Restructuring has paid off in higher second-quarter earnings for troubled base metal miner Inmet Mining (IMN-T), which posted a profit of $25.2 million for the three months ended June 30.
The company earned the $25.2 million on revenue of $47.5 million, against $7.7 million on $53.6 million in the comparable period of 1997. The profit figure includes $6.1 million from discontinued operations at German copper refiner Norddeutsche Affinerie, and $11 million from the sale of Inmet’s interest in Teck (TEK-T). With these items taken out, earnings from operations totalled $8.1 million.
The second-quarter profit brings earnings for the first six months of 1998 to $24.3 million (following a first-quarter loss), up from $8.6 million in the first half of 1997. Revenue for that period was $91.8 million, compared with $99.8 million the year before.
Operations resumed at the Ok Tedi copper-gold mine in Papua New Guinea in the quarter, providing operating profits of $2.1 million. Last year’s drought-enforced shutdown at Ok Tedi robbed Inmet of substantial cash flow in 1997. Inmet’s only two money-losers in the period were the Ovacik gold project in Turkey, where development has been stalled by permitting delays, and the small Navachab copper mine in Namibia.
The Troilus gold mine in northern Quebec saw its costs decline, partly due to increased mill throughput and partly because of the decline in the Canadian/U.S. exchange rate. At the Cayeli copper-zinc mine in Turkey, mill modifications have allowed faster throughput and better metal recoveries, with costs declining to US43 cents per lb.
A requisition by takeover bidder Zemex (ZMX-N) to convene a special meeting of shareholders has been accepted, with a meeting scheduled for mid-September. The proposal to be considered starts with a cash distribution of $4.50 per share to Inmet shareholders, after which Inmet shares would be consolidated at a ratio of 26.45-to-1. Zemex would nominate a new board and merge with Inmet on a share-for-share basis.
Inmet’s board has recommended that shareholders reject Zemex’s offer.
Management is soliciting proxies to defeat the proposal, with its president, William James, describing the proposal as “an attempt to get control of Inmet without paying for it.” Zemex, for its part, says it has the support of one other large shareholder.
The company continues to pursue a restructuring program, having made a public offering of
25% of Norddeutsche Affinerie, the German smelter it shared with Australian-based MIM and German-based Degussa, and the sale of its 1.8 million shares in Teck. Those sales, and the sale of its interest in the Antamina copper project in Peru to Teck and Noranda (NOR-T), have brought $265 million into the company. This puts about $535 million in cash on Inmet’s balance sheet, a considerable lure for potential takeover bidders.
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