TORONTO, CANADA--(Marketwire - April 26, 2012) -
All amounts in Canadian dollars unless indicated otherwise.
Inmet (TSX:IMN) announces first quarter earnings from continuing operations of $1.39 per share compared to $0.97 per share in the first quarter of 2011.
First quarter highlights
-- Strong earnings from operations
Earnings from operations were $151 million compared to $117 million in the first quarter of 2011.
Significantly higher copper sales volumes increased operating earnings by $72 million - a result of higher production at Las Cruces and Cayeli, and the timing of shipments at Cayeli.
This was somewhat offset by lower realized copper and zinc prices relative to the first quarter of 2011 that reduced operating earnings by $26 million.
-- Las Cruces production on target
Las Cruces produced 13,300 tonnes of copper cathode in the quarter compared to 8,100 tonnes produced during the same period of 2011.
The plant achieved record production of 10,300 tonnes of copper cathode in the first two months of 2012.
March production was not at the same level due to scheduled maintenance and a one-day national strike in Spain.
In April, Las Cruces expects to achieve monthly production of 6,000 tonnes of copper cathode (design capacity) for the first time.
-- Korea Panama Mining Corporation exercises Cobre Panama option
On April 25, 2012, Korea Panama Mining Corporation (KPMC) completed its acquisition of a 20 percent interest in Minera Panama SA (Minera Panama), owner and developer of the Cobre Panama development project, for US $169 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to date, in accordance with the option agreement of 2009.
Key financial data
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three months ended March 31
(thousands, except per share amounts) 2012 2011 change
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FINANCIAL HIGHLIGHTS
Sales
Gross sales $ 294,904 $ 254,277 +16%
Net income
Net income from continuing operations $ 96,137 $ 59,405 +62%
Net income from continuing operations per
share $ 1.39 $ 0.97 +43%
Net income from discontinued operations - $ 83,439 -100%
Net income from discontinued operations
per share - $ 1.36 -100%
Net income attributable to Inmet
shareholders $ 96,137 $ 142,844 -33%
Net income per share $ 1.39 $ 2.33 -40%
Cash flow
Cash flow provided by operating
activities $ 118,276 $ 118,176 -
Cash flow provided by operating
activities per share (1) $ 1.71 $ 1.92 -11%
Capital spending (2) $ 85,321 $ 40,730 +109%
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OPERATING HIGHLIGHTS
Production
Copper (tonnes) 24,800 17,700 +40%
Zinc (tonnes) 15,100 21,200 -29%
Pyrite (tonnes) 211,300 186,100 +14%
Copper cash cost (US $ per pound) (3) $ 1.00 $ 0.95 +5%
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as at as at
March 31 December 31
FINANCIAL CONDITION 2012 2011
Current ratio 8.4 to 1 9.3 to 1
Gross debt to total equity - 1%
Net working capital balance (millions) $ 1,345 $ 1,304
Cash balance and long-term bonds (millions) $ 1,730 $ 1,706
Gross debt (millions) $ 17 $ 17
Shareholders equity (millions) $ 3,506 $ 3,414
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(1) Cash flow provided by operating activities divided by average shares
outstanding for the period.
(2) The three months ended March 31, 2012 includes capital spending of $74
million at Cobre Panama.
The three months ended March 31, 2011 includes
capital spending of $23 million at Cobre Panama and $15 million at Las
Cruces.
(3) Copper cash cost per pound is a non-GAAP financial measure - see
Supplementary financial information on pages 25 to 26.First quarter press release
Where to find it
Our financial results 4
Key changes in 2011 4
Understanding our performance 5
Earnings from operations 7
Corporate costs 11
Results of our operations 13
Cayeli 14
Las Cruces 16
Pyhasalmi 18
Status of our development project 20
Cobre Panama 20
Managing our liquidity 21
Financial condition 24
Supplementary financial information 25
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, 2012.
Revised objective is as of April 26, 2012.
Caution with respect to forward-looking statements and information
Securities regulators encourage companies to disclose forward-looking information to help investors understand a companys future prospects.
This interim report contains statements about our business, results of operation and future financial condition.
These statements 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 like may, expect, anticipate, believe or other similar words.
Our objectives and outlook have been prepared based on our existing operations, expectations and circumstances.
