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Press release from Marketwire

Inmet Announces Fourth Quarter Earnings from Operations of $112 Million Compared to $89 Million in the Fourth Quarter of 2011

Thursday, February 21, 2013

Inmet Announces Fourth Quarter Earnings from Operations of $112 Million Compared to $89 Million in the Fourth Quarter of 201117:18 EST Thursday, February 21, 2013TORONTO, CANADA--(Marketwire - Feb. 21, 2013) - Inmet Mining Corporation (TSX:IMN) - All amounts in US dollars unless indicated otherwiseFourth quarter highlightsStrong earnings from operations Earnings from operations were $112 million compared to $89 million in the fourth quarter of 2011. This increase is due to the strong performance of our operations. Earnings were negatively affected by the timing of shipments at Çayeli and finalization adjustments, together totalling $11 million for the quarter or $0.15 per share. Copper and zinc production exceeded expectations Our operations produced 111,700 tonnes of copper and 66,300 tonnes of zinc in 2012, exceeding our target ranges for the year. Las Cruces has consistently achieved monthly design capacity of 6,000 tonnes of copper cathode since first crossing this threshold in April 2012. Increase in closure liabilities for closed propertiesWe recognized a charge of $10 million in earnings from operations, or $0.14 per share, for an increase in estimated costs for post-closure obligations at our closed properties this quarter. This compares to a charge of $16 million recognized in the fourth quarter of 2011 primarily as a result of a decrease in the discount rates we applied in determining the liabilities at period end. Net income reduced by foreign exchange lossesNet income of $38 million this quarter reflects after-tax foreign exchange losses of $19 million, or $0.27 per share, mainly on US dollar cash held in our euro-based entities. Our excess cash balances are held in US dollar funds as we plan to use these funds for the construction of Cobre Panama. Construction of Cobre Panama progressing By the end of the year, Minera Panama S.A. had entered into commitments for approximately $4.1 billion, representing 67 percent of estimated capital expenditures for the Cobre Panama project. Issuance of $500 million in senior unsecured notesOn December 18, 2012, we issued $500 million in senior unsecured notes, the proceeds of which will be used to fund development of Cobre Panama. The notes bear a coupon rate of interest of 7.5 percent and mature on June 1, 2021. First Quantum offerOn January 9, 2013, First Quantum Minerals Ltd. (First Quantum) commenced an unsolicited offer to acquire all of Inmet Mining's issued and outstanding common shares for consideration of cash or First Quantum shares or a combination of cash and First Quantum shares. Inmet's Board of Directors, on the recommendation of its Special Committee of the independent directors and with input from its, and the Special Committee's, financial and legal advisors, has recommended that Inmet shareholders reject this offer for reasons as set out in the Directors' Circular mailed to shareholders. Key financial datathree months ended December 31year ended December 31(thousands, except per share amounts)20122011change20122011changeFINANCIAL HIGHLIGHTSSalesGross sales$259,868$233,394+11%$1,123,977$947,911+19%Net incomeNet income from continuing operations$38,221$46,544-18%$330,076$256,314+29%Net income from continuing operations per share$0.56$0.67-16%$4.78$3.86+24%Net income from discontinued operations----80,786-100%Net income from discontinued operations per share----$1.22-100%Net income attributable to Inmet shareholders$38,77546,544-17%$331,211$337,100-2%Net income per share$0.56$0.67-16%$4.78$5.08-6%Cash flowCash flow provided by operating activities$116,851$70,768+65%$543,392$391,976+39%Cash flow provided by operating activities per share(1)$1.68$1.02+65%$7.83$5.90+33%Capital spending(2)$342,467$57,100+500%$785,761$201,909+289%OPERATING HIGHLIGHTSProductionCopper (tonnes)27,60026,200+5%111,70084,800+32%Zinc (tonnes)20,70017,900+16%66,30080,400-18%Pyrite (tonnes)222,500210,500+6%891,700804,900+11%Copper cash cost (US $ per pound)(3)$0.85$0.82+4%$0.88$0.86+2%as at December 31as at December 31FINANCIAL CONDITION20122011(US millions, except ratio)Current ratio8.4 to 19.3 to 1Net working capital balance$2,358$1,263Cash balance (including bonds and other securities; millions)$3,618$1,655Gross debt(4)$1,960$17Net debt (net cash)(5)($1,658)($1,639)Shareholders' equity attributable to Inmet shareholders$3,972$3,306(1)Cash flow provided by operating activities divided by average shares outstanding for the period.(2)The year ended December 31, 2012 includes capital spending of $713 million at Cobre Panama. The year ended December 31, 2011 includes capital spending of $129 million at Cobre Panama.(3)Copper cash cost per pound is a non-GAAP financial measure - see Supplementary financial information on pages 31 to 33.(4)Gross debt includes long-term debt and the current portion of long-term debt(5)Net debt (net cash) is a non-GAAP measure defined as long-term debt less cash and short-term investments, including bonds and other securities.Fourth quarter press releaseWhere to find itOur financial results5Key changes in 20125Understanding our performance5Earnings from operations8Corporate costs13Results of our operations15Çayeli16Las Cruces19Pyhäsalmi21Status of our development project23Cobre Panama23Managing our liquidity26Financial condition30Supplementary financial information31In 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 December 31, 2012. Change in Inmet's functional and presentation currencies to the US dollar The decision to construct Cobre Panama has significantly increased Inmet's exposure to the US dollar. Effective June 1, 2012, the US dollar was adopted as Inmet's functional currency on a prospective basis. We translated Inmet's May 31, 2012 financial statement items from Canadian dollars to US dollars using the May 31, 2012 exchange rate US $0.97 per Canadian dollar (Transition Rate). Our operating entities continue to measure the items in their financial statements using their functional currencies; Çayeli and Cobre Panama use the US dollar, and Pyhäsalmi and Las Cruces use the euro.At the same time we changed our presentation currency from Canadian dollars to US dollars and now report our results in US dollars. We have restated all comparative financial statements from previously reported Canadian dollar amounts to US dollars using the Transition Rate.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 December 31year ended December 31(thousands, except per share amounts)20122011change20122011changeEARNINGS FROM OPERATIONS(1)Çayeli$16,493$34,668-52%$162,879$154,618+5%Las Cruces73,39740,384+82%279,250122,373+128%Pyhäsalmi32,39530,190+7%111,357138,597-20%Other(9,924)(16,190)-39%(17,104)(16,190)+6%112,36189,052+26%536,382399,398+34%DEVELOPMENT AND EXPLORATIONCorporate development and exploration(8,620)(6,333)+36%(35,616)(28,273)+26%CORPORATE COSTSGeneral and administration(14,896)(7,487)+99%(53,522)(33,306)+61%Investment and other income(16,279)(3,883)+319%24,20629,748-19%Finance costs(2,632)(2,314)+14%(10,070)(9,182)+10%Income and capital taxes(31,713)(22,491)+41%(131,304)(102,071)+29%(65,520)(36,175)+81%(170,690)(114,811)+49%Net income from continuing operations38,22146,544-18%330,076256,314+29%Income from discontinued operation (net of taxes)----80,786-100%Non-controlling interest554-+100%1,135-+100%Net income attributable to Inmet shareholders$38,775$46,544-17%$331,211$337,100-2%Income from continuing operations per common share$0.56$0.67-16%$4.78$3.86+24%Diluted income from continuing operations per common share$0.56$0.67-16%$4.75$3.85+23%Basic net income per common share$0.56$0.67-16%$4.78$5.08-6%Diluted net income per common share$0.56$0.67-16%$4.75$5.06-6%Weighted average shares outstanding69,36669,332-69,36266,432+4%(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 December 31year ended December 31see pageEARNINGS FROM OPERATIONSMarket FactorsHigher (lower) copper prices$1($35)8Lower zinc prices-(7)8Lower other metal prices(6)(9)8Lower smelter processing charges-410Foreign exchange - decreased operating costs1511Operational FactorsHigher sales volume at Las Cruces, net of production costs2719620Higher (lower) sales volumes at our other mines(2)118Higher operating costs at our other mines(5)(9)11Higher depreciation due to Las Cruces production(3)(17)12Lower (higher) charge for mine rehabilitation at closed properties6(1)11Other4(1)Increase in operating earnings, compared to 201123137Higher taxes from higher income(9)(29)14Higher corporate development, exploration and administrative costs(10)(28)13Foreign exchange changes(11)(4)13Other(1)(2)Higher (lower) net income from continuing operations compared to 2011(8)74Lower income from discontinued operation - Ok Tedi-(81)14Non-controlling interest-1Lower net income attributable to Inmet shareholders compared to 2011($8)($6)Understanding our performanceMetal pricesThe table below shows the average metal prices we realized this quarter and year to date.The