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Press release from Marketwire

Inmet Announces First Quarter Earnings From Continuing Operations of $1.39 Per Share

Thursday, April 26, 2012

Inmet Announces First Quarter Earnings From Continuing Operations of $1.39 Per Share17:05 EDT Thursday, April 26, 2012TORONTO, 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 highlightsStrong 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 Çayeli, and the timing of shipments at Çayeli. 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 targetLas 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 optionOn 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 datathree months ended March 31(thousands, except per share amounts)20122011changeFINANCIAL HIGHLIGHTSSalesGross sales$294,904$254,277+16%Net incomeNet 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 flowCash 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%OPERATING HIGHLIGHTSProductionCopper (tonnes)24,80017,700+40%Zinc (tonnes)15,10021,200-29%Pyrite (tonnes)211,300186,100+14%Copper cash cost (US $ per pound) (3)$1.00$0.95+5%as at March 31as at December 31FINANCIAL CONDITION20122011Current ratio8.4 to 19.3 to 1Gross debt to total equity-1%Net working capital balance (millions)$1,345$1,304Cash balance and long-term bonds (millions)$1,730$1,706Gross debt (millions)$17$17Shareholders' equity (millions)$3,506$3,414(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 releaseWhere to find itOur financial results4Key changes in 20114Understanding our performance5Earnings from operations7Corporate costs11Results of our operations13Çayeli14Las Cruces16Pyhäsalmi18Status of our development project20Cobre Panama20Managing our liquidity21Financial condition24Supplementary financial information25In 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 informationSecurities regulators encourage companies to disclose forward-looking information to help investors understand a company's 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 three months ended March 31(thousands, except per share amounts)20122011changeEARNINGS FROM OPERATIONS (1)Çayeli$68,169$51,473+32%Las Cruces53,31430,576+74%Pyhäsalmi26,98734,453-22%Other2,837-+100%151,307116,502+30%DEVELOPMENT AND EXPLORATIONCorporate development and exploration(9,090)(13,411)-32%CORPORATE COSTSGeneral 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%(46,080)(43,686)+5%Net income from continuing operations96,13759,405+62%Income from discontinued operation (net of taxes)-83,439-100%Net income attributable to Inmet shareholders$96,137$142,844-33%Income from continuing operations per common share$1.39$0.97+43%Diluted income from continuing operations per common share$1.38$0.96+44%Basic net income per common share$1.39$2.33-40%Diluted net income per common share$1.38$2.31-40%Weighted average shares outstanding69,34961,549+13%(1)Gross sales less smelter processing charges and freight, cost of sales including depreciation and provisions for mine reclamation at closed properties. Key changes in 2012(millions)three months ended March 31see pageEARNINGS FROM OPERATIONSSalesLower copper prices denominated in Canadian dollars$(22)7Lower zinc prices denominated in Canadian dollars(4)7Higher copper sales volumes727Lower zinc sales volume(8)7Higher other metal sales5CostsLower processing charges and freight29Higher operating costs(4)10Higher depreciation(4)10Other(2)Higher earnings from operations compared to 201135CORPORATE COSTSLower corporate development and exploration costs411Foreign exchange changes(2)11Higher net income from continuing operations compared to 201137Lower income from discontinued operation - Ok Tedi(83)12Lower net income attributable to Inmet shareholders compared to 2011$(46)Understanding our performanceMetal pricesThe 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 3120122011changeUS dollar metal pricesCopper (per pound)US $3.87US $4.29-10%Zinc (per pound)US $0.93US $1.06-12%Canadian dollar metal pricesCopper (per pound)C $3.88C $4.23-8%Zinc (per pound)C $0.93C $1.05-11%CopperCopper 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. ZincZinc prices on the LME averaged US $0.92 per pound this quarter, a 7 percent increase from last quarter's average price of US $0.86 per pound and a 16 percent decrease from the first quarter of 2011. Exchange ratesExchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter compared to 2011.three months ended March 3120122011changeExchange rates1 US$ 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 liraTL 1.79TL 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 Çayeli's 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. three months ended March 31(US$)20122011changeTreatment chargesCopper (per dry metric tonne of concentrate)US $58US $48+21%Zinc (per dry metric tonne of concentrate)US $207US $258-20%Price participationCopper (per pound)US $0.00US $0.02-100%Zinc (per pound)US ($0.01)US $0.00not meaningfulFreight chargesCopper (per dry metric tonne of concentrate)US $61US $50+22%Zinc (per dry metric tonne of concentrate)US $30US $25+20%Statutory tax ratesThe table below shows the statutory tax rates for each of our taxable operating mines.20122011changeStatutory tax ratesÇayeli24%24%-Las Cruces30%30%-Pyhäsalmi24.5%26%-1.5%Earnings from operations three months ended March 31(thousands)20122011changeGross 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 expenses3,928(568)-792%Depreciation(31,055)(27,040)+15%Earnings from operations$151,307$116,502+30%Gross sales were significantly higher three months ended March 31(thousands)20122011changeGross sales by operationÇayeli$127,423$99,053+29%Las Cruces114,00790,826+26%Pyhäsalmi53,47464,398-17%$294,904$254,277+16%Gross sales by metalCopper$243,985$191,704+27%Zinc29,58244,871-34%Other21,33717,702+21%$294,904$254,277+16%Key components of the change in gross sales: increasing sales volumes at Las Cruces, timing of shipments at Çayeli, lower realized copper prices (millions)three months ended March 31Lower copper prices, denominated in Canadian dollars$(22)Lower zinc prices, denominated in Canadian dollars(4)Higher copper sales volumes at Las Cruces37Higher copper sales volumes at Çayeli34Lower zinc sales volumes at Pyhäsalmi(12)Changes in other metal sales5Other3Higher gross sales, compared to 2011$41We 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:(millions of pounds)copperzincApril 20121514May 201210-Unsettled sales at March 31, 20122514Higher 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 Çayeli. Additionally, the timing of shipments resulted in copper sales volumes exceeding production volumes at Çayeli 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 Çayeli and Pyhäsalmi, consistent with our objectives for this year. Sales volumesthree months ended March 3120122011changeCopper contained in concentrate (tonnes)15,00010,900+38%Copper cathode (tonnes)13,6009,700+40%Total copper (tonnes)28,60020,600+39%Zinc (tonnes)14,50019,700-26%Pyrite (tonnes)112,300141,300-21%Productionthree months ended March 