Actual events and results could be substantially different, however, because of the risks and uncertainties associated with our business or events that happen after the date of this interim report.
You should not place undue reliance on forward-looking statements.
As a general policy, we do not update forward-looking statements except if there is an offering document or where securities legislation requires us to do so.
Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended.
Also, many of the factors are beyond the control of Inmet.
Accordingly, readers should not place undue reliance on forward-looking statements or information.
Inmet undertakes no obligation to update forward-looking statements or information as a result of new information after the date of this interim report except as required by law.
All forward-looking statements and information herein are qualified by this cautionary statement.
Our financial results
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three months ended March 31
(thousands, except per share amounts) 2012 2011 change
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EARNINGS FROM OPERATIONS (1)
Cayeli $ 68,169 $ 51,473 +32%
Las Cruces 53,314 30,576 +74%
Pyhasalmi 26,987 34,453 -22%
Other 2,837 - +100%
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151,307 116,502 +30%
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DEVELOPMENT AND EXPLORATION
Corporate development and exploration (9,090) (13,411) -32%
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CORPORATE COSTS
General and administration (10,065) (8,422) +20%
Investment and other income (6,469) (5,773) +12%
Finance costs (2,681) (2,331) +15%
Income and capital taxes (26,865) (27,160) -1%
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(46,080) (43,686) +5%
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Net income from continuing operations 96,137 59,405 +62%
Income from discontinued operation (net of
taxes) - 83,439 -100%
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Net income attributable to Inmet
shareholders $ 96,137 $ 142,844 -33%
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Income from continuing operations per
common share $ 1.39 $ 0.97 +43%
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Diluted income from continuing operations
per common share $ 1.38 $ 0.96 +44%
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Basic net income per common share $ 1.39 $ 2.33 -40%
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Diluted net income per common share $ 1.38 $ 2.31 -40%
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Weighted average shares outstanding 69,349 61,549 +13%
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(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 2012
----------------------------------------------------------------------------
three months
ended see
(millions) March 31 page
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EARNINGS FROM OPERATIONS
Sales
Lower copper prices denominated in Canadian dollars $ (22) 7
Lower zinc prices denominated in Canadian dollars (4) 7
Higher copper sales volumes 72 7
Lower zinc sales volume (8) 7
Higher other metal sales 5
Costs
Lower processing charges and freight 2 9
Higher operating costs (4) 10
Higher depreciation (4) 10
Other (2)
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Higher earnings from operations compared to 2011 35
CORPORATE COSTS
Lower corporate development and exploration costs 4 11
Foreign exchange changes (2) 11
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Higher net income from continuing operations compared to
2011 37
Lower income from discontinued operation - Ok Tedi (83) 12
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Lower net income attributable to Inmet shareholders
compared to 2011 $ (46)
----------------------------------------------------------------------------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 7).
----------------------------------------------------------------------------
three months ended March 31
2012 2011 change
----------------------------------------------------------------------------
US dollar metal prices
Copper (per pound) US $3.87 US $4.29 -10%
Zinc (per pound) US $0.93 US $1.06 -12%
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Canadian dollar metal prices
Copper (per pound) C $3.88 C $4.23 -8%
Zinc (per pound) C $0.93 C $1.05 -11%
----------------------------------------------------------------------------Copper
Copper prices on the London Metals Exchange (LME) averaged US $3.77 per pound this quarter, an increase of 11 percent from the fourth quarter of 2011 and a 14 percent decrease from the first quarter of 2011.
Zinc
Zinc prices on the LME averaged US $0.92 per pound this quarter, a 7 percent increase from last quarters average price of US $0.86 per pound and a 16 percent decrease from the first quarter of 2011.
Exchange rates
Exchange rates affect our revenue and earnings.
The table below shows the average exchange rates we realized this quarter compared to 2011.
----------------------------------------------------------------------------
three months ended March 31
2012 2011 change
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Exchange rates
1 US$ to C$ $ 1.00 $ 0.99 +1%
1 euro to C$ $ 1.31 $ 1.35 -3%
1 euro to US$ $ 1.31 $ 1.37 -4%
1 US$ to Turkish lira TL 1.79 TL 1.57 +14%
----------------------------------------------------------------------------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 depreciated 1 percent relative to the US dollar, and appreciated 3 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,
-- translate Cayelis Turkish lira denominated costs into its functional
currency (US dollars)
-- revalue US dollars that we hold in cash at our operations whose
functional currency is the euro, and
-- revalue US dollars and euros that we hold in cash and long-term bonds at
Corporate.Treatment charges for copper increased
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 2012 and 2011 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.