prices we realize include finalization adjustments - see Gross sales on page 8.three months ended December 31year ended December 3120122011change20122011changeCopper (per pound)$3.48$3.51-1%$3.59$3.84-7%Zinc (per pound)$0.88$0.87+1%$0.88$0.97-9%CopperCopper prices on the London Metals Exchange (LME) averaged $3.61 per pound this year, or 10 percent lower than the average in 2011 of $4.00 per pound. Although average copper prices were lower in 2012, prices recovered substantially from the sharp decline that occurred in the fourth quarter of 2011. LME copper prices averaged $3.59 per pound in the fourth quarter, an increase of 6 percent over the comparative quarter of 2011. ZincLME zinc prices averaged $0.89 per pound this quarter, an increase of 3 percent over the fourth quarter of 2011. For the year, LME zinc prices averaged $0.88 per pound, 11 percent lower than the average 2011 zinc price of $0.99 per pound. Exchange ratesExchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter and year to date compared to 2011.three months ended December 31year ended December 3120122011change20122011changeExchange rates1 C$ to US$$1.01$0.98+3%$1.00$1.01-1%1 euro to US$$1.30$1.35-4%$1.29$1.39-7%1 US$ to Turkish liraTL 1.79TL 1.83-2%TL 1.80TL 1.65+9%Compared to the same quarter last year, the value of the US dollar depreciated 3 percent relative to the Canadian dollar, and appreciated 4 percent relative to the euro and 2 percent relative to the Turkish lira. Our earnings are affected by changes in foreign currency exchange rates when we:translate the operating expenses of our euro-based operations from their functional currency to US dollars revalue US dollars that we hold in cash at our operations whose functional currency is the euro translate Çayeli's Turkish lira denominated costs into its functional currency (US dollars). Prior to the adoption of the US dollar as Inmet's functional currency effective June 1, 2012, our earnings were affected by changes in foreign currency exchange rates when we revalued our US dollar denominated cash, bonds and other securities and senior unsecured notes held corporately at Inmet. Treatment charges for zinc decreased this yearTreatment 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 and year to date. Treatment charges for zinc concentrates were lower this year than in 2011, reflecting agreements we have signed with customers.three months ended December 31year ended December 31(US$)20122011change20122011changeTreatment chargesCopper (per dry metric tonne of concentrate)$54$55-2%$58$57+2%Zinc (per dry metric tonne of concentrate)$193$184+5%$184$216-15%Price participationCopper (per pound)$0.00$0.02-100%$0.00$0.02-100%Zinc (per pound)$0.00($0.02)+100%$0.00($0.01)+100%Freight chargesCopper (per dry metric tonne of concentrate)$47$58-19%$53$51+4%Zinc (per dry metric tonne of concentrate)$26$11+136%$25$22+14%Statutory tax rates The 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 December 31year ended December 31(thousands)20122011change20122011changeGross sales$259,868$233,394+11%$1,123,977$947,911+19%Smelter processing charges and freight(26,155)(27,330)-4%(113,996)(126,569)-10%Cost of sales:Direct production costs(85,739)(75,962)+13%(321,385)(292,893)+10%Inventory changes4,5496,780-33%(3,740)645-680%Other non-cash expenses(10,083)(20,995)-52%(21,502)(24,427)-12%Depreciation(30,079)(26,835)+12%(126,972)(105,269)+21%Earnings from operations$112,361$89,052+26%$536,382$399,398+34%Significantly higher gross sales this year three months ended December 31year ended December 31(thousands)20122011change20122011changeGross sales by operationÇayeli$58,742$77,124-24%$358,964$342,458+5%Las Cruces136,90997,731+40%538,981345,568+56%Pyhäsalmi64,21758,539+10%226,032259,885-13%$259,868$233,394+11%$1,123,977$947,911+19%Gross sales by metalCopper$198,076$177,344+12%$902,575$674,116+34%Zinc36,53333,307+10%125,362171,538-27%Other25,25922,743+11%96,040102,257-6%$259,868$233,394+11%$1,123,977$947,911+19%Key components of the change in gross sales: increasing sales volumes at Las Cruces, lower realized copper prices for the year (millions)three months ended December 31year ended December 31Higher (lower) copper prices$1($35)Lower zinc prices-(7)Lower other metal prices(6)(9)Higher sales volumes at Las Cruces35221Higher (lower) copper sales volumes at Çayeli(14)44Higher (lower) zinc sales volumes3(39)Higher other sales volumes7-Other-1Higher gross sales, compared to 2011$26$176We 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 negative finalization adjustments from third quarter shipments. At the end of this quarter, the following sales had not been settled:20 million pounds of copper provisionally priced at US $3.59 per pound 19 million pounds of zinc provisionally priced at US $0.94 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)copperzincJanuary 20131619February 20134-Unsettled sales at December 31, 20122019Higher copper sales volumes, lower zinc sales volumes this yearOur sales volumes are directly affected by the amount of production from our mines and our ability to ship to our customers. This quarter, timing of shipments resulted in copper sales volumes lagging production volumes by a combined 1,900 tonnes as compared to 3,100 tonnes in the fourth quarter of 2011. Sales volumesthree months ended December 31year ended December 3120122011change20122011changeCopper contained in concentrate8,30010,300-19%46,60041,200+13%Copper cathode (tonnes)17,40012,800+36%68,80042,000+64%Total copper (tonnes)25,70023,100+11%115,40083,200+39%Zinc (tonnes)19,00017,300+10%65,10084,400-23%Pyrite (tonnes)299,700175,900+70%852,500809,200+5%Productionthree months ended December 31year ended December 31Inmet's share20122011change20122011changeobjective 2013Copper (tonnes)Çayeli7,0008,600-19%31,40028,700+9%27,800 - 30,900Las Cruces17,30014,100+23%67,70042,100+61%68,500 - 72,000Pyhäsalmi3,3003,500-6%12,60014,000-10%12,000 - 13,40027,60026,200+5%111,70084,800+32%108,300 - 116,300Zinc (tonnes)Çayeli11,10011,300-2%40,70048,100-15%35,900 - 39,900Pyhäsalmi9,7006,600+47%25,60032,300-21%20,300 - 22,50020,80017,900+16%66,30080,400-18%56,200 - 62,400Pyrite (tonnes)Pyhäsalmi222,500210,500+6%891,700804,900+11%820,0002012 production compared to targetCopper production slightly exceeded our target range as copper grades and recoveries at Çayeli exceeded expectations. Zinc production also exceeded our target range as zinc grades and recoveries at both Çayeli and Pyhäsalmi were higher than expected. We produced more pyrite at Pyhäsalmi than our target to meet the increased customer demand in China. 2012 production compared to 2011Copper production was higher than in 2011 mainly because of higher production at Las Cruces. Zinc production was lower than in 2011 due to lower zinc grades at Çayeli and Pyhäsalmi. This quarter, zinc production was higher than the fourth quarter of 2011 due to higher grades and recoveries at Pyhäsalmi. Pyhäsalmi increased pyrite production this year to meet higher customer demand.2013 outlook for salesWe use our production objectives to estimate our sales target.We expect overall copper production in 2013 of between 108,300 tonnes and 116,300 tonnes, in line with 2012. We expect zinc production volumes in 2013 to decrease by approximately 10 percent as zinc grades trend more towards overall reserve grades at Çayeli and Pyhäsalmi. Our revenues are also affected by the metal prices we receive. According to international research, copper supply should grow modestly in 2013. Production from the start-up of new operations and improvements at existing mines could be somewhat offset by the risk of mine underperformance, delays to existing or new development projects and possible labour disruptions. Continued strong demand is expected in China, coupled with continued economic recovery in Europe and the United States. The small expected market surplus should support copper prices in 2013 at a level similar to 2012.For zinc, modest increases are expected in both market supply and demand with a contracting market surplus. These market trends should support average prices in 2013 above those of 2012.Zinc smelter processing charges down, copper charges up this yearthree months ended December 31year ended December 31(thousands)20122011change20122011changeSmelter processing charges and freight by operationÇayeli$12,856$14,373-11%$67,348$69,424-3%Las Cruces861351+145%2,3741,188+100%Pyhäsalmi12,43812,606-1%44,27455,957-21%$26,155$27,330-4%$113,996$126,569-10%Smelter processing charges and freight by metalCopper$8,425$10,986-23%$49,439$42,368+17%Zinc13,47911,251+20%46,29663,500-27%Other4,2515,093-17%18,26120,701-12%$26,155$27,330-4%$113,996$126,569-10%Smelter processing charges by type, and freightCopper treatment and refining charges$2,923$3,683-21%$17,847$14,410+24%Zinc treatment charges7,1016,199+15%23,40234,368-32%Copper price participation-416-100%-1,542-100%Zinc price participation(56)(648)-91%(10)(1,872)-99%Content losses8,1998,930-8%36,62642,427-14%Freight7,7968,449-8%35,06634,477+2%Other192301-37%1,0651,217-12%$26,155$27,330-4%$113,996$126,569-10%For the year, and the quarter, changes in our copper treatment and refining