Cayeli foundation of Inmet’s quarter

Increased production from the Cayeli copper-zinc mine in Turkey was in the foreground of the second-quarter picture at Inmet Mining (IMN-T).

Inmet showed a profit of $959,000 for the 3-month period ended June 30, on total revenue of $27.1 million. In the second quarter of 1998, Inmet earned $6.4 million on $29 million in revenues, plus a further $18.7 million from sales of shares in Teck (TEK-T) and from discontinued operations.

For the six months ended June 30, Inmet earned $3.8 million on revenue of $53.3 million. The first-half figure included a $3.6-million gain on the sale of Inmet’s interest in German copper refiner Norddeutsche Affinerie, and a $3.2-million loss taken on the sale of the Ovacik gold project in Turkey. For the first half of 1998, the company posted earnings of $24.3 million on revenue of $55.9 million.

The company blamed the lower revenues on lower realized prices for copper and gold: it got an average of US71 cents per lb. for copper and US$258 per oz. for gold in the quarter, against averages of US81 cents and US$310 in the corresponding period of 1998.

While Inmet has cut costs substantially, it also showed a $433,000 loss on investments in the quarter, compared with investment income of $3.2 million in the corresponding quarter of 1998, excluding the gain on the Teck sale. First-half investment income was down to $1.5 million, against $4.8 million (excluding the Teck sale) in 1998.

The Cayeli copper-zinc mine has emerged as Inmet’s cornerstone asset, providing an operating profit of $4.4 million in the quarter and $7.4 million for the year. Production costs have remained low, at US43 cents per lb. copper, with higher millhead grade and mill recoveries so far this year.

A paste backfill plant is close to the commissioning stage, with two successful tests using paste backfill in mined-out stopes. Mine-scale exploration drilling continues with the objective of blocking out enough ore to justify an expansion of the mill to handle 1 million tonnes annually.

Life is not so bright at the Troilus gold mine in north-central Quebec, which posted an operating loss of $15,000 in the quarter. Inmet took a $1-million charge against earnings when it revalued Troilus’s assets at a lower gold price. Cash production costs were fractionally lower, and a mill expansion (to a capacity of 15,000 tonnes daily) is complete. Troilus is also mining higher grades.

At the Ok Tedi copper-gold mine in Papua New Guinea, where Inmet has an 18% interest, the second quarter was profitable, but revenues were substantially lower than in the corresponding quarter of 1998, when large quantities of stockpiled concentrate were sold. Mill throughput was lower, but grades were higher, resulting in higher production in the quarter, and Inmet’s share of the earnings was $818,000.

Talks are continuing on the future of the mine, which finds itself unable to dispose of the large quantity of mill tailings without causing environmental damage to downstream tributaries of the Fly River. The local community is in favour of continuing mining, and the national government, which has final approval of the mine’s waste-management program, is a 30% shareholder in the operation.

Inmet has $80.8 million in cash and short-term notes, plus net working capital of $94 million.