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three months ended March 31
(US$) 2012 2011 change
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Treatment charges
Copper (per dry metric tonne of
concentrate) US $58 US $48 +21%
Zinc (per dry metric tonne of
concentrate) US $207 US $258 -20%
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Price participation
Copper (per pound) US $0.00 US $0.02 -100%
Zinc (per pound) US ($0.01) US $0.00 not meaningful
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Freight charges
Copper (per dry metric tonne of
concentrate) US $61 US $50 +22%
Zinc (per dry metric tonne of
concentrate) US $30 US $25 +20%
----------------------------------------------------------------------------Statutory tax rates
The table below shows the statutory tax rates for each of our taxable operating mines.
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2012 2011 change
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Statutory tax rates
Cayeli 24% 24% -
Las Cruces 30% 30% -
Pyhasalmi 24.5% 26% -1.5%
----------------------------------------------------------------------------Earnings from operations
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2012 2011 change
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Gross sales $ 294,904 $ 254,277 +16%
Smelter processing charges and freight (30,302) (31,585) -4%
Cost of sales:
Direct production costs (80,740) (71,428) +13%
Inventory changes (5,428) (7,154) -24%
Other non-cash expenses 3,928 (568) -792%
Depreciation (31,055) (27,040) +15%
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Earnings from operations $ 151,307 $ 116,502 +30%
----------------------------------------------------------------------------Gross sales were significantly higher
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2012 2011 change
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Gross sales by operation
Cayeli $ 127,423 $ 99,053 +29%
Las Cruces 114,007 90,826 +26%
Pyhasalmi 53,474 64,398 -17%
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$ 294,904 $ 254,277 +16%
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Gross sales by metal
Copper $ 243,985 $ 191,704 +27%
Zinc 29,582 44,871 -34%
Other 21,337 17,702 +21%
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$ 294,904 $ 254,277 +16%
----------------------------------------------------------------------------Key components of the change in gross sales: increasing sales volumes at Las Cruces, timing of shipments at Cayeli, lower realized copper prices
----------------------------------------------------------------------------
three months ended
(millions) March 31
----------------------------------------------------------------------------
Lower copper prices, denominated in Canadian dollars $ (22)
Lower zinc prices, denominated in Canadian dollars (4)
Higher copper sales volumes at Las Cruces 37
Higher copper sales volumes at Cayeli 34
Lower zinc sales volumes at Pyhasalmi (12)
Changes in other metal sales 5
Other 3
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Higher gross sales, compared to 2011 $ 41
----------------------------------------------------------------------------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 $5 million in positive finalization adjustments from fourth quarter 2011 sales.
At the end of this quarter, the following sales had not been settled:
-- 25 million pounds of copper provisionally priced at US $3.83 per pound
-- 14 million pounds of zinc provisionally priced at US $0.91 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:
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(millions of pounds) copper zinc
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April 2012 15 14
May 2012 10 -
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Unsettled sales at March 31, 2012 25 14
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Higher copper sales volumes, lower zinc 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 higher than the first quarter
of 2011 mainly because of Las Cruces production and the mining of
higher-grade stopes at Cayeli.
Additionally, the timing of shipments
resulted in copper sales volumes exceeding production volumes at Cayeli
by 3,000 tonnes this quarter and 1,500 tonnes in the first quarter of
2011.
-- Zinc production and sales volumes were lower than the first quarter of
2011 due to lower zinc grades at Cayeli and Pyhasalmi, consistent with
our objectives for this year.Sales volumes
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three months ended March 31
2012 2011 change
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Copper contained in concentrate (tonnes) 15,000 10,900 +38%
Copper cathode (tonnes) 13,600 9,700 +40%
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Total copper (tonnes) 28,600 20,600 +39%
Zinc (tonnes) 14,500 19,700 -26%
Pyrite (tonnes) 112,300 141,300 -21%
----------------------------------------------------------------------------Production
----------------------------------------------------------------------------
three months ended March 31 objective
2012 2011 change 2012
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Copper (tonnes)
Cayeli 8,100 6,000 +35% 27,000 - 30,000
Las Cruces 13,300 8,100 +64% 61,700 - 68,600
Pyhasalmi 3,400 3,600 -6% 11,300 - 12,600
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24,800 17,700 +40% 100,000 - 111,200
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Zinc (tonnes)
Cayeli 10,500 12,500 -16% 36,000 - 39,800
Pyhasalmi 4,600 8,700 -47% 22,800 - 25,200
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15,100 21,200 -29% 58,800 - 65,000
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Pyrite (tonnes)
Pyhasalmi 211,300 186,100 +14% 800,000
----------------------------------------------------------------------------2012 outlook for sales
We use our production objectives to estimate our sales target.