charges are due to changes in copper-in concentrate sales volumes. Sales volumes also drove variations in zinc treatment charges at Çayeli and Pyhäsalmi, in addition to more favorable terms with smelters, reflecting a deficit in the zinc concentrate market at the time our 2012 contracts were negotiated.2013 outlook for smelter processing charges and freight We expect our costs for copper treatment and refining to be higher in 2013 than in 2012 as the global copper concentrate supply is expected to narrowly exceed smelter capacity in 2013, shifting the market to a slight surplus position towards the end of the year. We do not expect to pay copper price participation in 2013.We expect total zinc smelter processing charges, including price participation, to be slightly higher than 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 2012. Higher direct production costs and cost of sales three months ended December 31year ended December 31(thousands)20122011change20122011changeDirect production costs by operationÇayeli$25,758$23,991+7%$94,330$93,237+1%Las Cruces43,50637,798+15%167,142142,941+17%Pyhäsalmi16,47514,173+16%59,91356,715+6%Total direct production costs85,73975,962+13%321,385292,893+10%Inventory changes(4,549)(6,780)-33%3,740(645)-680%Charges for mine rehabilitation and other non-cash charges10,08320,995-52%21,50224,427-12%Total cost of sales (excluding depreciation)$91,273$90,177+1%$346,627$316,675+9%Direct production costs Direct production costs were $28 million higher this year ($10 million higher this quarter) mainly because higher production at Las Cruces increased variable electricity, consumables and royalty costs, somewhat offset by the impact of the weaker euro relative to the US dollar. 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 an additional $17 million this year for post-closure liabilities at our closed properties, including $10 million in the fourth quarter. $7 million of these costs related to the decrease in discount rates and the US dollar to Canadian dollar exchange rate we applied in determining the liabilities in the first nine months of 2012. Under IFRS, we are required to revalue our asset retirement obligations for changes in market risk-free interest rates - this discount rate decrease reflects the current low interest rate environment. Additionally, this quarter we recognized a $4 million increase in our estimated closure obligations at Troilus for ongoing treatment of tailings effluent for suspended solids and associated labour costs, as well as increased estimated cash flows required to remediate our other closed properties. In 2011, we recorded increased asset retirement obligations of $16 million: $5 million for closure liabilities at Troilus related to an increase in our estimated closure obligations for ongoing treatment of tailings effluent for suspended solids and associated labour costs and $11 million from a decrease in the discount rates we applied.2013 outlook for cost of sales (excluding depreciation)We expect consolidated direct production costs to be slightly higher in 2013 because higher production at Las Cruces will increase total variable costs, primarily electricity, consumables and royalties. We also expect slightly higher direct production costs at Çayeli in 2013 due to increased labour and electricity costs, and increased costs associated with higher expected tonnes processed in 2013 than in 2012. Our budget for 2013 assumes our costs at Pyhäsalmi will be similar to 2012.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 report in US dollars will also be affected by the value of the euro and the Turkish lira relative to the US dollar.Additionally, changes in market risk-free interest rates could significantly increase or decrease our costs related to mine rehabilitation at our closed properties. At December 31, 2012, the interest rates we used to value our asset retirement obligations at our closed properties ranged from 1.1 percent to 2.4 percent.Higher depreciationthree months ended December 31year ended December 31(thousands)20122011change20122011changeDepreciation by operationÇayeli$4,702$5,391-13%$24,692$21,337+16%Las Cruces22,33119,129+17%92,03774,931+23%Pyhäsalmi3,0462,315+32%10,2439,001+14%$30,079$26,835+12%$126,972$105,269+21%Depreciation was higher this year than last mainly because of higher copper sales volumes at Las Cruces and Çayeli. 2013 outlook for depreciationWe expect depreciation to be higher in 2013 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. Spending on corporate development and explorationCorporate development and exploration costs were approximately $8 million higher than 2011, which mainly reflects our higher budget for 2012 to explore for world class deposits. 2013 outlook for corporate development and explorationWe expect spending on exploration in 2013 to be slightly higher than 2012, focusing on Mexico, Chile and Peru, where we have established field offices, the United States and on Cobre Panama to drill more exploration targets on the concession there. We will also continue exploring in areas around our existing operations. General and administrationGeneral and administration costs are largely for management remuneration, governance and strategy. Costs in 2012 were $19 million higher than 2011 mainly because stock-based compensation expense was $10 million higher. As a result of the decision to proceed with full construction of Cobre Panama, we recognized a non-cash stock-based compensation expense of $8 million this year on Long-Term Incentive Plan (LTIP) units issued in previous years that relate to the project. This expense represents the cumulative impact from the units' grant dates to December 31, 2012, on a 100 percent award basis, as no value was attributed to these units prior to a positive construction decision for Cobre Panama. See note 22c to our 2011 annual financial statements for more details on these units. The increase in general and administration expense also reflects increased human resources and other costs supporting the growth of the business and construction activities for Cobre Panama. 2013 outlook for general and administrationWe expect general and administration costs in 2013 to be similar to those in 2012.Investment and other income three months ended December 31year ended December 31(thousands)2012201120122011Interest income$3,818$4,668$15,144$16,099Foreign exchange gain (loss)(19,608)(8,327)6,27010,446Dividend and royalty income7591,4602,9882,944Other(1,248)(1,684)(196)259($16,279)($3,883)$24,206$29,748Foreign exchange gains and lossesWe have foreign exchange gains or losses when we revalue certain foreign denominated assets and liabilities.Our foreign exchange gains and losses were from:three months ended December 31year ended December 31(thousands)2012201120122011Translation of US dollar cash held by Corporate prior to June 2012 inclusive of proceeds of notes offering-527,338(8,001)Translation of US dollar senior unsecured notes prior to June 2012--(16,884)-Translation of US dollar bonds and other securities prior to June 2012-(8,321)4,33011,232Translation of US dollar cash held in euro-based entities(14,771)-(15,998)-Translation of Cdn dollar cash held by Corporate subsequent to May 2012(357)-2,231-Translation of Cdn dollar bonds and other securities subsequent to May 2012(2,067)-7,912-Translation of other monetary assets and liabilities(2,413)(11)(2,659)7,215($19,608)($8,327)$6,270$10,446We recognized net foreign exchange gains of $15 million this year from the revaluation of US dollar denominated cash, bonds and other securities and the senior unsecured notes held in Inmet prior to the change in its functional currency from the Canadian dollar to the US dollar effective June 1, 2012. As of this date, Inmet's US dollar-denominated monetary assets and liabilities were no longer revalued. Instead we began recognizing foreign exchange impacts on the revaluation of Inmet's Canadian dollar denominated monetary assets and liabilities with a gain of $10 million in 2012 on Canadian dollar denominated cash, bonds and other securities due to a weakening in the US dollar relative to the Canadian dollar. We recognized a foreign exchange loss of $2 million this quarter on these Canadian dollar denominated holdings. Additionally, in 2012 we began holding our euro-based operations' excess cash in US dollars. We recognized $16 million in foreign exchange losses this year, including $15 million this quarter, on the revaluation of US denominated cash balances to euros due to a depreciation in the US dollar relative to the euro. 2013 outlook for investment and other incomeInvestment and other income is affected by the balance of our cash, bonds and other securities, and by interest rates and exchange rates. We are capitalizing interest income earned on funds from the proceeds of our senior unsecured notes (as we are capitalizing interest costs on the senior unsecured notes). At December 31, 2012, we held Cdn $218 million in cash, bonds and other securities subject to translation in our US dollar denominated accounts and US $599 million in cash subject to translation in our euro accounts. Income tax expensethree months ended December 31year ended December 31(thousands)20122011change20122011changeÇayeli$3,983$9,444$32,923$50,947Las Cruces18,3718,09772,49522,788Pyhäsalmi8,0136,61223,95130,710Corporate and other1,346(1,662)1,935(2,374)$31,713$22,491$131,304$102,071Consolidated effective tax rate45%33%+8%28%28%-Our tax expense changes as our earnings change.The consolidated effective tax rate was higher this quarter compared to the same quarter of 2011 mainly because of the improvement in earnings at Las Cruces, combined with its lower intergroup interest expense as it repaid a portion of its intergroup debt earlier this year. Additionally, we realized higher foreign exchange losses and other corporate costs this quarter for which there is no tax recovery. 