31objective20122011change2012Copper (tonnes)Çayeli8,1006,000+35%27,000 - 30,000Las Cruces13,3008,100+64%61,700 - 68,600Pyhäsalmi3,4003,600-6%11,300 - 12,60024,80017,700+40%100,000 - 111,200Zinc (tonnes)Çayeli10,50012,500-16%36,000 - 39,800Pyhäsalmi4,6008,700-47%22,800 - 25,20015,10021,200-29%58,800 - 65,000Pyrite (tonnes)Pyhäsalmi211,300186,100+14%800,0002012 outlook for salesWe 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 three months ended March 31(thousands)20122011changeSmelter processing charges and freight by operationÇayeli$22,174$17,894+24%Las Cruces305268+14%Pyhäsalmi7,82313,423-42%$30,302$31,585-4%Smelter processing charges and freight by metalCopper$16,981$11,201+52%Zinc11,32717,677-36%Other1,9942,707-26%$30,302$31,585-4%Smelter processing charges by type and freightCopper treatment and refining charges$5,883$3,381+74%Zinc treatment charges5,9479,762-39%Copper price participation-386-100%Zinc price participation(259)(200)+30%Content losses10,90211,621-6%Freight7,4116,307+18%Other418328+27%$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 Pyhäsalmi. 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 three months ended March 31(thousands)20122011changeDirect production costs by operationÇayeli$24,053$23,378+3%Las Cruces41,21833,488+23%Pyhäsalmi15,46914,562+6%Total direct production costs80,74071,428+13%Inventory changes5,4287,154-24%Charges for mine rehabilitation and other non-cash charges(3,928)568-792%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 Çayeli decreased at the end of this quarter, and at Çayeli 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 Çayeli and Pyhäsalmi will be similar to 2011.Certain variable costs may continue to affect our earnings, depending on metal prices:royalties at Çayeli 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 depreciationthree months ended March 31(thousands)20122011changeDepreciation by operationÇayeli$7,501$5,226+44%Las Cruces21,14019,556+8%Pyhäsalmi2,4142,258+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 Çayeli. 2012 outlook for depreciationWe expect depreciation to be higher in 2012 because of higher sales volumes at Las Cruces. Corporate costsCorporate costs include corporate development and exploration, general and administration costs, taxes, interest and other income. Corporate development and explorationCosts 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)20122011Interest income$4,392$2,772Foreign exchange losses(12,468)(10,826)Dividend and royalty income500600Other1,1071,681$(6,469)$(5,773)Interest income Interest income was higher this quarter compared to the same period last year because our cash balances were higher. Foreign exchange lossesWe have foreign exchange gains or losses when we revalue certain foreign denominated assets and liabilities.Our foreign exchange losses were from:three months ended March 31(thousands)20122011Translation of US dollar held-to-maturity investments$(5,094)$(1,452)Translation of US dollar cash(4,659)(8,237)Translation of Turkish lira taxes payable at Çayeli(1,472)545Translation of other monetary assets and liabilities(1,243)(1,682)$(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.Çayeli's 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 (Çayeli's functional currency) relative to the Turkish lira.2012 outlook for investment and other incomeInvestment 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 expensethree months ended March 31(thousands)20122011changeÇayeli$9,791$11,656Las Cruces11,5817,497Pyhäsalmi5,3537,803Corporate and other140204$26,865$27,160Consolidated effective tax rate22%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 Çayeli's taxes were lower as it recognized a foreign exchange loss from its US dollar denominated cash (Çayeli's income taxes are denominated in Turkish lira). Additionally, there was a decrease in the statutory tax rate at Pyhäsalmi from 26 percent to 24.5 percent. 2012 outlook for income tax expenseOther than the decrease in the statutory tax rate at Pyhäsalmi 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 operations2012 estimatesOur 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: Copper priceUS $3.80 per poundZinc priceUS $0.95 per poundUS $ to C$ exchange rate$1.00euro to C$ exchange rate$1.30Working capitalAssume no changes for the yearÇayelithree months ended March 3120122011changeTonnes of ore milled (000's)299293+2%Tonnes of ore milled per day3,3003,300-Grades (percent)copper3.42.9+17%zinc5.46.3-14%Mill recoveries (percent)copper7971+11%zinc6568-4%Production (tonnes)copper8,1006,000+35%zinc10,50012,500-16%Cost per tonne of ore milled (C$)$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, Çayeli's 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 productionIn 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 Çayeli 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 (millions of Canadian dollars unlessthree months ended March 31revised objectiveotherwise stated)201220112012Sales analysisCopper sales (tonnes)11,1007,50028,500Zinc sales (tonnes)10,30010,00037,900Gross copper sales$97$70$243Gross zinc sales212379Other metal sales9618Gross sales12799340Smelter processing charges and freight(22)(18)(66)Net sales$105$81$274Cost analysisTonnes of ore milled (thousands)2992931,200Direct production costs ($ per tonne)$80$80$80Direct production costs$24$23$96Change in inventory51-Depreciation and other non-cash costs8632Operating costs$37$30$128Operating earnings$68$51$146Operating cash flow$31$54$137The objective for 2012 uses the assumptions listed on page 13.The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.(millions)three months ended March 31Lower copper prices, denominated in Canadian dollars$(6)Lower zinc prices(3)Higher copper sales volumes26Higher other metal sales3Higher depreciation(2)Other(1)Higher operating earnings, compared to 201117Change in cash taxes2Changes in working capital (see note 12 on page 41)(43)Change in depreciation2Other(1)Lower operating cash flow, compared to 2011$(23)Capital spending three months ended March 31objective(thousands)20122011change2012Capital spending$2,300$2,400-4%$20,0002012 outlook for capital spending We expect to spend $20 million on capital in 2012, including $7 million to upgrade our ore pass system to address deterioration that has accumulated over time from normal abrasion, and to extend the shotcrete slickline and replace certain mobile equipment.Las Cruces three months ended March 3120122011changeTonnes of ore processed (000's)246173+42%Copper grades (percent)6.76.1+10%Plant recoveries (percent)8577+10%Cathode copper production (tonnes)13,3008,100+64%Cost per pound of cathode produced (C$)$1.40$1.88-26%Higher copper production Las Cruces production this quarter was significantly higher than the first quarter of 2011, increasing to 13,300 tonnes of copper cathode from 8,100 tonnes. The plant achieved record production of 10,300 tonnes of copper cathode in the first two months of 2012. March production was lower due to a nine-day planned maintenance shutdown, a one-day national strike, and the time required for overall process stabilization following each of these stoppages. This represents the majority of scheduled shutdown time this year. We achieved recoveries of 85 percent in the quarter, a significant increase over the first quarter of last year when recoveries were affected by an oxygen supply failure. A drier than normal rainy season has allowed the water level in the pit to remain low and all pond levels are within expected limits. Cost per pound of copper produced this quarter was significantly lower than the same quarter of 2011 due to higher production volumes; however it was higher than our overall objective for this year due to lower production volumes to accommodate the plant shutdown in March and incremental shutdown costs of approximately $3 million. 