Our production guidance for copper and zinc remains as previously disclosed.
Our Canadian dollar sales revenues are affected by the US dollar denominated metal prices we receive and the exchange rate between the US dollar and Canadian dollar.
Zinc smelter processing charges down, copper charges up
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three months ended March 31
(thousands) 2012 2011 change
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Smelter processing charges and freight by
operation
Cayeli $ 22,174 $ 17,894 +24%
Las Cruces 305 268 +14%
Pyhasalmi 7,823 13,423 -42%
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$ 30,302 $ 31,585 -4%
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Smelter processing charges and freight by
metal
Copper $ 16,981 $ 11,201 +52%
Zinc 11,327 17,677 -36%
Other 1,994 2,707 -26%
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$ 30,302 $ 31,585 -4%
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Smelter processing charges by type and
freight
Copper treatment and refining charges $ 5,883 $ 3,381 +74%
Zinc treatment charges 5,947 9,762 -39%
Copper price participation - 386 -100%
Zinc price participation (259) (200) +30%
Content losses 10,902 11,621 -6%
Freight 7,411 6,307 +18%
Other 418 328 +27%
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$ 30,302 $ 31,585 -4%
----------------------------------------------------------------------------Our copper treatment and refining charges were higher than they were in the first quarter of 2011 because our terms with smelters were higher, as we expected, and because we sold more copper.
This was offset by lower zinc treatment charges this quarter than last year due mainly to lower zinc sales volumes at Pyhasalmi.
2012 outlook for smelter processing charges and freight
We expect our costs for copper treatment and refining to be slightly higher in 2012 than in 2011 based on recently signed agreements with our customers.
A tight concentrate supply is expected to keep the copper market in a deficit position in 2012.
We do not expect to pay copper price participation.
We expect total zinc smelter processing charges, including price participation, to be lower than in 2011 and a continued deficit to exist in the zinc concentrate market in 2012.
Las Cruces sells its copper cathode production directly to buyers in the Spanish and Mediterranean markets and therefore does not incur smelting processing charges and has relatively low freight costs.
We expect our ocean freight costs to be similar to rates realized in 2011.
Higher direct production costs and cost of sales
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three months ended March 31
(thousands) 2012 2011 change
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Direct production costs by operation
Cayeli $ 24,053 $ 23,378 +3%
Las Cruces 41,218 33,488 +23%
Pyhasalmi 15,469 14,562 +6%
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Total direct production costs 80,740 71,428 +13%
Inventory changes 5,428 7,154 -24%
Charges for mine rehabilitation and other
non-cash charges (3,928) 568 -792%
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Total cost of sales (excluding
depreciation) $ 82,240 $ 79,150 +4%
----------------------------------------------------------------------------Direct production costs
Direct production costs were $9 million higher than in the first quarter of 2011, mainly because higher production at Las Cruces increased variable electricity and consumables costs, and from incremental costs associated with the nine day scheduled maintenance shutdown at this operation.
Inventory changes
Copper inventories at Cayeli decreased at the end of this quarter, and at Cayeli and Las Cruces in the first quarter of 2011, because of the timing of shipments.
Charges for mine rehabilitation and other non-cash charges
These charges include accruals for asset retirement obligations, provisions for severance and retirement and other non-cash expenses.
We recorded a decrease of $3 million this quarter in post-closure liabilities at our closed properties.
This decrease was a result of an increase in the discount rates we applied in determining the liabilities.
Under International Financial Reporting Standards, we are required to revalue our asset retirement obligations for changes in market risk-free interest rates.
