) Depreciation - we increased property, plant and equipment relating to the reversal of an impairment charge recognized for Cayeli, and made an associated increase in depreciation of $2.0 million for the three months ended March 31, 2010 (year ended December 31, 2010 - $7.9 million).
(iv) Depreciation of property, plant and equipment associated with asset retirement obligations - we recognized a $3.2 million decrease in depreciation for the three months ended March 31, 2010 (year ended December 31, 2010 - $6.3 million).
Under both IFRS and Canadian GAAP, we recognize a corresponding change in the provision for asset retirement obligations in the carrying value of the related property, plant and equipment and depreciate this amount prospectively. The amount of our asset retirement obligations under IFRS is different from the amount under Canadian GAAP, and therefore has an impact on our related assets and depreciation expense.
(v) Provision for asset retirement obligations - we increased cost of sales by $6.5 million for the year ended December 31, 2010 to increase our asset retirement obligations at our closed properties as a result of changes in discount rates.
Under IFRS, we measure asset retirement obligations using a risk free interest rate, and revalue for changes in market risk free interest rates. Under Canadian GAAP, we used a credit adjusted risk free interest rate and were not required to remeasure for changes in market rates.
(vi) Deferred income taxes - as a result of the tax effect of changes recognized in our income statement under IFRS, we increased income tax expense by $1.6 million for the three months ended March 31, 2010 (year ended December 31, 2010 - $4.8 million).
The schedule below reconciles our Canadian GAAP and IFRS comprehensive income for the three months ended March 31, 2010 and the year ended December 31, 2010. The Canadian GAAP statement of comprehensive income is presented in an IFRS format.
March 31, December 31,
Notes 2010 2010
----------------------------------------------------------------------------
Comprehensive income (loss) reported
under Canadian GAAP ($36,949) $ 181,643
Total adjustments to net income 4,780 32,683
Adjustments to other comprehensive
income (loss):
Currency translation adjustments i, ii (10,542) (28,167)
----------------------------------------------------------------------------
Comprehensive income (loss) under IFRS ($42,711) $ 186,159
----------------------------------------------------------------------------
Notes to the reconciliation of the statement of comprehensive income for the three months ended March 31, 2010 and the year ended December 31, 2010
Adjustments
(i) Currency translation adjustments - for the three months ended March 31, 2010, we reversed foreign exchange losses previously recognized in the statement of earnings under Canadian GAAP, which decreased other comprehensive income by $1.3 million (year ended December 31, 2010 - $22.7 million).
Under IFRS, only dividends that represent a return on capital invested in a foreign operation require recognition of previously deferred foreign exchange gains or losses. Under Canadian GAAP, dividends, including those related to the accumulation of earnings and repayment of intercompany debt, are considered a return on investment, and we recognized the deferred foreign exchange gains or losses on these amounts in investment and other income.
(ii) Currency translation adjustments - as a result of the currency translation impact of recognizing changes to our balance sheet under IFRS, we decreased other comprehensive income by $9.2 million for the three months ended March 31, 2010 (year ended December 31, 2010 - $5.5 million).
Cash flow statement
The IFRS transition adjustments above did not have an impact on our cash and short-term investments. Differences in our cash flow statements between Canadian GAAP and IFRS are the result of non-cash adjustments to items in the statements of earnings outlined above and the presentation of Ok Tedi cash flows as discontinued operations (note 10).