2013 outlook for income tax expenseWe expect the statutory tax rates at our operations in 2013 to remain the same as they were in 2012, unless a statutory tax rate change is enacted. We expect income tax expense to increase in 2013 due to higher income from operations mainly from higher sales volumes as Las Cruces, offset partly by lower expected copper sales volumes at Çayeli.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 $81 million in 2011 includes net earnings of $17 million in January 2011, before the sale, and a gain on sale of $64 million net of withholding taxes. We paid Papua New Guinea withholding taxes of $27 million on the sale.Results of our operations2013 estimatesOur financial review by operation includes estimates for our 2013 operating earnings and operating cash flows. We have based these estimates on our 2013 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 year: Copper priceUS $3.60 per poundZinc priceUS $1.00 per poundeuro to C$ exchange rate$1.25Working capitalAssume no changesÇayelithree months ended December 31year ended December 3120122011change20122011changeTonnes of ore milled (000's)319316+1%1,2181,195+2%Tonnes of ore milled per day3,5003,400+1%3,3003,300+2%Grades (percent)copper3.03.5-14%3.33.2+3%zinc5.05.3-6%5.06.0-17%Mill recoveries (percent)copper7479-6%7875+4%zinc6967+3%6668-3%Production (tonnes)copper7,0008,600-19%31,40028,700+9%zinc11,10011,300-2%40,70048,100-15%Cost per tonne of ore milled$81$76+7%$77$78-1%Copper production exceeded target this yearÇayeli's mine production reached a record 1.21 million tonnes this year. The increase in mine production is the result of consistent ground support and rehabilitation performance, improved mine planning processes, including new scheduling software capable of quick scenario reviews, and capturing further benefits from the mine control system implemented in 2011. Mill production this year reached a record of 1.22 million tonnes. Managing tailings density and coordination with the mine's pastefill requirements were key in achieving the higher throughput level this year. Copper production in 2012, at 31,400 tonnes, was better than in 2011 and exceeded the high end of our guidance range due to higher copper grades and recoveries. Zinc production was significantly lower than in 2011, consistent with our expectations, due to the lower zinc grade and associated lower recoveries. Cost per tonne of ore milled was slightly lower than 2011 mainly because we processed more ore this year. Higher cost per tonne of ore milled this quarter reflects higher costs for electricity and a study Çayeli has undertaken to further increase its productivity.The three-year labour agreement at Çayeli expired in May 2012. The negotiation of a new labour agreement, initially delayed due to changes to government labour regulations, is proceeding in early 2013 and we will make a strong effort to manage labour cost escalations to retain our cost competitiveness.Our tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. In 2012 Çayeli became the subject of an audit of its 2008 to 2011 taxation years. On February 4, 2013, Çayeli received an assessment from the Turkish tax authorities adjusting the amount of withholding taxes to be remitted on dividends paid by Çayeli to its direct shareholder. The shares of Çayeli are owned by an indirect wholly-owned Spanish subsidiary of Inmet. The Turkish tax authorities have taken the position that Inmet and not the Spanish subsidiary is the beneficial owner of the dividends. The Turkish tax authorities are therefore taking the position that the withholding tax on the dividends should be the 15 percent domestic rate and not the reduced rate of 5 percent under the Turkey-Spain tax treaty. The dividends paid during the period assessed total TL 628 million. The assessed tax liability is TL 63 million (US $35 million) plus interest and penalties. Our view is that the relevant facts and circumstances support the position that Çayeli fulfilled its tax remittance obligations and Çayeli intends to vigorously dispute the assessment.2013 outlook for production In 2013, the production level should increase from 1.2 million tonnes to 1.25 million tonnes. The mine should benefit from the commissioning of the two new ore passes by the third quarter of 2013, the extension of a shotcrete slickline to the lower levels of the mine, improved lower mine infrastructure and the addition of stope production from a new mining block, all of which should ease pressure on existing production areas. Çayeli's ground conditions require constant monitoring and reinforcement, including the need to minimize any underground void area. Continued progress in meeting the challenges of poor ground conditions and planned operational efficiencies is aimed at reducing the risks associated with achieving our production plan. Both copper and zinc recoveries should be lower in 2013, reflecting the increased proportions of metallurgically challenging ore types. We expect to produce between 27,800 tonnes and 30,900 tonnes of copper and between 35,900 tonnes and 39,900 tonnes of zinc in 2013. We expect operating costs in 2013 to be slightly higher than 2012 levels primarily due to increased manpower levels, increased electricity costs and increased mine department consumables.Financial review Lower copper sales volumes due to lower copper production volumes and timing of shipments this quarter (millions unlessthree months ended December 31year ended December 31objectiveotherwise stated)20122011201220112013Sales analysisCopper sales (tonnes)5,1006,90033,20027,50029,400Zinc sales (tonnes)10,0009,90040,00050,00037,900Gross copper sales$36$53$258$214$233Gross zinc sales19197710184Other metal sales45242717Gross sales5977359342334Smelter processing charges and freight(13)(14)(67)(69)(74)Net sales$46$63$292$273$260Cost analysisTonnes of ore milled (thousands)3193161,2181,1951,250Direct production costs ($ per tonne)$81$76$77$78$81Direct production costs$26$24$94$93$101Change in inventory(4)(3)2(1)-Depreciation and other non-cash costs89332632Operating costs$30$28$129$118$133Operating earnings$16$35$163$155$127Operating cash flow$64$8$170$152$120The objective for 2013 uses the assumptions listed on page 15.The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.(millions)three months ended December 31Year ended December 31Lower metal prices($5)($8)Higher (lower) copper sales volumes(11)34Lower zinc sales volumes-(11)Higher smelter processing charges and freight-1Higher operating costs(2)(1)Lower (higher) depreciation1(3)Other(2)(4)Higher (lower) operating earnings, compared to 2011(19)8Change in tax expense because of foreign exchange changes in Çayeli's Turkish lira accounts213Changes in working capital (see note 17 on page 52)72(8)Higher depreciation(1)3Other22Higher operating cash flow, compared to 2011$56$18Capital spendingthree months ended December 31year ended December 31objective(thousands)20122011change20122011change2013Capital spending$8,300$3,400+144%$17,500$12,700+38%$18,000We spent $18 million in capital this year to begin construction of a pair of new ore passes, add to the underground mobile fleet, improve underground pastefill and water drainage infrastructure, replace the surface concrete batch plant, and continue mine development. In 2011 we spent $13 million to engineer the new ore passes, purchase mobile equipment, install column flotation cells and a conveyor dust collection system in the mill, add surface water runoff capacity, and continue our mine development. 