2012 outlook for productionFor 2012, we continue to expect to produce between 61,700 and 68,600 tonnes of copper cathode, or approximately 90 percent of design capacity. No major construction projects or major shutdowns are planned for the remainder of the year. In total, we expect a minimum of 90 percent operating time throughout 2012.Las Cruces' unit operating costs should continue to decrease as production volumes increase and we have not made any adjustment to previous cost guidance.Financial review Higher sales volumes due to higher production(millions of Canadian dollars unless otherwise stated)three months ended March 31revised objective201220112012Sales analysisCopper sales (tonnes)13,6009,70065,200Gross copper sales$114$91$549Freight--(3)Net sales$114$91$546Cost analysisPounds of copper produced (millions)2918144Direct production costs ($ per pound)$1.40$1.88$1.14Direct production costs$41$33$164Change in inventory-7-Depreciation and other non-cash costs202097Operating costs$61$60$261Operating earnings$53$31$285Operating cash flow$80$58$381The objective for 2012 uses the assumptions listed on page 13.The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.(millions)three months ended March 31Lower copper prices, denominated in Canadian dollars$(14)Higher copper sales volume43Higher production costs(8)Other1Higher operating earnings, compared to 201122Changes in working capital (see note 12 on page 41)1Other(1)Higher operating cash flow, compared to 2011$22Capital spending three months ended March 31objective(thousands)20122011change2012Capital spending$6,200$14,800-58%$48,0002012 outlook for capital spendingWe expect to spend $48 million on capital projects in 2012. The largest expenditures will come in the areas of mine development, tailings facility expansion and land purchase.Pyhäsalmithree months ended March 3120122011changeTonnes of ore milled (000's)342335+2%Tonnes of ore milled per day3,8003,700+3%Grades (percent)copper1.01.1-9%zinc1.52.9-48%sulphur4342+2%Mill recoveries (percent)copper9696-zinc9091-1%Production (tonnes)copper3,4003,600-6%zinc4,6008,700-47%pyrite211,300186,100+14%Cost per tonne of ore milled (C$)$45$43+5%Lower zinc grades this quarter in line with planPyhäsalmi maintained its strong performance in the first quarter of 2012, processing at an annualized rate in-line with its annual objective and achieving copper recoveries of 96 percent and zinc recoveries of 90 percent. Copper grades this quarter were slightly lower than the first quarter of 2011. Zinc grades this quarter were lower than the first quarter of 2011 and consistent with our plan, due to the availability of fewer zinc-rich stopes this year. Copper and zinc production this quarter were therefore lower than the first quarter of 2011.Operating costs were higher this quarter primarily from labour and materials costs.2012 outlook for productionPyhäsalmi expects to mine 1.4 million tonnes of approximately 1 percent copper and 2 percent zinc in 2012, and produce between 11,300 tonnes and 12,600 tonnes of copper and 22,800 tonnes and 25,200 tonnes of zinc. Copper and zinc production should be lower than it was in 2011 as fewer higher grade stopes are available in the short-term mining sequence. Both copper and zinc grades should recover after 2012.Pyhäsalmi expects to produce 800,000 tonnes of pyrite in 2012 and expects to sell 915,000 tonnes of pyrite, an increase of 115,000 tonnes from our original objective, due to stronger demand from Asian customers. Financial reviewLower earnings because of lower zinc sales volumesthree months ended March 31revised objective(millions of Canadian dollars unless otherwise stated)201220112012Sales analysisCopper sales (tonnes)3,9003,50011,900Zinc sales (tonnes)4,2009,70024,000Pyrite sales (tonnes)112,300141,300915,000Gross copper sales$33$31$99Gross zinc sales92250Other metal sales111181Gross sales5364230Smelter processing charges and freight(8)(13)(55)Net sales$45$51$175Cost analysisTonnes of ore milled (thousands)3423351,370Direct production costs ($ per tonne)$45$43$43Direct production costs$15$15$58Change in inventory1--Depreciation and other non-cash costs2211Operating costs$18$17$69Operating earnings$27$34$106Operating cash flow$27$40$89The objective for 2012 uses the assumptions listed on page 13.The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011. (millions)three months ended March 31Lower copper and zinc prices, denominated in Canadian dollars$(4)Lower zinc sales volumes(7)Higher other metal sales2Other2Lower operating earnings, compared to 2011(7)Change in cash taxes2Changes in working capital (see note 12 on page 41)(8)Lower operating cash flow, compared to 2011$(13)Capital spending three months ended March 31objective(thousands)20122011change2012Capital spending$2,500$300+733%$10,0002012 outlook for capital spending Capital spending of $10 million in 2012 will primarily be to replace underground mobile equipment, improve the tailings impoundment area, and upgrade the satellite ore grinding circuit and zinc cleaner cells. Status of our development projectCobre PanamaBasic engineering progressed this quarter and is currently under independent review. We continue to expect to conclude and report on basic engineering in the second quarter of 2012 and we continue to advance a range of financing options to provide us with the financial capacity to proceed with the project.We made progress with several early works projects this quarter in preparation to proceed with construction, including further work on a pioneer road and other road by-passes and upgrades and the initiation of several permits required for additional work. We also continued with basic engineering of the power plant. On April 25, 2012, KPMC completed its acquisition of a 20 percent interest in Minera Panama, owner and developer of Cobre Panama. KPMC acquired its interest for US $169 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to date.2012 outlook for developmentWe plan to:continue to build our privilege to operate through intensive dialogue with stakeholders at the community, regional and national levels, to increase their understanding of the project and its benefits to Panama, and our understanding of their potential concerns continue