7. Cash and short-term investments
March 31, December 31, January 1,
2011 2010 2010
----------------------------------------------------------------------------
Cash and cash
equivalents:
Liquidity funds $ 294,186 $ 194,603 $ 205,190
Term deposits 77,459 52,991 40,140
Overnight deposits 60,150 4,319 54,435
Bankers acceptances - - 92,200
Money market funds 7 40,048 19,951
Bank deposits 12,458 27,168 95,001
----------------------------------------------------------------------------
444,260 319,129 506,917
----------------------------------------------------------------------------
Short-term
investments:
Corporate - - 26,996
Term deposits - 7,296 -
----------------------------------------------------------------------------
- 7,296 26,996
----------------------------------------------------------------------------
Total cash and
short-term
instruments $ 444,260 $ 326,425 $ 533,913
----------------------------------------------------------------------------
8. Restricted cash
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, December 31, January 1,
2011 2010 2010
----------------------------------------------------------------------------
Collateralized cash for letter of
credit facility - Inmet Mining $ 16,692 $ 16,906 $ 16,492
In trust for Ok Tedi reclamation - - 26,365
Collateralized cash for letters of
credit - Las Cruces 56,163 52,138 72,008
Collateralized cash for Pyhasalmi
reclamation 1,688 1,632 1,854
------------------------------------------
74,543 70,676 116,719
Less current portion:
Collateralized cash for letters
of credit - Las Cruces (695) (617) (15,130)
----------------------------------------------------------------------------
$ 73,848 $ 70,059 $ 101,589
----------------------------------------------------------------------------
9. Held to maturity investments
This quarter, we purchased US $274 million of US Treasury bonds with credit ratings of AAA. The bonds mature between March 2012 and January 2016 and have a weighted average annual yield to maturity of 1.2 percent. Additionally, we purchased a Provincial Government bond for $8 million with a credit rating of AA, maturity of June 2011 and an annual yield to maturity of 1.08 percent.
We have designated these bonds as held to maturity, measuring them initially at fair value and subsequently at amortized cost.
10. Sale of our interest in Ok Tedi
On January 29, 2011, Ok Tedi Mining Limited repurchased our 18 percent equity interest in Ok Tedi for US $335 million. Our interest in Ok Tedi met the criteria of an asset held for sale, so we presented our share of the results of operations of Ok Tedi as discontinued operations in the consolidated statements of earnings and the consolidated statements of cash flow retroactively. In 2011, after-tax income of $83 million from this discontinued operation includes net earnings of $17 million in January, before the sale, and a gain on sale of $66 million net of withholding taxes. Papua New Guinea withholding taxes of $28 million were paid on the sale and no Canadian taxes were payable, but we expect to reduce our tax-effected Canadian tax loss pools by about $2 million. The following tables provide a breakdown of our share of the earnings and cash flows at Ok Tedi for the three months ended March 31, 2010 and 2011.
Statements of earnings
---------------------------------------------------------------------------
---------------------------------------------------------------------------
three months ended March 31
2011 2010
---------------------------------------------------------------------------
Gross sales $ 44,865 $ 94,626
Smelter processing charges and freight (4,051) (10,523)
Cost of sales (excluding depreciation) (12,116) (27,963)
Depreciation (2,272) (6,789)
-------------------------------
26,426 49,351
Investment and other income (80) 72
Finance costs (33) (254)
Income tax expense (9,670) (18,456)
-------------------------------
16,643 30,718
Gain on sale of our interest 79,029 -
Income tax expense on sale of our interest (12,233) -
---------------------------------------------------------------------------
Net income from discontinued operation $ 83,439 $ 30,718
---------------------------------------------------------------------------
Statements of cash flow
----------------------------------------------------------------------------
----------------------------------------------------------------------------
three months ended March 31
2011 2010
----------------------------------------------------------------------------
Cash provided by operating activities
Before net change in non-cash working capital $ - $ 34,949
Net change in non-cash working capital - 11,501
-------------------------------
- 46,450
Cash provided by (used in) investing
activities
Cash proceeds on sale, net of withholding tax 306,982 -
Purchase of property, plant and equipment - (4,280)
-------------------------------
306,982 (4,280)
Cash used in financing activities - (648)
-------------------------------
Foreign exchange change on cash held in
