Inmet turns profit in quarter

Earnings at Inmet Mining (IMN-T) were steady in the third quarter despite changes in accounting procedures that kept profits from the Ok Tedi mine in Papua New Guinea off the books. The company earned $3 million (6 per share) on revenue of $28.4 million in the 3-month period, and for the first nine months of the year, it reported a profit of $7.9 million.

In last year’s third quarter, the company earned $8.4 million on revenue of $32.2 million, excluding gains of $23.4 million on non-recurring items that were recorded as profit.

Once again, the company’s best operating performer was its Cayeli zinc-copper mine in Turkey, where increased mill throughput paid off in higher copper production. Higher metal prices contributed to the mine’s $7.3-million operating profit.

Zinc production at Cayeli was lower, as fewer zinc-rich zones were stoped during the quarter; this nudged the mine’s copper production costs, which include a zinc credit, up to US$925 per tonne (US42 per lb.).

The pit at the Troilus gold mine in north-central Quebec continues to be expanded, which has meant lower millhead grades for much of the year. Still, the mine showed a $2-million operating profit, down from $2.8 million in the third quarter of 1999. Gold is currently being mined at a grade of 0.82 gram per tonne for US$246 per oz.

Ok Tedi, in which Inmet holds an 18% interest, has not paid dividends yet this year, and so, under accounting rules adopted last quarter, Inmet is not showing income from Ok Tedi. The mine is in a phase of equipment replacement that has swallowed up most of its profits, and Inmet does not expect a dividend distribution this year.

Broken Hill Proprietary (BHP-N), which owns a 52% interest and operates the mine, is withdrawing from the Ok Tedi project, which in recent years has been beset by tailings-disposal problems. Negotiations between the owners (BHP, Inmet, and the Papua New Guinean government) are under way to determine how BHP may dispose of its interest.

On the exploration side, Inmet has concluded an agreement with Australian explorer Pilbara Mines under which it can earn a 70% interest in the Teutonic Bore property near Leonora, Western Australia. The agreement excludes tailings and stockpiles on which Pilbara is currently doing a pre-feasibility study for possible production.

Inmet’s work commitment is $2.8 million, to be spent over four years. The Teutonic Bore zinc-copper deposit, containing 2.2 million tonnes grading 11.39% zinc, 3.53% copper and 150 grams silver per tonne, was mined between 1980 and 1985 by BP Minerals.