to improve site access and infrastructure, including the completion of early works projects that will facilitate contractors' mobilization for site capture complete additional work on resource definition, metallurgical recoveries, pit design and other engineering to allow us to include the Balboa and Brazo mineralization in our mine plan for Cobre Panama complete basic engineering, review readiness plans and prepare to initiate site capture upon receipt of the main permits continue to work with SK Engineering and Construction to complete basic engineering for the coal-fired power plant and begin detailed engineering and procurement update the capital and operating expenditure estimates for the development project at the conclusion of basic engineering develop and implement, with the assistance of our EP+CM contractors, project specific Health & Safety and Environmental and Social mitigation plans that are consistent with the ESIA and Inmet's Corporate Responsibility Standards continue to grow the strength of our management team and human resources dedicated to the project. Capital expenditure guidance for the remainder of 2012 will be provided in the second quarter after basic engineering is concluded and with consideration of a final decision to proceed with full-scale construction of the project. Managing our liquidityWe develop our financing strategy by looking at our long-term capital requirements and deciding on the optimal mix of cash, future operating cash flow, credit facilities and project financing. Our capital structure includes a liquidity cushion that gives us the flexibility to deal with operational disruptions or general market downturns.three months ended March 31(millions)20122011CASH FROM OPERATING ACTIVITIESÇayeli$31$54Las Cruces8058Pyhäsalmi2740Corporate development and exploration not incurred by operations(6)(12)General and administration(10)(8)Foreign exchange losses on US dollar denominated cash(5)(8)Other1(6)118118CASH FROM INVESTING AND FINANCINGPurchase of property, plant and equipment(85)(41)Purchase and maturity of long-term investments, net48(267)Foreign exchange on cash held in foreign currency13Other(6)(2)(42)(307)CASH FROM DISCONTINUED OPERATION (OK TEDI)-307Increase in cash76118Cash and short-term investmentsBeginning of period1,083326End of period$1,159$444Our available liquidity also includes $571 million of held to maturity investments ($623 million at December 31, 2011), providing a total of $1,730 million in capital available to finance our growth strategy as at March 31, 2012.OPERATING ACTIVITIESKey components of the change in operating cash flows (millions)three months ended March 31Higher earnings from operations (see page 4)$35Add back higher depreciation included in earnings from operations4Lower tax expense4Changes in working capital (see note 12 on page 41)(49)Lower realized foreign exchange loss on cash4Lower corporate development and exploration4Other(2)Change in operating cash flow, compared to 2011$-Operating cash flows this quarter were consistent with the first quarter of 2011. While operating earnings before depreciation were higher than 2011 by $39 million, net working capital this quarter end was significantly higher mainly reflecting higher accounts receivable at Çayeli due to higher sales volumes and the timing of collections from customers. 2012 outlook for cash from operating activitiesThe table below shows expected operating cash flow from our operations, based on our outlook for metal prices and production (see page 13), and the assumptions in Results of our operations (starting on page 13). 2012 estimated operating cash flow by operation (millions)Çayeli$137Las Cruces381Pyhäsalmi89$607INVESTING AND FINANCINGCapital spending three months ended March 31(millions)20122011Çayeli$2$2Las Cruces615Pyhäsalmi2-Cobre Panama7524$85$41Please see Results of our operations and Status of our development project for a discussion of actual results and our 2012 objectives. Capital spending this quarter was mainly for Cobre Panama.Cash from discontinued operation - 2011In January 2011, we sold our 18 percent equity interest in Ok Tedi for net proceeds of $307 million (after Papua New Guinea withholding taxes).Purchase and maturing of long-term investmentsThis quarter, $49 million of our bond portfolio matured and was converted into cash. In the first quarter of 2011, we used most of the US dollar proceeds from the sale of Ok Tedi to purchase US Treasury bonds with AA credit ratings. 2012 outlook for investing and financingCapital spendingAt our operating mines, we expect capital spending to be $78 million in 2012, most significantly $48 million at Las Cruces, including $22 million for mine development, as well as several smaller expenditures including a tailings facility expansion, land purchase and certain plant improvements. We will provide capital spending guidance for Cobre Panama for 2012 in the second quarter after basic engineering is finalized and released.On April 25, 2012, KPMC completed its acquisition of a 20 percent interest in Minera Panama, owner and developer of Cobre Panama. KPMC acquired its interest for US $169 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to date.Financial conditionOur strategy is to make sure we have sufficient liquidity (including cash and committed credit facilities) to finance our operating requirements as well as our growth projects. At March 31, 2012, we had $1,730 million in total funds, including $1,159 million of cash and short-term investments and $571 million invested in long-term bonds.CashAt March 31, 2012 our cash and short-term investments of $1,159 million included cash and money market instruments that mature in 90 days or less. Our policy is to invest excess cash in highly liquid investments of the highest credit quality, and to limit our exposure to individual counterparties to minimize the risk associated with these investments. We base our decisions about the length of maturities on our cash flow requirements, rates of return and other factors.At March 31, 2012, we held cash and short-term investments in the following:A to AAA rated treasury funds and money market funds managed by leading international fund managers, who are investing in money market and short-term debt securities and fixed income securities issued by leading international financial institutions and their sponsored securitization vehicles. Cash, term and overnight deposits with leading Canadian and international financial institutions. See note 3 on page 36 in the consolidated financial statements for more details about where our cash is invested.Long-term bondsWe hold a bond portfolio to provide better yields while minimizing our investment risk. As at March 31, 2012, the portfolio was $571 million and included: 58 percent US Treasury bonds 4 percent Government of Canada bonds 33 percent Canadian Provincial Government bonds 5 percent corporate bonds. The bonds mature between April 2012 and August 2016. Although our intention is to hold these investments to maturity, there