foreign currency - (2,180)
----------------------------------------------------------------------------
Net cash from discontinued operation $ 306,982 $ 39,342
----------------------------------------------------------------------------
11. Provisions
The table below shows the significant components of our provisions.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, January 1,
March 31, 2011 2010 2010
----------------------------------------------------------------------------
Asset retirement obligations $ 171,994 $ 168,589 $ 198,291
Employee benefits and other 11,069 11,478 15,556
---------------------------------------------
183,063 180,067 213,847
Less current portion:
Asset retirement obligations (16,847) (16,417) (13,500)
Employee benefits and other (741) (1,251) (3,917)
---------------------------------------------
(17,588) (17,668) (17,417)
----------------------------------------------------------------------------
$ 165,475 $ 162,399 $ 196,430
----------------------------------------------------------------------------
12. Accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss) includes:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, December January 1,
2011 31, 2010 2010
----------------------------------------------------------------------------
Unrealized losses on gold forward
sales contracts (net of tax of nil
(December 31, 2010 - $2,427,
January 1, 2010 - $2,015)) $ - ($5,661) ($4,701)
Unrealized gains (losses) on
investments (net of tax of $155
(December 31, 2010 - $78, January
1, 2010 - $4,788)) (915) (452) 23,794
Currency translation adjustment (150,434) (179,104) -
----------------------------------------------------------------------------
Accumulated other comprehensive
income (loss) ($151,349) ($185,217) $ 19,093
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Currency translation adjustments
The table below is breakdown of our currency translation adjustments.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, December 31,
2011 2010 January 1, 2010
----------------------------------------------------------------------------
Pyhasalmi (euro functional
currency) ($17,084) ($24,354) $ -
Las Cruces (euro functional
currency) (59,807) (93,427) -
Cayeli (US dollar functional
currency) (29,914) (20,908) -
Cobre Panama (US dollar functional
currency) (43,629) (29,701) -
Ok Tedi (US dollar functional
currency) - (10,714) -
----------------------------------------------------------------------------
($150,434) ($179,104) $ -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Canadian dollar to US dollar exchange rate was $0.97 at March 31, 2011, $0.99 at December 31, 2010 and $1.05 at January 1, 2010. The Canadian dollar to euro exchange rate was $1.38 at March 31, 2011, $1.33 at December 31, 2010 and $1.50 at January 1, 2010.
13. Investment and other income
------------------------------------------------------------------
------------------------------------------------------------------
three months ended March 31
2011 2010
------------------------------------------------------------------
Interest income $ 2,772 $ 1,597
Dividend and royalty income 600 714
Foreign exchange loss (10,826) (1,061)
Other 1,681 (46)
------------------------------------------------------------------
($5,773) $ 1,204
------------------------------------------------------------------
------------------------------------------------------------------
Foreign exchange loss is a result of:
------------------------------------------------------------
------------------------------------------------------------
three months ended March 31
2011 2010
------------------------------------------------------------
Translation of foreign-
denominated cash ($8,732) ($771)
Revaluation of US dollar
held-to-maturity
investments (1,452) -
Translation of other-
monetary assets and
liabilities (642) (290)
------------------------------------------------------------
($10,826) ($1,061)
------------------------------------------------------------
------------------------------------------------------------
14. Finance costs
----------------------------------------------------------------
----------------------------------------------------------------
three months ended March 31
2011 2010
----------------------------------------------------------------
Interest on note payable $ 279 $ 298
Accretion on note payable 161 154
Accretion on provisions and
capital lease obligations 1,891 1,421
----------------------------------------------------------------
$ 2,331 $ 1,873
----------------------------------------------------------------
----------------------------------------------------------------
15. Income tax
For the three months ended March 31, 2011:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Corporate Las Cobre
and Cayeli Cruces Pyhasalmi Panama
other (Turkey) (Spain) (Finland) (Panama) Total
---------------------------------------------------------------------------
Current income
taxes $249 $10,590 $- $7,932 $- $18,771