2012 outlook for cost of sales (excluding depreciation)
We expect consolidated direct production costs to be higher in 2012 because higher production at Las Cruces will increase total variable costs, primarily electricity and royalties.
Our budget for 2012 assumes our costs at Cayeli and Pyhasalmi will be similar to 2011.
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.
The total amount we spend in Canadian dollars will also be affected by the value of the US dollar and euro relative to the Canadian dollar.
Additionally, changes in market risk-free interest rates could significantly increase or decrease our costs related to mine rehabilitation at our closed properties.
Higher depreciation
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three months ended March 31
(thousands) 2012 2011 change
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Depreciation by operation
Cayeli $ 7,501 $ 5,226 +44%
Las Cruces 21,140 19,556 +8%
Pyhasalmi 2,414 2,258 +7%
----------------------------------------------------------------------------
$ 31,055 $ 27,040 +15%
----------------------------------------------------------------------------Depreciation was higher this quarter than in 2011 mainly because of higher copper sales volumes at Las Cruces and Cayeli.
2012 outlook for depreciation
We expect depreciation to be higher in 2012 because of higher sales volumes at Las Cruces.
Corporate costs
Corporate costs include corporate development and exploration, general and administration costs, taxes, interest and other income.
Corporate development and exploration
Costs this quarter were $4 million lower than the first quarter of 2011.
We incurred approximately $6 million of expenses in the first quarter of 2011 from the work related to the arrangement agreement to merge with Lundin Mining Corporation, which Inmet and Lundin Mining Corporation agreed to mutually terminate on March 29, 2011.
Investment and other income
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2012 2011
----------------------------------------------------------------------------
Interest income $ 4,392 $ 2,772
Foreign exchange losses (12,468) (10,826)
Dividend and royalty income 500 600
Other 1,107 1,681
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$ (6,469) $ (5,773)
----------------------------------------------------------------------------Interest income
Interest income was higher this quarter compared to the same period last year because our cash 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:
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three months ended March 31
(thousands) 2012 2011
----------------------------------------------------------------------------
Translation of US dollar held-to-maturity
investments $ (5,094) $ (1,452)
Translation of US dollar cash (4,659) (8,237)
Translation of Turkish lira taxes payable at
Cayeli (1,472) 545
Translation of other monetary assets and
liabilities (1,243) (1,682)
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$ (12,468) $ (10,826)
----------------------------------------------------------------------------We continue to hold US dollar bonds in Canada, and plan to use this money to fund our US dollar denominated capital program at Cobre Panama.
We recognized total foreign exchange losses of $5.1 million on these funds this quarter because the US dollar depreciated in value relative to the Canadian dollar.
In 2012, we started to hold our euro-based operations excess cash in US dollars, and as a result recognized foreign exchange losses of $4.5 million this quarter on the revaluation of US-denominated cash balances to euros.
Cayelis income taxes are denominated in Turkish lira.
This operation recognized a foreign exchange loss of $1.5 million this quarter from the revaluation of its taxes payable due to the depreciation of the US dollar (Cayelis functional currency) relative to the Turkish lira.
2012 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.
At March 31, 2012, we held US $278 million in cash and held to maturity investments subject to translation in our Canadian accounts and US $247 million in cash subject to translation in our euro accounts.
Income tax expense
----------------------------------------------------------------------------
three months ended March 31
(thousands) 2012 2011 change
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Cayeli $ 9,791 $ 11,656
Las Cruces 11,581 7,497
Pyhasalmi 5,353 7,803
Corporate and other 140 204
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$ 26,865 $ 27,160
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Consolidated effective tax rate 22% 31% -9%
----------------------------------------------------------------------------Our tax expense changes as our earnings change.
The consolidated effective tax rate is lower this quarter compared to the same quarter of last year, mainly because Cayelis taxes were lower as it recognized a foreign exchange loss from its US dollar denominated cash (Cayelis income taxes are denominated in Turkish lira).
Additionally, there was a decrease in the statutory tax rate at Pyhasalmi from 26 percent to 24.5 percent.
2012 outlook for income tax expense
Other than the decrease in the statutory tax rate at Pyhasalmi from 26 percent to 24.5 percent, we expect the statutory tax rates at our operations to remain the same in 2012 as they were in 2011.
Discontinued operation - 2011
We sold our 18 percent equity interest in Ok Tedi in January 2011, and have reported our results relating to Ok Tedi in that year as discontinued operations.