is a liquid market for them and they are available to us at any time.Restricted cashOur restricted cash balance of $78 million as at March 31, 2012 included:$19 million in cash collateralized letters of credit for Inmet $57 million at Las Cruces related to a reclamation bond, issuing letters of credit to suppliers and the local water authority and for its labour bond to the government $2 million for future reclamation at Pyhäsalmi. COMMON SHARESCommon shares outstanding as of March 31, 201269,365,748Deferred share units outstanding as of March 31, 2012 (redeemable on a one-for-one basis for common shares)91,772Dividend declarationThe board of directors has declared an eligible dividend of $0.10 per common share payable on June 15, 2012 to common shareholders of record as at May 31, 2012.Supplementary financial informationPage 26 includes supplementary financial information about cash costs. These measures do not fall into the category of International Financial Reporting Standards. We use unit cash cost information as a key performance indicator, both on a segmented and consolidated basis. We have included cash costs as supplementary information because we believe our key stakeholders use these measures as a financial indicator of our profitability and cash flows before the effects of capital investment and financing costs, such as interest. Since cash costs are not recognized financial measures under International Financial Reporting Standards, they should not be considered in isolation of earnings or cash flows. There is also no standard way to calculate cash costs, so they are not a reliable way to compare us to other companies.About InmetInmet is a Canadian-based global mining company that produces copper and zinc. We have three wholly-owned mining operations: Çayeli (Turkey), Las Cruces (Spain) and Pyhäsalmi (Finland). Following KPMC's acquisition of a 20 percent interest in Minera Panama, we have an 80 percent interest in Cobre Panama, a development property in Panama.This press release is also available at www.inmetmining.com.First quarter conference callWill be held onFriday, April 27, 2012 8:30 a.m. Eastern Time webcast available at http://events.digitalmedia.telus.com/inmet/042712q/index.php or www.inmetmining.comYou can also dial in by callingLocal or international: +1.416.695.6616 Toll-free within North America: +1.800.952.6845 Starting at approximately 10:30 a.m. (ET) Friday, April 27, 2012, a conference call replay will be availableLocal or international: +1.905.694.9451 passcode 7808342 Toll-free within North America: +1.800.408.3053 passcode 7808342 INMET MINING CORPORATIONSupplementary financial informationCash costs 2012 For the three months ended March 31per pound of copperÇAYELILAS CRUCESPYHÄSALMITOTAL(US dollars)Direct production costs$1.23$1.34$2.11$1.41Royalties and variable compensation0.120.07-0.08Smelter processing charges and freight1.030.010.790.45Metal credits(1.59)-(3.09)(0.94)Cash cost$0.79$1.42$(0.19)$1.002011 For the three months ended March 31per pound of copperÇAYELILAS CRUCESPYHÄSALMITOTAL(US dollars)Direct production costs$1.62$1.83$1.87$1.77Royalties and variable compensation0.180.09-0.10Smelter processing charges and freight1.830.011.300.89Metal credits(3.02)-(3.86)(1.81)Cash cost$0.61$1.93$(0.69)$0.95Reconciliation of cash costs to statements of earnings2012 For the three months ended March 31per pound of copper(millions of Canadian dollars, except where otherwise noted)ÇAYELILAS CRUCESPYHÄSALMITOTALGAAP referencepage 15page 17page 19Direct production costs$24$41$15$80Smelter processing charges and freight22-830By product sales(30)-(20)(50)Adjust smelter processing and freight, and sales to production basis(2)-(4)(6)Operating costs net of metal credits$14$41$(1)$54US $ to C$ exchange rate$1.00$1.00$1.00$1.00Inmet's share of production (000's)17,80029,4007,50054,700Cash cost (US dollars)$0.79$1.42$(0.19)$1.002011 For the three months ended March 31per pound of copper(millions of Canadian dollars, except where otherwise noted)ÇAYELILAS CRUCESPYHÄSALMITOTALGAAP referencepage 15page 17page 19Direct production costs$23$33$15$71Smelter processing charges and freight18-1331By product sales(30)-(33)(63)Adjust smelter processing and freight, and sales to production basis(3)--(3)Operating costs net of metal credits$8$33$(5)$36US $ to C$ exchange rate$0.99$0.99$0.99$0.99Inmet's share of production (000's)13,20017,8008,00039,000Cash cost (US dollars)$0.61$1.93$(0.69)$0.95INMET MINING CORPORATIONQuarterly review(unaudited)Latest Four Quarters(thousands of Canadian dollars, except per share amounts)2012 First quarter2011 Fourth quarter2011 Third quarter2011 Second quarterSTATEMENTS OF EARNINGSGross sales$294,904$241,059$261,757$221,952Smelter processing charges and freight(30,302)(28,228)(37,043)(33,870)Cost of sales (excluding depreciation)(82,240)(93,138)(81,144)(73,644)Depreciation(31,055)(27,716)(27,321)(26,649)151,30791,977116,24987,789Corporate development and exploration(9,090)(6,541)(4,688)(4,562)General and administration(10,065)(7,734)(9,987)(8,258)Investment and other income(6,469)(4,011)35,7784,731Finance costs(2,681)(2,390)(2,377)(2,386)Income tax expense(26,865)(23,229)(33,770)(21,264)Net income attributable to Inmet equity holders$96,137$48,072$101,205$56,050Net Income per shareBasic$1.39$0.69$1.46$0.86Diluted$1.38$0.69$1.46$0.86Previous Four Quarters(thousands of Canadian dollars, except per share amounts)2011 First quarter2010(1) Fourth quarter2010(1) Third quarter2010(1) Second quarterSTATEMENTS OF EARNINGSGross sales$254,277$230,269$225,960$161,165Smelter processing charges and freight(31,585)(35,733)(34,358)(35,272)Cost of sales (excluding depreciation)(79,150)(82,967)(70,503)(48,123)Depreciation(27,040)(18,882)(19,062)(10,328)116,50292,687102,03767,442Corporate development and exploration(13,411)(5,434)(2,758)(2,524)General and administration(8,422)(4,758)(3,985)(6,200)Investment and other income(5,773)50,6223,1973,321Finance costs(2,331)(4,294)(5,239)(1,770)Income tax expense(27,160)(31,960)(25,266)(8,775)Income from continuing operations59,40596,86367,98651,494Income from discontinued operation (net of taxes)83,43947,99333,56912,475$142,844$144,856$101,555$63,969Net income attributable to:Inmet equity holders$142,844$146,932$91,678$68,495Non-controlling interest-(2,076)9,877(4,526)$142,844$144,856$101,555$63,969Income from continuing operations per shareBasic$0.97$1.73$1.04$1.00Diluted$0.96$1.73$1.04$1.00Income from discontinuing operations per shareBasic$1.36$0.84$0.60$0.22Diluted$1.35$0.84$0.60$0.22Net Income per shareBasic$2.33$2.57$1.64$1.22Diluted$2.31$2.57$1.64$1.22(1)Information from 2010 restated in accordance with IFRS, including presentation of our share of Ok Tedi as discontinued operations. Consolidated financial statementsINMET MINING CORPORATIONConsolidated statements of financial position(thousands of Canadian dollars)Note referenceMarch 31, 2012December 31, 2011(unaudited)AssetsCurrent assets:Cash and short term investments3$1,159,388$1,082,893Restricted cash4955810Accounts