Deferred income
taxes (45) 1,066 7,497 (129) - 8,389
---------------------------------------------------------------------------
Income tax
expense $204 $11,656 $7,497 $7,803 $- $27,160
---------------------------------------------------------------------------
---------------------------------------------------------------------------
For the three months ended March 31, 2010:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Corporate Las Cobre
and Cayeli Cruces Pyhasalmi Panama
other (Turkey) (Spain) (Finland) (Panama) Total
---------------------------------------------------------------------------
Current income
taxes $1,160 $9,808 $- $4,942 $- $15,910
Deferred income
taxes (2,347) (2,942) (7,634) 17 - (12,906)
---------------------------------------------------------------------------
Income tax
expense ($1,187) $6,866 ($7,634) $4,959 $- $3,004
---------------------------------------------------------------------------
---------------------------------------------------------------------------
16. Net income per share
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010
----------------------------------------------------------------------------
Income from continuing operations available
to common shareholders $ 59,405 $ 54,053
Income from discontinued operations
available to common shareholders 83,439 30,718
Net income available to common shareholders 142,844 84,711
----------------------------------------------------------------------------
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2011 2010
----------------------------------------------------------------------------
Weighted average common shares outstanding 61,549 56,107
Plus incremental shares from assumed
conversions:
Deferred share units 112 96
Long term incentive plan units 52 43
----------------------------------------------------------------------------
Diluted weighted average common shares
outstanding 61,713 56,246
----------------------------------------------------------------------------
The table below shows our earnings per common share for the three months ended March 31.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
three months ended March 31
(Canadian dollars per share) 2011 2010
----------------------------------------------------------------------------
Basic Diluted Basic Diluted
Net income from continuing operations
per share $0.97 $0.96 $0.96 $0.96
Income from discontinued operations per share 1.36 1.35 0.55 0.55
----------------------------------------------------------------------------
Net income per share $2.33 $2.31 $1.51 $1.51
----------------------------------------------------------------------------
----------------------------------------------------------------------------
17. Statements of cash flows
The tables below show the components of our net change in non-cash working capital by segment.
For the three months ended March 31, 2011:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Corporate Las Cobre
and Cayeli Cruces Pyhasalmi Panama
other (Turkey) (Spain) (Finland) (Panama) Total
---------------------------------------------------------------------------
Accounts
receivable ($760) $7,585 ($5,246) $9,077 $- $10,656
Inventories - 711 5,971 (66) - 6,616
Accounts
payable and
accrued
liabilities (2,169) 812 4,701 (2,400) - 944
Taxes payable (1,402) (1,990) - 4,999 - 1,607
Provisions (510) - - - - (510)
Other - (3) - - - (3)
---------------------------------------------------------------------------
($4,841) $7,115 $5,426 $11,610 $- $19,310
---------------------------------------------------------------------------
---------------------------------------------------------------------------
For the three months ended March 31, 2010:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Corporate Las Cobre
and Cayeli Cruces Pyhasalmi Panama
other (Turkey) (Spain) (Finland) (Panama) Total
---------------------------------------------------------------------------
Accounts
receivable ($337) $5,897 $ - $925 $- $6,485
Inventories 4,153 (1,442) - 582 - 3,293
Accounts
payable and
accrued
liabilities (4,695) 521 - (6,539) - (10,713)
Taxes payable 576 (1,448) - 766 - (106)
Provisions (216) - - - - (216)
Other (5) 77 - - - 72
---------------------------------------------------------------------------
($524) $3,605 $ - ($4,266) $- ($1,185)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
18. Capital commitments
Our operations had the following capital commitments as at March 31, 2011:
-- Las Cruces committed $3.4 million for the purchase of plant equipment.
-- Cobre Panama committed $130.0 million for the design and supply of two
SAG mills, four ball mills and the related gearless drives, and for
basic engineering.
Additional annual disclosures under IFRS
As a result of the transition adjustments discussed in note 6 to the interim financial statements, we have included the following IFRS annual disclosures for the year ended December 31, 2010 to help you understand our interim financial information.