2013 outlook for capital spending We expect to spend $18 million on capital in 2013, including $6 million on mine development and $5 million to complete the upgrade of our ore pass system to address deterioration that has accumulated over time from normal abrasion. Las Cruces three months ended December 31year ended December 31(100 percent)20122011change20122011changeTonnes of ore processed (000's)276231+19%1,082776+39%Copper grades (percent)6.96.9-7.16.5+9%Plant recoveries (percent)9086+5%8884+5%Cathode copper production (tonnes)17,30014,100+23%67,70042,100+61%Cost per pound of cathode produced$1.14$1.21-6%$1.12$1.54-27%Plant production consistently at or above design capacity 2012 was a year of significant accomplishments for Las Cruces with plant production averaging the design capacity of 6,000 tonnes of copper cathode for the last 9 months of the year. This production level was reached following a shutdown in March to remove and re-align the ball mill gearing as well as to make numerous operating improvements to improve process flows. Las Cruces produced 17,300 tonnes of copper cathode in this quarter of 2012, with a three day maintenance shutdown, and achieved plant recoveries of 90 percent.The plant reliability increased in all areas during 2012 with stable reactor and agitator performance and further improvements to crushing, conveying and grinding. In all, 12 days of planned downtime were required for ongoing plant maintenance compared to our original plan of 20 days. Overall copper recoveries were 88 percent in 2012, an improvement from 84 percent in 2011 due to the full implementation of the leach feed surge tank with oxygen addition. Plant feed grades averaged 7.1 percent during the year, compared to 6.5 percent in 2011.Las Cruces production of 67,700 tonnes of copper cathode this year was significantly higher than 42,100 tonnes in 2011 as a result of process improvements and came within 1.5 percent of the high end of our guidance range.Cost per pound of copper produced was significantly lower than in 2011 due to higher production volumes.2013 outlook for productionIn 2013, we will concentrate on reducing recovery losses downstream of the leaching reactors that have increased with the increase in copper cathode production and due to operating with process solutions that contain more copper.We expect to produce between 68,500 tonnes and 72,000 tonnes copper cathode in 2013. The plant will be tested at higher ore throughput and lower grade to assess the effects on plant performance before we enter into lower copper grade areas of the mine that we expect in 2014.We expect cost per pound of copper in 2013 to be similar to 2012 levels.Financial review Higher sales volumes due to higher production (millions unlessthree months ended December 31year ended December 31objectiveotherwise stated)20122011201220112013Sales analysisCopper sales (tonnes)17,40012,80068,90042,00070,300Gross copper sales$137$98$539$345$562Smelter processing charges and freight(1)-(2)(1)(3)Net sales$136$98$537$344$559Cost analysisPounds of copper produced (millions)383114993155Direct production costs ($ per pound)$1.14$1.21$1.121.54$1.11Direct production costs$4338$167$143$172Change in inventory-(3)21-Depreciation and other non-cash costs2023897893Operating costs$63$58$258$222$265Operating earnings$73$40$279$122$294Operating cash flow$50$44$320$188$386The objective for 2013 uses the assumptions listed on page 15.The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.(millions)three months ended December 31year ended December 31Higher (lower) copper prices, denominated in US dollars$4($28)Higher copper sales volumes32220Higher smelter processing charges and freights(1)(1)Higher operating costs in base currency(7)(35)Foreign exchange - decreased operating costs213Higher depreciation(3)(17)Other65Higher operating earnings, compared to 201133157Changes in working capital (see note 17 on page 52)(29)(42)Change in depreciation317Other(1)-Higher operating cash flow, compared to 2011$6$132Capital spending three months ended December 31year ended December 31objective(thousands)20122011change20122011change2013Capital spending$18,000$9,700+86%$43,200$51,900-17%$49,000We spent $43 million this year mainly on mine development, tailings facility expansion and land purchase. In 2011, we spent $52 million mainly for mine development, tailings facility expansion and plant improvements.2013 outlook for capital spendingWe expect to spend $49 million on capital projects in 2013. The largest expenditures should be for mine development ($22 million), tailings facility expansion ($5 million), debottlenecking ($8 million) and other plant improvement projects.Pyhäsalmithree months ended December 31year ended December 3120122011change20122011changeTonnes of ore milled (000's)351348+1%1,3841,386-Tonnes of ore milled per day3,8003,800+1%3,8003,800-Grades (percent)copper1.01.1-9%1.01.1-9%zinc3.02.1+43%2.02.6-23%sulphur4143-5%4242-Mill recoveries (percent)copper9795+2%9696-zinc9390+3%9291+1%Production (tonnes)copper3,3003,500-6%12,60014,000-10%zinc9,7006,600+47%25,60032,300-21%pyrite222,500210,500+6%891,700804,900+11%Cost per tonne of ore milled$47$41+15%$43$41+5%Lower grades this year in-line with annual objectivesPyhäsalmi continued its strong performance in 2012, processing 1.4 million tonnes of ore and achieving copper recoveries of 96 percent and zinc recoveries of 92 percent. Backfill supply was reliable and the underground open void volume was maintained below planned levels. Both copper and zinc production were at the high end of our guidance range but lower than in 2011, as expected, because of lower grades in the areas we mined. A record 891,700 tonnes of pyrite concentrate was produced this year to meet higher customer demand.Operating costs were higher this year than they were in 2011 due to higher labour, consumables and contractor costs, and due to the incremental costs associated with producing more pyrite. 2013 outlook for productionPyhäsalmi expects to mine 1.4 million tonnes of approximately 1 percent copper and 1.7 percent zinc in 2013, and produce between 12,000 tonnes and 13,400 tonnes of copper and 20,300 tonnes and 22,500 tonnes of zinc. Zinc production should be lower than it was in 2012 as we expect a decrease in zinc grades in 2013. Pyhäsalmi expects to produce and sell 820,000 tonnes of pyrite in 2013.Operating costs are expected to remain at levels consistent with 2012.Financial reviewLower earnings because of lower sales volumes and realized metal prices this year(millions unlessthree months ended December 31year ended December 31objectiveotherwise stated)20122011201220112013Sales analysisCopper sales (tonnes)3,2003,40013,40013,70012,700Zinc sales (tonnes)9,0007,40025,10034,40021,400Pyrite sales (tonnes)299,700175,900852,500809,200820,000Gross copper sales$25$27$106$114$101Gross zinc sales1814487047Other metal sales2118727661Gross sales6459226260209Smelter processing charges and freight(12)(13)(44)(56)(42)Net sales52$46$182$204$167Cost analysisTonnes of ore milled (thousands)3513481,3841,3861,370Direct production costs ($ per tonne)$47$41$43$41$42Direct production costs$16$14$60$57$58Change in inventory-(1)-(1)-Depreciation and other non-cash costs4311912Operating costs$20$16$71$65$70Operating earnings$32$30$111$139$97Operating cash flow$28$23$97$114$84The objective for 2013 uses the assumptions listed on page 15.The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011. (millions)three months ended December 31year ended December 31Lower copper prices$ -($6)Higher (lower) zinc prices1(3)Higher (lower) zinc sales volumes3(11)Lower copper sales volumes(2)(5)Higher (lower) other metal sales3(3)Lower smelter processing prices and freight14Higher operating costs in base currency(3)(8)Foreign exchange - decreased operating costs15Other(2)(1)Higher (lower) operating earnings, compared to 20112(28)Change in tax expense(1)7Changes in working capital (see note 17 on page 52)35Other1(1)Higher (lower) operating cash flow, compared to 2011$5($17)Capital spending three months ended December 31year ended December 31objective(thousands)20122011change20122011change2013Capital spending$2,600$1,900+37%$8,600$7,000+23%$8,0002013 outlook for capital spending Capital spending of $8 million in 2013 will primarily be to replace underground mobile equipment, upgrade the pyrite flotation cleaner cells and flotation air blower system, and improve the reclaim water system. Status of our development projectCobre PanamaConstruction progressFor a visual update on our construction progress, we invite you to visit our photo gallery on Inmet's web site at www.inmetmining.com.At December 31, 2012, total construction was 9.3 percent completed compared to a planned completion percentage of 10.9 percent. We made the following advancements in the project's development this quarter: Infrastructure Our Engineering, Procurement and Construction Management (EP+CM) contractor, Joint Venture Panama (JVP), progressed with detailed engineering and procurement, earthworks and ground preparation for camps and road construction. We began the commissioning of the mine site's camp and general pioneering work is progressing well, including development work on the quarry and coastal road construction. Progress at the port site in Punta Rincon included completion of the jack-up barges allowing safe mooring of barges at the port site, and the mobile crusher allowing rock production to commence at the port site. The camp platform at the port site was completed in early 2013. Power plantOur Engineering, Procurement and Construction (EPC) contractor, SK Engineering and Construction, progressed with detailed engineering and procurement activities, and with planning. Geotechnical work has started and the fabrication of long-lead equipment continued as planned. Process plantWe completed our evaluation of process plant bids and awarded the contract for detailed engineering and procurement services to Joint Venture Panama in late 2012. Upon satisfactory