receivable130,245105,213Inventories84,33690,533Current portion of held to maturity investments150,750181,6991,525,6741,461,148Restricted cash477,24971,822Property, plant and equipment1,913,6421,830,992Investments in equity securities3,2723,161Held to maturity investments419,815441,775Deferred income tax assets58327Other assets1,4681,425Total assets$3,941,178$3,810,650LiabilitiesCurrent liabilities:Accounts payable and accrued liabilities$167,203$143,149Provisions13,35713,517180,560156,666Long-term debt17,44617,126Provisions178,176175,609Other liabilities17,59517,719Deferred income tax liabilities41,82129,282Total liabilities435,598396,402Commitments and contingencies13EquityShare capital1,592,4121,591,948Contributed surplus66,80166,752Share based compensation510,0318,527Retained earnings2,007,9421,911,805Accumulated other comprehensive loss6(171,606)(164,784)Total equity3,505,5803,414,248Total liabilities and equity$3,941,178$3,810,650(See accompanying notes)INMET MINING CORPORATIONSegmented statements of financial position2012 As at March 31 (unaudited)CORPORATE & OTHERÇAYELILAS CRUCESPYHÄSALMICOBRE PANAMATOTAL(thousands of Canadian dollars)(Turkey)(Spain)(Finland)(Panama)AssetsCash and short-term investments$761,538$163,291$102,594$68,736$63,229$1,159,388Other current assets156,98275,35482,11249,9141,924366,286Restricted cash19,549-56,0701,630-77,249Property, plant and equipment1,646135,813894,86868,896812,4191,913,642Investments in equity securities3,272----3,272Held to maturity investments338,66781,148---419,815Other non-current assets1,354172---1,526$1,283,008$455,778$1,135,644$189,176$877,572$3,941,178LiabilitiesCurrent liabilities$17,000$39,198$58,074$16,793$49,495$180,560Long-term debt17,446----17,446Provisions67,98718,50560,35731,327-178,176Other liabilities676-16,919--17,595Deferred income tax liabilities-58529,60011,636-41,821$103,109$58,288$164,950$59,756$49,495$435,5982011 As at December 31CORPORATE & OTHERÇAYELILAS CRUCESPYHÄSALMICOBRE PANAMATOTAL(thousands of Canadian dollars)(Turkey)(Spain)(Finland)(Panama)AssetsCash and short-term investments$734,794$137,590$136,128$47,623$26,758$1,082,893Other current assets189,74946,19786,68353,5972,029378,255Restricted cash16,842-53,3641,616-71,822Property, plant and equipment1,236142,260897,86068,274721,3621,830,992Investments in equity securities3,161----3,161Held to maturity investments359,45282,323---441,775Other non-current assets1,303449---1,752$1,306,537$408,819$1,174,035$171,110$750,149$3,810,650LiabilitiesCurrent liabilities$22,006$42,822$54,898$16,957$19,983$156,666Long-term debt17,126----17,126Provisions71,08318,02355,62630,877-175,609Other liabilities676-17,043--17,719Deferred income tax liabilities--17,65611,626-29,282$110,891$60,845$145,223$59,460$19,983$396,402INMET MINING CORPORATIONConsolidated statements of changes in equity(unaudited)Attributable to Inmet equity holders(thousands of Canadian dollars)Share CapitalRetained earningsContributed surplusShare based compensationAccumulated other comprehensive income (loss)TotalBalance as at December 31, 2010$1,089,576$1,577,507$66,131$6,542$(185,217)$2,554,539Comprehensive income-142,844--33,868176,712Equity settled share-based compensation plans--1511,041-1,192Balance as at March 31, 2011$1,089,576$1,720,351$66,282$7,583$(151,349)$2,732,443Comprehensive income-205,327--(13,435)191,892Equity settled share-based compensation plans204-470944-1,618Dividends-(13,873)---(13,873)Issuance of share capital502,168----502,168Balance as at December 31, 2011$1,591,948$1,911,805$66,752$8,527$(164,784)$3,414,248Comprehensive income (loss)-96,137--(6,822)89,315Equity settled share-based compensation plans464-491,504-2,017Balance as at March 31, 2012$1,592,412$2,007,942$66,801$10,031$(171,606)$3,505,580INMET MINING CORPORATIONConsolidated statements of earnings (unaudited)Three Months Ended March 31(thousands of Canadian dollars except per share amounts)Note reference20122011Gross sales$294,904$254,277Smelter processing charges and freight(30,302)(31,585)Cost of sales (excluding depreciation)(82,240)(79,150) Depreciation(31,055)(27,040)Earnings from operations151,307116,502Corporate development and exploration(9,090)(13,411)General and administration(10,065)(8,422)Investment and other income7(6,469)(5,773)Finance costs8(2,681)(2,331)Income before taxation123,00286,565Income tax expense9(26,865)(27,160)Income from continuing operations96,137$59,405Income from discontinued operation (net of taxes)10-83,439Net income96,137$142,844Earnings per common share11Income from continuing operationsBasic$1.39$0.97Diluted$1.38$0.96Income from discontinued operationBasic$-$1.36Diluted$-$1.35Net incomeBasic$1.39$2.33Diluted$1.38$2.31(See accompanying notes)INMET MINING CORPORATIONSegmented statements of earnings(unaudited)2012 For the three months ended March 31CORPORATE & OTHERÇAYELILAS CRUCESPYHÄSALMICOBRE PANAMADISCONTINUED OPERATIONS - OK TEDITOTAL(thousands of Canadian dollars)(Turkey)(Spain)(Finland)(Panama)(Papua New Guinea)Gross sales$-$127,423$114,007$53,474$-$-$294,904Smelter processing charges and freight-(22,174)(305)(7,823)--(30,302)Cost of sales (excluding depreciation)2,837(29,579)(39,248)(16,250)--(82,240)Depreciation-(7,501)(21,140)(2,414)--(31,055)Earnings from operations2,83768,16953,31426,987--151,307Corporate development and exploration(5,702)(394)(948)(800)(1,246)-(9,090)General and administration(10,065)-----(10,065)Investment and other income(4,275)(1,914)(112)(168)--(6,469)Finance costs(841)(348)(1,304)(188)--(2,681)Income tax expense(140)(9,791)(11,581)(5,353)--(26,865)Net income$(18,186)$55,722$39,369$20,478$(1,246)$-$96,1372011 For the three months ended March 31CORPORATE & OTHERÇAYELILAS CRUCESPYHÄSALMICOBRE PANAMADISCONTINUED OPERATIONS - OK TEDITOTAL(thousands of Canadian dollars)(Turkey)(Spain)(Finland)(Panama)(Papua New Guinea)Gross sales$-$99,053$90,826$64,398$-$-$254,277Smelter processing charges and freight-(17,894)(268)(13,423)--(31,585)Cost of sales (excluding depreciation)-(24,460)(40,426)(14,264)--(79,150)Depreciation-(5,226)(19,556)(2,258)--(27,040)Earnings from operations-51,47330,57634,453--116,502Corporate development and exploration(9,969)(478)(5)(730)(2,229)-(13,411)General and administration(8,422)-----(8,422)Investment and other income(6,995)850248124--(5,773)Finance costs(941)(147)(1,024)(219)--(2,331)Income tax expense(204)(11,656)(7,497)(7,803)--(27,160)Net income from continuing operations$(26,531)$40,042$22,298$25,825$(2,229)$-$59,405Income from discontinued operation (net of taxes)-----83,43983,439Net income$(26,531)$40,042$22,298$25,825$(2,229)$83,439$142,844INMET MINING CORPORATIONConsolidated statements of comprehensive income (unaudited)Three Months Ended March 31(thousands of Canadian dollars)Note reference20122011Net income$96,137$142,844Other comprehensive income for the period:Continuing operationsChanges in fair value of investments103(540)Currency translation adjustments(6,927)17,956Income tax recovery related to investments - other comprehensive income277(6,822)17,493Other comprehensive income