1. Property, plant and equipment
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Plant and Development
Property equipment expenditures Total
---------------------------------------------------------------------------
January 1, 2010, net
of accumulated
depreciation $135,127 $238,344 $1,572,198 $1,945,669
Additions 39,666 47,982 96,298 183,946
Depreciation (21,534) (82,532) - (104,066)
Reclassification to
property, plant and
equipment 269,058 639,293 (908,351) -
Reclassification to
assets held for
sale (note 10) (11,822) (92,100) - (103,922)
Asset retirement obligations
adjustments 4,968 7,247 - 12,215
Disposals - (8,887) - (8,887)
Funding received under Cobre
Panama option agreement - - (14,127) (14,127)
Other - (75) - (75)
Foreign exchange (3,441) 556 (171,503) (174,388)
---------------------------------------------------------------------------
December 31, 2010,
net of accumulated
depreciation $412,022 $749,828 $574,215 $1,736,065
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Plant and Development
Property equipment expenditures Total
---------------------------------------------------------------------------
January 1, 2010
Cost $293,542 $502,562 $1,572,198 $2,368,302
Accumulated
depreciation (158,415) (264,218) - (422,633)
---------------------------------------------------------------------------
Net carrying value $135,127 $238,344 $1,572,198 $1,945,669
---------------------------------------------------------------------------
December 31, 2010
Cost $591,971 $1,096,578 $574,215 $2,262,764
Accumulated
depreciation (179,949) (346,750) - (526,699)
---------------------------------------------------------------------------
Net carrying value $412,022 $749,828 $574,215 $1,736,065
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2. Accounts receivable
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2010 January 1, 2010
----------------------------------------------------------------------------
Accounts receivable from sale of metal $ 89,917 $ 112,435
Value-added and other taxes receivable 9,619 22,132
Advances and prepaid expenses 12,940 13,948
Other amounts receivable 6,950 7,246
----------------------------------------------------------------------------
$ 119,426 $ 155,761
----------------------------------------------------------------------------
----------------------------------------------------------------------------
3. Inventories
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2010 January 1, 2010
----------------------------------------------------------------------------
Stockpiled ore $ 22,077 $ 16,812
Work in progress 7,407 14,253
Finished goods inventory 23,327 28,668
Materials and supplies 19,343 38,591
----------------------------------------------------------------------------
$ 72,154 $ 98,324
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4. Accounts payable and accrued liabilities
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2010 January 1, 2010
----------------------------------------------------------------------------
Accounts payables and accrued
liabilities $ 94,792 $ 106,701
Amounts payable related to metal sales
(note 29(a)) 592 103
Income taxes payable 40,961 63,720
----------------------------------------------------------------------------
$ 136,345 $ 170,524
----------------------------------------------------------------------------
----------------------------------------------------------------------------
5. Other liabilities
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December, 31 2010 January 1, 2010
----------------------------------------------------------------------------
Las Cruces capital lease obligation $ 17,441 20,019
Other 676 676
----------------------------------------------------------------------------
$ 18,117 $ 20,695
----------------------------------------------------------------------------
----------------------------------------------------------------------------
6. Asset retirement obligations
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2010 January 1, 2010
----------------------------------------------------------------------------
Present value of future water
treatment costs $ 34,722 $ 30,032
Obligations at closed properties 35,209 35,490
Obligations at operating and
developing mines 98,658 132,769
--------------------------------------
168,589 198,291
Less current portion (16,417) (13,500)
----------------------------------------------------------------------------
$ 152,172 $ 184,791
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The table below shows how our asset retirement obligations changed in 2010.
2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Las Ok Closed
Cayeli Cruces Pyhasalmi Tedi sites Total
----------------------------------------------------------------------------
Opening balance
at January 1,
2010 $15,673 $55,929 $21,522 $39,645 $65,522 $198,291
Liabilities
settled - - - - (9,719) (9,719)
Accretion
expense charged
through finance
costs 590 2,160 708 910 2,066 6,434
Liabilities
incurred - 4,953 - - - 4,953
Revisions in
timing and
amount of
estimated cash
flows - - 7,263 1,585 14,298 23,146
Reclassification
to held for
sale (note 10) - - - (39,981) - (39,981)
Foreign exchange
and other (861) (6,603) (2,676) (2,159) (2,236) (14,535)
----------------------------------------------------------------------------
Closing balance
at December 31,
2010 $15,402 $56,439 $26,817 $ - $69,931 $168,589
----------------------------------------------------------------------------
----------------------------------------------------------------------------
At December 31, 2010, we estimate that we need $213 million in undiscounted cash flows to settle these liabilities, payable over approximately 15 years. We discount cash flows at interest rates that range from one percent to five percent.
Contacts:
Inmet Mining Corporation
Jochen Tilk
President and Chief Executive Officer
1.416.860.3972
Inmet Mining Corporation
Flora Wood
Director, Investor Relations
1.416.361.4808
www.inmetmining.com