In spite of a 151% drop in net income during the fourth-quarter 2008, Canadian base metals miner Inmet Mining will not reduce capital expenditures this year.
Inmet lost $32.5 million or negative 67-cents per share during the fourth quarter of 2008, compared to a net income of $63.6 million or $1.32/sh for the fourth-quarter 2007.
The company attributed the loss to a significant decline in the price of copper and zinc, which reduced sales by $92 million during the fourth quarter. Inmet also took a $34 million impairment charge because of its decision not to proceed further in the development of the Cerattepe project in Turkey.
Nevertheless, Inmet officials stressed based on the strength of our financial position entering into this downturn, together with our relatively lower operating costs:
•- we do not expect there to be any impact on our ability to meet expected production levels as a result of market conditions
•- we should be able to maintain capital expenditures at our current operations and for the development of Las Cruces. The company expects Spain's Las Cruces production to begin this year.
•- we should be able to continue to pursue our growth objectives by advancing the Petaquilla project and considering other opportunities as they arise.
Inmet officials expect copper and zinc sales volumes to be higher this year because of our higher production expectations, including new production at Las Cruces. We have set a higher copper production target for 2009 because production should start at Las Cruces and we expect higher throughput at Cayeli and OK Tedi. We expect to mine lower zinc grades at Pyhasalmi in 2009.
Chief Executive Richard Ross said he expects the company to meet its production forecasts of 125,600 tonnes of copper, 79,000 tonnes of zinc and 241,500 ounces of gold this year.
Although other copper mining companies have suspended their projects due to the current global economic downturn, Inmet has decided to advance what we believe to be one of the most promising copper porphyry projects in the world.
Given the rapidly deteriorating supply of new copper mines, we believe that having a ‘ready-to-build project' the size of Petaquilla in Inmet's portfolio, will put us in a very strong position when the general economy and with it the demand for metals turn around once again, the company said.
Our vision is to progress Petaquilla over the next two years before a major decision on construction will have to be made. We will do this carefully always ensuring that our balance sheet remains strong and our liquidity is not impacted to endure the current economic environment.
Inmet has set three main objectives for the Panamanian project over the next two years including:
•· Complete sufficient drilling to establish a 43-101 resource large enough to support a daily mill throughput of 150,000 tonnes per day for a minimum of 25 years;
•· Complete all front-end engineering and design;
•· Complete and submit for approval the Environmental and Social Impact Assessment, advance permitting and continue to build a social license.
Meanwhile, Inmet has projected capital spending to be $286 million this year including $84 million at Las Cruces, $94 million at Petaquilla, and $17 million at Ok Tedi.
WRITE DOWN OF CERATTEPE
While Inmet has joined with the Turkish Ministry in an appeal to the Turkish Administrative Supreme Court over a lower court decision to cancel operating licenses for Cerattepe, the company announced Tuesday it had decided we will not proceed with the project, regardless of the decision on the appeal.
All work has ceased on the project, and we took a $34 million charge to write down the assets to net realizable value, Inmet said.