from discontinued operation (net of taxes)-16,375Comprehensive income$89,315$176,712(See accompanying notes)INMET MINING CORPORATIONConsolidated statements of cash flows(unaudited)Three Months Ended March 31(thousands of Canadian dollars)Note reference20122011Cash provided by (used in) operating activities(1)Net income from continuing operations$96,137$59,405Add (deduct) items not affecting cash:Depreciation31,05527,040Deferred income taxes12,3468,389Accretion expense on provisions and capital leases2,2341,891Change in asset retirement obligations at closed sites(2,837)-Foreign exchange loss7,6434,225Other1,977(418)Settlement of asset retirement obligations(911)(1,666)Net change in non-cash working capital12(29,368)19,310118,276118,176Cash provided by (used in) investing activitiesPurchase of property, plant and equipment(85,321)(40,730)Acquisition of held to maturity investments(1,161)(275,456)Maturing of held to maturity investments48,9328,000Funding received under Cobre Panama option agreement-3,944Purchase of equity securities-(3,493)Sale of short-term investments266,9487,278Other-126229,398(300,331)Cash provided by (used in) financing activitiesFinancial assurance payments(5,070)(1,952)Other(492)(884)(5,562)(2,836)Foreign exchange on cash held in foreign currencies1,3313,140Cash provided by discontinued operation10-306,982Increase in cash:343,443125,131Cash:Beginning of period815,945319,129End of period$1,159,388$444,260Short term investments--Cash and short-term investments$1,159,388$444,260(See accompanying notes)(1)Supplementary cash flow information:Cash interest paid$549$562Cash taxes paid$13,765$17,509INMET MINING CORPORATIONSegmented statements of cash flows(unaudited)2012 For the three months ended March 31CORPORATE & OTHERÇAYELILAS CRUCESPYHÄSALMICOBRE PANAMADISCONTINUED OPERATIONS - OK TEDITOTAL(thousands of Canadian dollars)(Turkey)(Spain)(Finland)(Panama)(Papua New Guinea)Cash provided by (used in) operating activitiesBefore net change in non-cash working capital$(13,829)$67,197$73,648$23,165$(2,537)$-$147,644Net change in non-cash working capital(3,158)(36,373)6,3863,777--(29,368)(16,987)30,82480,03426,942(2,537)-118,276Cash provided by (used in) investing activitiesPurchase of property, plant and equipment(587)(2,324)(6,182)(2,462)(73,766)-(85,321)Acquisition of held to maturity investments(702)(459)----(1,161)Maturity of held-to-maturity investments48,932-----48,932Sale of short-term investments266,948-----266,948314,591(2,783)(6,182)(2,462)(73,766)-229,398Cash provided by (used in) financing activities(2,751)-(2,811)---(5,562)Foreign exchange on cash held in foreign currencies2,240(2,457)692725131-1,331Intergroup funding (distributions)(3,401)117(105,267)(4,092)112,643--Increase (decrease) in cash293,69225,701(33,534)21,11336,471-343,443Cash:Beginning of year467,846137,590136,12847,62326,758-815,945End of period761,538163,291102,59468,73663,229-1,159,388Short term investments-------Cash and short-term investments$761,538$163,291$102,594$68,736$63,229$-$1,159,3882011 For the three months ended March 31CORPORATE & OTHERÇAYELILAS CRUCESPYHÄSALMICOBRE PANAMADISCONTINUED OPERATIONS - OK TEDITOTAL(thousands of Canadian dollars)(Turkey)(Spain)(Finland)(Panama)(Papua New Guinea)Cash provided by (used in) operating activitiesBefore net change in non-cash working capital$(26,380)$46,882$52,264$28,329$(2,229)$-$98,866Net change in non-cash working capital(4,841)7,1155,42611,610--19,310(31,221)53,99757,69039,939(2,229)-118,176Cash provided by (used in) investing activitiesPurchase of property, plant and equipment(182)(2,416)(14,834)(326)(22,972)-(40,730)Acquisition of held to maturity investments(274,979)(477)----(275,456)Maturing of held to maturity investments8,000-----8,000Funding received under Cobre Panama option agreement----3,944-3,944Purchase of equity investments(3,493)-----(3,493)Sale of short-term investments--7,278---7,278Other126-----126(270,528)(2,893)(7,556)(326)(19,028)-(300,331)Cash provided by (used in) financing activities139-(2,975)---(2,836)Foreign exchange on cash held in foreign currencies-(3,520)2,4334,320(93)-3,140Cash provided by discontinued operation-----306,982306,982Intergroup funding (distributions)302,598(79)(14,590)1,91017,143(306,982)-Increase (decrease) in cash98847,50535,00245,843(4,207)-125,131Cash:Beginning of year53,184107,75052,57097,0568,569-319,129End of period54,172155,25587,572142,8994,362-444,260Short term investments-------Cash and short-term investments$54,172$155,255$87,572$142,899$4,362$-$444,260Notes to the consolidated financial statements1. Corporate information Inmet Mining Corporation is a publicly traded corporation listed on the Toronto Stock Exchange. Our registered and head office is 330 Bay Street, Suite 1000, Toronto, Canada. Our principal activities are the exploration, development and mining of base metals.2. Basis of presentation and statement of complianceWe prepared these interim consolidated financial statements using the same accounting policies and methods as those described in our consolidated financial statements for the year ended December 31, 2011. These interim financial statements are in compliance with International Accounting Standard 34, Interim Financial Reporting (IAS 34). Accordingly, certain information and disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards have been omitted or condensed. The preparation of financial statements in accordance with IAS 34 requires us to use certain critical accounting estimates and requires us to exercise judgement in applying our accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, have been set out in note 4 to our consolidated financial statements for the year ended December 31, 2011. These interim financial statements should be read in conjunction with our consolidated financial statements for the year ended December 31, 2011, which are included in our 2011 annual report.3. Cash and short-term investments March 31, 2012December 31, 2011Cash and cash equivalents:Liquidity funds$493,311$387,857Term deposits22,6386,763Overnight deposits20,15372,701Bankers acceptances25,208920Money market funds80,639130,485Corporate56,47511,974Bank deposits123,14432,764Provincial short-term notes337,820172,4811,159,388815,945Short-term investments:Corporate-50,184Provincial short term notes-193,339Bankers acceptances-23,425-266,948Total cash and short-term instruments$1,159,388$1,082,8934. Restricted cashMarch 31, 2012December 31, 2011Collateralized cash for letter of credit facility - Inmet Mining$19,549$16,842Collateralized cash for letters of credit - Las Cruces57,02554,174Collateralized cash for Pyhäsalmi reclamation1,6301,61678,20472,632Less current portion:Collateralized cash for letters of credit - Las Cruces(955)(810)$77,249$71,8225. Stock-based compensationDuring the first quarter of 2012, the following issuances were made under our equity-based compensation plans: Stock option planOn February 22, 2012, a grant of 83,084 options was made to senior management, with an exercise price of $64.17, graded vesting and an expiry