advancement of detailed engineering and procurement of certain equipment, we expect to award the contract for construction of the process plant in the third quarter of 2013. MPSA and its contractors' workforce comprise more than 90 percent local residents from the Provinces of Cocle and Colon, Panama. The combined construction workforce is expected to increase to more than 9,000 people by the end of 2014. Our one-team approach for safety and health execution on the project has led to the current lost-time injury frequency of less than 0.23 injuries per 200,000 work hours worked since the Full Notice to Proceed was issued in May 2012.Capital spendingThe following table provides a breakdown of capital expenditures on a 100 percent basis. three months ended December 31year ended December 31objective(US$ millions)20122011201220112013Capital spending since issuance of full notice to proceed (FNTP)$243$-$593$-$2,147Interest paid on senior unsecured notes70-70-169Changes in working capital--(81)(5)(75)Capital spending prior to FNTP-42$131134-Capital spending in the consolidated statements of cash flows$313$42$713$129$2,241We expect completion to take approximately 44 months from the point we issued Full Notice to Proceed. The schedule below provides the expected timing of capital spending by year. (US$ millions)Total expenditures (100% basis)Inmet's share after StreamFranco-Nevada's Stream fundingKPMC's 20% shareCumulative spending at December 31, 2012$593$313$-$280(1)Future capital spending:20132,1471,43528342920142,5271,5165065052015914520211183Total direct costs$6,181$3,784$1,000$1,397(1)Includes KPMC's $161 million payment to acquire a 20% interest in MPSA, which increased KPMC's share of total project funding to $1.4 billion and reduced Inmet's share by an equal and offsetting amount.Capital commitmentsSince construction commenced in May 2012, contracts have been awarded for mass earthworks and quarry development at both the mine and port sites, the tailings management facility, the coastal road joining the mine to the port, permanent and temporary camp construction, the port causeway and commodity berth, infrastructure and the power plant, detailed engineering and procurement of certain equipment for the process plant, the mobile mine equipment fleet, fuel supply, construction camp catering and the mine pre-stripping. The total value of commitments that MPSA has entered into since the start of full construction is approximately $4.1 billion, representing 67 percent of estimated capital expenditures. MPSA expects to award the construction contract for the mineral processing plant during the third quarter of 2013.Funding planThe table below outlines the total project funding plan as at December 31, 2012.(US$ millions)Total expenditures (100% basis)Total construction budget for Cobre Panama$6,181Less: Cumulative project funding at December 31, 2012Inmet's share(400)Attributable to non-controlling interest (KPMC)(261)Cumulative funding to date(661)Less: Future fundingAttributable to precious metal stream partner (Franco-Nevada)(1,000)Attributable to non-controlling interest (KPMC)(1,136)Inmet's share of future funding3,384Less: Cash on hand at December 31, 2012 (includes bonds and other securities and excludes MPSA cash)(3,531)Excess funding position at December 31, 2012$147Increase to Cobre Panama reserves and mine lifeIn December 2012, we announced an increase to proven and probable mineral reserves at Cobre Panama. The additional mineral reserves reflect the completion of work on resource definition, metallurgical recoveries, pit design and other engineering, allowing us to include the Balboa, Brazo and Botija Abajo mineralization in our mine plan for Cobre Panama. The additional mineral reserves increased Cobre Panama's total estimated contained copper by 27 percent to approximately 26 billion pounds, and increased estimated contained gold by 41 percent to approximately 7.3 million ounces. These additional mineral reserves have been integrated into a revised mine plan that extends the estimated mine life for Cobre Panama from 31 to 40 years. 2013 outlook for developmentWe plan to:InfrastructureContinue with mobilization of major contractors for bulk earthworks and complete the construction of platforms for the power plant and process plant. Complete development of additional quarries to support construction activity at the port, mine site, tailings management facility and coastal road. Continue the installation of temporary and permanent camps at the plant and port sites. Award contracts for the construction of the remainder of infrastructure. Develop and implement an operational readiness strategy to allow for the start of pre-stripping activities in 2014. Power PlantProgress with detailed engineering and procurement for the power plant and geotechnical investigation work. Begin construction activities for the power plant following site capture. Process PlantComplete detailed engineering, procurement of equipment and award the contract for construction of the process plant. Start construction activities for the process plant following site capture. OtherContinue 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 develop and implement, with the assistance of our EPC/M contractors, our one-team, project specific health & safety and environmental and social mitigation plans that are consistent with the Environmental and Social Impact Assessment and Inmet's Corporate Responsibility Standards and Procedures. Continue to grow the strength of our management team and human resources dedicated to 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 December 31year ended December 31(millions)2012201120122011CASH FROM OPERATING ACTIVITIESÇayeli$64$8$170$152Las Cruces5044320188Pyhäsalmi282397114Corporate development and exploration not incurred by operations(6)(4)(22)(21)General and administration(10)(5)(37)(26)Realized foreign exchange gains (losses) on cash(15)-14(8)Other651(7)11771543392CASH FROM INVESTING AND FINANCINGPurchase of property, plant and equipment(342)(57)(786)(202)Purchase and maturity of bonds and other securities, net4413(1,452)(226)Sale of 20 percent interest in Cobre Panama--161-Long-term debt borrowing493-1,922-Funding from non-controlling shareholders40-100-Issuance of common shares---486Dividends on common shares(7)(7)(14)(13)Foreign exchange on cash held in foreign currency15(23)25(5)Other(1)(4)(6)3242(78)(50)43CASH FROM DISCONTINUED OPERATION (OK TEDI)---297Increase (decrease) in cash359(7)493732Cash and short-term investmentsBeginning of period1,1821,0551,048316End of period$1,541$1,048$1,541$1,048Our available liquidity also includes $2,077 million of bonds and other securities ($607 million at December 31, 2011), providing a total of $3,618 billion in capital available to finance our growth strategy as at December 31, 2012.OPERATING ACTIVITIESKey components of the change in operating cash flows (millions)three months ended December 31year ended December 31Higher earnings from operations (see page 5)$23$137Add back higher depreciation included in earnings from operations322Lower income tax expense-18Higher corporate development and administrative costs(7)(12)Realized foreign exchange loss on cash held by Inmet Corporate(15)22Changes in working capital (see note 17 on page 52)51(38)Other(9)2Higher operating cash flow, compared to 2011$46$151Operating cash flows this quarter and year to date were higher than in 2011 primarily due to higher earnings from operations before non-cash charges. The increase this quarter was also due to a reduction in net working capital, mainly due to the timing of income tax payments made by Pyhäsalmi, and payments received from Çayeli's customers.This year, the increase in net working capital reflects higher accounts receivable at Las Cruces associated with higher copper cathode sales during 2012 and the timing of collections from customers. 2013 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 15), and the assumptions in Results of our operations (starting on page 15). 