After-tax income of $83 million in 2011 includes net earnings of $17 million in January 2011, before the sale, and a gain on sale of $66 million net of withholding taxes.
We paid Papua New Guinea withholding taxes of $28 million on the sale.
Results of our operations
2012 estimates
Our financial review by operation includes estimates for our 2012 operating earnings and operating cash flows.
We have based these estimates on our 2012 objectives for production (using the midpoints in our production volume ranges) and cost per tonne of ore milled (cost per pound of copper produced at Las Cruces), as well as the following assumptions for the remaining nine months of the year:
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Copper price US $3.80 per pound
Zinc price US $0.95 per pound
US $ to C$ exchange rate $1.00
euro to C$ exchange rate $1.30
Working capital Assume no changes for the year
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Cayeli
----------------------------------------------------------------------------
three months ended March 31
2012 2011 change
----------------------------------------------------------------------------
Tonnes of ore milled (000s) 299 293 +2%
Tonnes of ore milled per day 3,300 3,300 -
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Grades (percent)
copper 3.4 2.9 +17%
zinc 5.4 6.3 -14%
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Mill recoveries (percent)
copper 79 71 +11%
zinc 65 68 -4%
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Production (tonnes)
copper 8,100 6,000 +35%
zinc 10,500 12,500 -16%
----------------------------------------------------------------------------
Cost per tonne of ore milled (C$) $ 80 $ 80 -
----------------------------------------------------------------------------Higher grades and recoveries increased copper production
Copper grades this quarter were higher than 2011, while zinc grades were lower, because we produced in different areas of the mine.
This higher copper grade ore, and lower zinc grade ore, compared to last year led to higher copper recoveries and lower zinc recoveries respectively.
The result was higher copper production and lower zinc production compared to 2011.
Due to the timing of shipments, Cayelis copper sales volumes exceeded production volumes by approximately 3,000 tonnes this quarter and 1,500 tonnes in the first quarter of 2011.
Cost per tonne of ore milled this quarter was consistent with the same quarter last year and our target.
2012 outlook for production
In 2012, mill throughput should remain at approximately 1.2 million tonnes.
We expect lower copper and zinc grades for the remainder of 2012 as we produce from lower grade areas of the mine.
We continue to expect to produce between 27,000 tonnes and 30,000 tonnes of copper and between 36,000 and 39,800 tonnes of zinc.
Zinc production at Cayeli from 2008 to 2011 benefitted from grades well above the average reserve grade of 4.3 percent.
In 2012, lower zinc grades, as expected, account for the anticipated decline in zinc production.
Both copper and zinc recoveries should remain near 2011 levels in 2012, reflecting the ongoing metallurgical challenges presented by the higher percentages of bornite containing ores and the decreasing zinc grade.
Financial review
Higher copper sales volumes due to higher copper production volumes and timing of shipments
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three months ended revised
(millions of Canadian dollars unless March 31 objective
otherwise stated) 2012 2011 2012
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Sales analysis
Copper sales (tonnes) 11,100 7,500 28,500
Zinc sales (tonnes) 10,300 10,000 37,900
------------------------------------
Gross copper sales $ 97 $ 70 $ 243
Gross zinc sales 21 23 79
Other metal sales 9 6 18
------------------------------------
Gross sales 127 99 340
Smelter processing charges and freight (22) (18) (66)
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Net sales $ 105 $ 81 $ 274
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Cost analysis
Tonnes of ore milled (thousands) 299 293 1,200
Direct production costs ($ per tonne) $ 80 $ 80 $ 80
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Direct production costs $ 24 $ 23 $ 96
Change in inventory 5 1 -
Depreciation and other non-cash costs 8 6 32
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Operating costs $ 37 $ 30 $ 128
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Operating earnings $ 68 $ 51 $ 146
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Operating cash flow $ 31 $ 54 $ 137
----------------------------------------------------------------------------The objective for 2012 uses the assumptions listed on page 13.
The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.
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three months
ended
(millions) March 31
----------------------------------------------------------------------------
Lower copper prices, denominated in Canadian dollars $ (6)
Lower zinc prices (3)
Higher copper sales volumes 26
Higher other metal sales 3
Higher depreciation (2)
Other (1)
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