date of February 22, 2019. We calculated the compensation expense for these options using the Black Scholes valuation model and assuming the following weighted average parameters, resulting in a weighted average fair value of $29.23 per option: 5 year expected life, 50 percent expected volatility, expected dividend rate of 0.3 percent annually and a risk free interest rate of 1.5 percent.Performance share unit (PSU) planOn February 22, 2012, the Board granted 36,580 PSUs to senior executives based on a 5 day VWAP prior to the grant date of $64.17 and a 3 year vesting period from January 1, 2012 to December 31, 2014. We used a Monte Carlo simulation model to calculate the compensation expense for the PSUs assuming no forfeitures, 3 year historical average volatilities and a 3-year risk free interest rate of 1.33%, resulting in a March 31, 2012 fair value per PSU of $66.71.We recognized the following share-based compensation expense in general and administration relating to all outstanding equity-based awards:three months ended March 3120122011Stock option plan$1,744$-Performance share unit plan253-Long-term incentive plan-759Deferred share unit plan224282Share award plan49151$2,270$1,1926. Accumulated other comprehensive lossAccumulated other comprehensive loss includes:March 31, 2012December 31, 2011Unrealized gains (losses) on investments (net of tax of $96) (December 31, 2011 - $94)$(447)$(552)Currency translation adjustment(171,159)(164,232)Accumulated other comprehensive loss$(171,606)$(164,784)Currency translation adjustmentsThe table below is breakdown of our currency translation adjustments.March 31, 2012December 31, 2011Pyhäsalmi (euro functional currency)$(26,354)$(28,277)Las Cruces (euro functional currency)(97,271)(106,456)Çayeli (US dollar functional currency)(21,807)(15,563)Cobre Panama (US dollar functional currency)(25,727)(13,936)$(171,159)$(164,232)The Canadian dollar to US dollar exchange rate was $1.00 at March 31, 2012 and $1.02 at December 31, 2011. The Canadian dollar to euro exchange rate was $1.33 at March 31, 2012 and $1.32 at December 31, 2011. 7. Investment and other incomeThree months ended March 3120122011Interest income$4,392$2,772Dividend and royalty income500600Foreign exchange loss(12,468)(10,826)Other1,1071,681$(6,469)$(5,773)Foreign exchange loss is a result of:Three months ended March 3120122011Translation of US dollar held-to-maturity investments$(5,094)$(1,452)Translation of US dollar cash(4,659)(8,237)Translation of Turkish lira taxes payable at Çayeli(1,472)545Translation of other monetary assets and liabilities(1,243)(1,682)$(12,468)$(10,826)8. Finance costsThree months ended March 3120122011Interest on note payable$274$279Accretion on note payable173161Accretion on provisions and capital lease obligations2,2341,891$2,681$2,3319. Income taxFor the three months ended March 31, 2012:Corporate and otherÇayeli (Turkey)Las Cruces (Spain)Pyhäsalmi (Finland)TotalCurrent income taxes$145$8,933$-$5,441$14,519Deferred income taxes(5)85811,581(88)12,346Income tax expense$140$9,791$11,581$5,353$26,865For the three months ended March 31, 2010:Corporate and otherÇayeli (Turkey)Las Cruces (Spain)Pyhäsalmi (Finland)TotalCurrent income taxes$249$10,590$-$7,932$18,771Deferred income taxes(45)1,0667,497(129)8,389Income tax expense$204$11,656$7,497$7,803$27,16010. Sale of our interest in Ok TediOn January 29, 2011, Ok Tedi Mining Limited repurchased our 18 percent equity interest in Ok Tedi for US $335 million. Our interest in Ok Tedi met the criteria of an asset held for sale, so we presented our share of the results of operations of Ok Tedi as discontinued operations in the consolidated statements of earnings and the consolidated statements of cash flow retroactively. In 2011, after-tax income of $83 million from this discontinued operation includes net earnings of $17 million in January, before the sale, and a gain on sale of $66 million net of withholding taxes. Papua New Guinea withholding taxes of $28 million were paid on the sale and no Canadian taxes were payable because we utilized our Canadian tax attributes. The following tables provide a breakdown of our share of the earnings at Ok Tedi for the three months ended March 31, 2011.Statements of earningsthree months ended March 31, 2011Gross sales$44,865Smelter processing charges and freight(4,051)Cost of sales (excluding depreciation)(12,116)Depreciation(2,272)26,426Investment and other income(80)Finance costs(33)Income tax expense(9,670)16,643Gain on sale of our interest79,029Income tax expense on sale of our interest(12,233)Net income from discontinued operation$83,43911. Net income per sharethree months ended March 31(thousands)20122011Income from continuing operations available to common shareholders$96,137$59,405Income from discontinued operations available to common shareholders-83,439Net income available to common shareholders$96,137$142,844three months ended March 31(thousands)20122011Weighted average common shares outstanding69,34961,549Plus incremental shares from assumed conversions:Deferred share units92112Long term incentive plan units-52Diluted weighted average common shares outstanding69,44161,713The table below shows our earnings per common share for the three months ended March 31. three months ended March 31(Canadian dollars per share)20122011BasicDilutedBasicDilutedNet income from continuing operations per share$1.39$1.38$0.97$0.96Income from discontinued operations per share--1.361.35Net income per share$1.39$1.38$2.33$2.3112. Statements of cash flowsThe tables below show the components of our net change in non-cash working capital by segment.For the three months ended March 31, 2012:Corporate and otherÇayeli (Turkey)Las Cruces (Spain)Pyhäsalmi (Finland)TotalAccounts receivable$1,139$(35,676)$5,949$3,617$(24,971)Inventories-4,464(2,007)1,2643,721Accounts payable and accrued liabilities(4,689)(6,924)2,444(365)(9,534)Taxes payable6861,765-(739)1,712Other(294)(2)--(296)$(3,158)$(36,373)$6,386$3,777$(29,368)For the three months ended March 31, 2011:Corporate and otherÇayeli (Turkey)Las Cruces (Spain)Pyhäsalmi (Finland)TotalAccounts receivable$(760)$7,585$(5,246)$9,077$10,656Inventories-7115,971(66)6,616Accounts payable and accrued liabilities(2,169)8124,701(2,400)944Taxes payable(1,402)(1,990)-4,9991,607Other(510)(3)--(513)$(4,841)$7,115$5,426$11,610$19,31013. Capital commitments As at March 31, 2012, Cobre Panama had committed $149.1 million for the design and supply of two SAG mills, four ball mills and the related gearless drives, engineering, and early works.14. Event after balance sheet date On April 25, 2012, Korea Panama Mining Corporation completed its acquisition of a 20 percent interest in Minera Panama, SA, owner and developer of Cobre Panama, for US $169 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to date.FOR FURTHER INFORMATION PLEASE CONTACT: Jochen TilkInmet Mining CorporationPresident and Chief Executive Officer+1.416.860.3972ORFlora WoodInmet Mining CorporationDirector, Investor Relations+1.416.361.4808www.inmetmining.com