2013 estimated operating cash flow by operation (millions)Çayeli$120Las Cruces386Pyhäsalmi84$590INVESTING AND FINANCINGCapital spending three months ended December 31year ended December 31objective(millions)20122011201220112013Çayeli$8$3$18$13$18Las Cruces1810435249Pyhäsalmi32978Cobre Panama313427131292,241Corporate and other--3110$342$57$786$202$2,326Please see Results of our operations and Status of our development project for a discussion of actual results and our 2013 objectives. Capital spending this year was mainly for Cobre Panama. Purchase and maturing of investmentsIn 2012, we invested $2.3 billion in US dollar-denominated bonds and other securities comprising US Treasury bonds, Canadian government and corporate bonds and Supranational bonds with credit ratings of A to AAA. The securities mature between 2013 and 2018 and have a weighted average annual yield to maturity of 0.31 percent. During the year, $840 million of securities matured. In 2011, we used most of the US dollar proceeds from the sale of Ok Tedi to buy $274 million in US Treasury bonds with AA credit ratings and $67 million of bonds matured. Issuance of senior unsecured notesOn May 18, 2012, we issued $1.5 billion in senior unsecured notes, bearing a coupon rate of interest of 8.75 percent and maturing on June 1, 2020. The notes were priced at 98.584 percent of their face value, yielding proceeds of $1.43 billion net of the discount and transaction fees. On December 18, 2012, we issued an additional $0.5 billion of senior unsecured notes, bearing a coupon rate of interest of 7.5 percent and maturing in June 2021. The notes were priced at 100 percent of their face value, yielding proceeds of $493 million net of transaction fees. Interest is payable on the notes semi-annually on December 1 and June 1 of each year. As the proceeds will be used to fund the development of Cobre Panama, interest costs will be capitalized to project assets during the construction period.These notes are unconditionally guaranteed on a senior unsecured basis by certain Inmet subsidiaries. The notes contain certain customary covenants and restrictions for a financing instrument of this type. Sale of 20 percent interest in Cobre PanamaOn April 25, 2012, KPMC completed its acquisition of a 20 percent interest in MPSA. KPMC acquired its interest for $161 million in cash. Together with the 20 percent of funding of the estimated $6.2 billion of development costs for Cobre Panama it will provide during the construction period, this amounts to total funding of $1.4 billion. During 2012, KPMC provided $100 million of this funding ($40 million this quarter).Issuance of common shares - 2011 In May 2011, a subsidiary of Temasek Holdings (Private) Ltd. exchanged its subscription receipts for 7.78 million Inmet common shares and we received cash of $486 million.Cash from discontinued operation - 2011 In January 2011, we sold our 18 percent equity interest in Ok Tedi for net proceeds of $297 million (after Papua New Guinea withholding taxes).2013 outlook for investing and financingCapital spending We expect capital spending to be $2,326 million in 2013. The more significant items include:•$2,241 million at Cobre Panama to advance construction activities on the project•$49 million at Las Cruces, including $22 million for mine development, as well as other capital projects including a tailings facility expansion and certain plant improvements.Sale of precious metal stream to Franco-Nevada In August 2012, we announced the completion of a precious metals stream agreement with Franco-Nevada. Under the terms of the agreement, a wholly-owned subsidiary of Franco-Nevada will provide a $1 billion deposit which will be used to fund a portion of Cobre Panama project capital costs. The deposit will become available after Inmet's funding since issuing a FNTP reaches $1 billion (expected by mid-2013) and will be provided pro-rata on a 1:3 ratio with Inmet's subsequent funding contributions.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 December 31, 2012, we had $3,618 million in total funds, including $1,541 million of cash and short-term investments and $2,077 million invested in bonds and other securities.CashAt December 31, 2012 our cash and short-term investments of $1,541 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 high 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 December 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 4 on page 45 in the consolidated financial statements for more details about where our cash is invested.Bonds and other securitiesWe hold a portfolio of bonds and other securities to provide better yields while minimizing our investment risk. As at December 31, 2012, our portfolio was $2,077 million. The portfolio includes:34 percent US Treasury bonds 25 percent Canadian and provincial government bonds 37 percent corporate bonds 4 percent Supranational bonds. The securities mature between 2013 and 2018. Restricted cashOur restricted cash balance of $78 million as at December 31, 2012 included:$20 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 $1 million for future reclamation at Pyhäsalmi. COMMON SHARESCommon shares outstanding as of December 31, 2012 and February 21, 201369,365,748Deferred share units outstanding as of December 31, 2012109,022(redeemable on a one-for-one basis for common shares)Additional risk factorWe have significantly increased our cash balance following the issuance of our senior unsecured notes for the construction of Cobre Panama. For U.S. federal income tax purposes a non-U.S. corporation may be classified as a "passive foreign investment company" (PFIC) for U.S. federal income tax purposes in any taxable year in which either (1) at least 75 percent of its gross income is passive income, or (2) on average at least 50 percent of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income. Based on our analysis, we do not believe that we are a PFIC in the current taxation year. The methods used to determine income and assets for the purpose of this test are subject to interpretation and judgement, and based on the manner in which fair value is determined, the analysis could show that we are a PFIC. If we are classified as a PFIC, U.S. taxpayers that hold our common shares could be subject to adverse U.S. federal income tax consequences, including increased tax liabilities and possible additional reporting requirements. As the determination of PFIC status is made annually at the close of each tax year and is dependent on a number of assumptions, there can be no assurance that Inmet is not a PFIC in the current year or will not become a PFIC in any future tax year. U.S. taxpayers that hold our common shares are urged to consult their tax advisors concerning the potential U.S. federal income tax consequences of holding common shares if Inmet were considered a PFIC in any year.Supplementary financial informationPages 32 and 33 include 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), and have an 80 percent interest in the Cobre Panama development project, currently in construction.This press release is also available at www.inmetmining.com.Fourth quarter conference call Will be held onFriday, February 22, 2013 8:30 a.m. Eastern Time webcast available at http://events.digitalmedia.telus.com/inmet/022213/index.php or www.inmetmining.comYou can also dial in by callingLocal or international: +1.416.340.8530 Toll-free within North America: +1.877.240.9772 Starting at approximately 10:30 a.m. (ET) Friday, February 22, 2013, a conference call replay will be availableLocal or international: +1.905.694.9451 passcode 7813798 Toll-free within North America: +1.800.408.3053 passcode 7813798 INMET MINING CORPORATIONSupplementary financial informationCash costs2012 For the year ended December 31per pound of copperLASÇAYELICRUCESPYHÄSALMITOTAL(US dollars)Direct production costs$1.27$1.08$2.18$1.26Royalties and variable compensation0.110.06-0.07Smelter processing charges and freight0.970.020.950.39Metal credits(1.47)-(3.81)(0.84)Cash cost$0.88$1.16($0.68)$0.882011 For the year ended December 31per pound of copperLASÇAYELICRUCESPYHÄSALMITOTAL(US dollars)Direct production costs$1.35$1.55$1.93$1.54Royalties and variable compensation$0.180.07-0.10Smelter processing charges and freight$1.480.011.160.70Metal credits(2.41)-(4.02)(1.48)Cash cost$0.60$1.63($0.93)$0.86Reconciliation of cash costs to statements of earnings2012 For the year ended December 31per pound of copper(millions of US dollars, except where otherwise noted)ÇAYELILAS CRUCESPYHÄSALMITOTALGAAP referencepage 17page 20page 22Direct production costs$94$167$60$321Smelter processing charges and freight67244113By product sales(101)-(120)(221)Adjust smelter processing and freight, and sales to production basis1-(3)(2)Operating costs net of metal credits$61$169($19)$211Inmet's share of production (000's)69,200149,20027,800246,200Cash cost (US dollars)$0.88$1.16($0.68)$0.882011 For the year ended December 31per pound of copper(millions of US dollars, except where otherwise noted)ÇAYELILAS CRUCESPYHÄSALMITOTALGAAP referencepage 17page 20page 22Direct production costs$93$143$57$293Smelter processing charges and freight69156126By product sales(128)-(146)(274)Adjust smelter processing and freight, and sales to production basis4-48Operating costs net of metal credits$38$144($29)$153Inmet's share of production (000's)63,30092,90030,800187,000Cash cost (US dollars)$0.60$1.63($0.93)$0.86INMET MINING CORPORATIONSupplementary financial informationCash costs2012 For the three months ended December 31per pound of copperÇAYELILAS CRUCESPYHÄSALMITOTAL(US dollars)Direct production costs$1.59$1.11$2.30$1.37Royalties and variable compensation0.080.05-0.05Smelter processing charges and freight1.030.02$1.210.42Metal credits(1.68)-($4.71)(0.99)Cash cost$1.02$1.18($1.20)$0.852011 For the three months ended December 31per pound of copperLASÇAYELICRUCESPYHÄSALMITOTAL(US dollars)Direct production costs$1.15$1.19$1.86$1.27Royalties and variable compensation0.090.05-0.06Smelter processing charges and freight1.130.010.920.50Metal credits(1.71)-(3.36)(1.01)Cash cost$0.66$1.25($0.58)$0.82Reconciliation of cash costs to statements of earnings2012 For the three months ended December 31per pound of copper(millions of US dollars, except where otherwise noted)ÇAYELILAS CRUCESPYHÄSALMITOTALGAAP referencepage 17page 20page 22Direct production costs$26$43$16$85Smelter processing charges and freight1311226By product sales(23)-(39)(62)Adjust smelter processing and freight, and sales to production basis--22Operating costs net of metal credits$16$44($9)$51Inmet's share of production (000's)15,50038,2007,20060,900Cash cost (US dollars)$1.02$1.18($1.20)$0.852011 For the three months ended December 31per pound of copper(millions of US dollars, except where otherwise noted)ÇAYELILAS CRUCESPYHÄSALMITOTALGAAP referencepage 17page 20page 22Direct production costs$24$38$14$76Smelter processing charges and freight14-1327By product sales(24)-(32)(56)Adjust smelter processing and freight, and sales to production basis(1)-1-Operating costs net of metal credits$13$38($4)$47Inmet's share of production (000's)19,00031,1007,70057,800Cash cost (US dollars)$0.66$1.25($0.58)$0.82INMET MINING CORPORATION Quarterly review (unaudited) Latest Four Quarters (thousands of US dollars, except per share amounts)2012 Fourth quarter2012(2) Third quarter2012 Second quarter2012(1) First quarterSTATEMENTS OF EARNINGSGross sales$259,868$327,187$251,395$285,527Smelter processing charges and freight(26,155)(30,023)(28,480)(29,338)Cost of sales (excluding depreciation)(91,273)(91,096)(84,634)(79,624)Depreciation(30,079)(37,633)(29,193)(30,067)112,361168,435109,088146,498Corporate development and exploration(8,620)(7,905)(10,290)(8,801)General and administration(14,896)(12,982)(15,899)(9,745)Investment and other income(16,279)1,64545,103(6,263)Finance costs(2,632)(2,463)(2,379)(2,596)Income tax expense(31,713)(42,135)(31,444)(26,012)Income from continuing operations$38,221$104,595$94,179$93,081Net income attributable to:Inmet equity holders$38,775$104,897$94,458$93,081Non-controlling interest(554)(302)(279)-$38,221$104,595$94,179$93,081Net Income per shareBasic$0.56$1.51$1.36$1.35Diluted$0.56$1.50$1.35$1.34Previous Four Quarters(thousands of US dollars, except per share amounts)2011(1) Fourth quarter2011(1) Third quarter2011(1) Second quarter2011(1) First quarterSTATEMENTS OF EARNINGSGross sales$233,394$253,432$214,894$246,191Smelter processing charges and freight(27,330)(35,865)(32,793)(30,581)Cost of sales (excluding depreciation)(90,177)(78,563)(71,302)(76,633)Depreciation(26,835)(26,452)(25,802)(26,180)89,052112,55284,997112,797Corporate development and exploration(6,333)(4,539)(4,417)(12,984)General and administration(7,487)(9,669)(7,995)(8,155)Investment and other income(3,883)34,6404,581(5,590)Finance costs(2,314)(2,301)(2,310)(2,257)Income tax expense(22,491)(32,696)(20,588)(26,296)Income from continuing operations46,54497,98754,26857,515Income from discontinued operation (net of taxes)--80,786$46,544$97,987$54,268$138,301Net income attributable to:Inmet equity holders$46,544$97,987$54,268$138,301Non-controlling interest----$46,544$97,987$54,268$138,301Income from continuing operations per shareBasic$0.67$1.41$0.83$0.94Diluted$0.67$1.41$0.83$0.93Income from discontinuing operations per shareBasic$-$-$-$1.32Diluted$-$-$-$1.31Net Income per shareBasic$0.67$1.41$0.83$2.26Diluted$0.67$1.41$0.83$2.241. Information restated from previously reported Canadian dollar amounts to US dollar amounts at May 31, 2012 exchange rate of US $0.97 per Canadian dollar. 2. Investment and other income in the third quarter has been recast as a result of a reassessment of the embedded derivative relating to the senior unsecured notes prepayment option as being closely related at inception. The net effect was a decrease to investment and other income for the third quarter of 2012 and an equivalent decrease in net income in that period. INMET MINING CORPORATIONConsolidated statements of financial position(Unaudited)As at balance sheet date (thousands of US dollars) Note referenceDecember 31, 2012December 31, 2011(1)December 31, 2010(1)AssetsCurrent assets:Cash and short term investments4$1,541,219$1,048,457$316,045Restricted cash51,291784597Accounts receivable160,387101,867115,628Inventories92,39987,65469,860Current portion of bonds and other securities6883,599175,92152,201Assets held for sale--308,9352,678,895$1,414,683863,266Restricted cash577,05069,53867,831Property, plant and equipment2,632,2971,772,7661,680,858Bonds and other securities61,193,088430,787311,091Deferred income tax assets8953178,444Other assets1,6431,3802,261Total assets$6,583,868$3,689,471$2,933,751LiabilitiesCurrent liabilities:Accounts payable and accrued liabilities7282,676138,596$132,009Provisions820,04113,08717,106Current portion of long term debt917,870--Liabilities associated with assets held for sale--108,338320,587$151,683257,453Long-term debt91,941,98916,58116,091Provisions8227,146170,025157,235Other liabilities18,24317,15617,541Deferred income tax liabilities104,09928,35112,127Total liabilities2,612,064$383,796460,447Commitments and contingencies18EquityShare capital1,541,7731,541,3241,054,927Contributed surplus64,82564,62964,028Share based compensation1021,8968,2566,334Retained earnings2,176,1971,851,0101,527,342Accumulated other comprehensive loss11(85,413)(159,544)(179,327)Total equity attributable to Inmet equity holders$3,719,278$3,305,6752,473,304Non-controling interest12252,526--Total equity$3,971,804$3,305,675$2,473,304Total liabilities and equity$6,583,868$3,689,471$2,933,751(1)refer to note 3 for effect of change in presentation currency to the US Dollar (See accompanying notes)INMET MINING CORPORATIONSegmented statements of financial position(unaudited) 2012 As at December 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS - OK TEDI TOTAL (thousands of US dollars) (Turkey) (Spain) (Finland) (Panama)(Papua New Guinea)AssetsCash and short-term investments$1,128,087$148,678$157,903$22,071$84,480$-$1,541,219Other current assets894,91141,529148,25051,8231,163-1,137,676Restricted cash19,804-55,6291,617--77,050Property, plant and equipment3,764134,389852,95570,1661,571,023-2,632,297Bonds and other securities1,092,056101,032----1,193,088Other non-current assets1,4661,072----2,538$3,140,088$426,700$1,214,737$145,677$1,656,666$-$6,583,868LiabilitiesCurrent liabilities$61,204$54,111$59,288$19,472$126,512$-$320,587Long-term debt1,941,989-----1,941,989Provisions79,80921,77269,18935,80020,576-227,146Other liabilities681-17,562---18,243Deferred income tax liabilities889-91,59411,616--104,099$2,084,572$75,883$237,633$66,888$147,088$-$2,612,0642011 As at December 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS - OK TEDI TOTAL(Papua New(thousands of US dollars)(Turkey)(Spain)(Finland)(Panama)Guinea)AssetsCash and short-term investments$711,427$133,215$131,799$46,109$25,907$-$1,048,457Other current assets183,71544,72883,92651,8931,964-366,226Restricted cash16,306-51,6671,565--69,538Property, plant and equipment1,196137,736869,30866,103698,423-1,772,766Bonds and other securities351,08279,705----430,787Other non-current assets1,262435----1,697$1,264,988$395,819$1,136,700$165,670$726,294$-$3,689,471LiabilitiesCurrent liabilities$21,305$41,460$53,152$16,418$19,348$-$151,683Long-term debt16,581-----16,581Provisions68,82317,45053,85729,895--170,025Other liabilities655-16,501---17,156Deferred income tax liabilities--17,09511,256--28,351$107,364$58,910$140,605$57,569$19,348$-$383,7962010 As at December 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS - OK TEDI TOTAL(thousands of US dollars) (Turkey) (Spain) (Finland) (Panama)(Papua New Guinea)AssetsCash and short-term investments$51,493$104,324$57,961$93,970$8,297$-$316,045Other current assets58,85157,08457,70864,088664308,826547,221Restricted cash16,368-49,8831,580--67,831Property, plant and equipment754147,799911,49664,854555,955-1,680,858Bonds and other securities248,28862,803----311,091Other non-current assets9225,5714,212---10,705$376,676$377,581$1,081,260$224,492$564,916$308,826$2,933,751LiabilitiesCurrent liabilities$29,322$38,393$45,718$27,994$7,688$108,338$257,453Long-term debt16,091-----16,091Provisions55,70720,92054,64425,964--157,235Other liabilities655-16,886---17,541Deferred income tax liabilities171--11,956--12,127$101,946$59,313$117,248$65,914$7,688$108,338$460,447INMET MINING CORPORATION Consolidated statements of changes in equity (unaudited) Attributable to Inmet equity holders(thousands of US dollars)Note reference Share Capital Retained earnings Contributed surplusShare based compensationAccumulated other comprehensive income (loss) (note 11) TotalNon- controlling interestTotal equityBalance as at December 31, 2010$1,054,927$1,527,342$64,028$6,334($179,327)$2,473,304$ -$2,473,304Comprehensive income-337,100--19,783356,883-356,883Equity settled share-based compensation plans198-6011,922-2,721-2,721Dividends-(13,432)---(13,432)-(13,432)Issuance of share capital486,199----486,199-486,199Balance as at December 31, 2011$1,541,324$1,851,010$64,629$8,256($159,544)$3,305,675$ -$3,305,675Comprehensive income-331,211--68,358399,5694,867404,436Equity settled share-based compensation plans449-19613,640-14,285-14,285Dividends-(13,616)---(13,616)-(13,616)Equity funding from non-controlling shareholder------100,000100,000Sale of 20 percent interest in Cobre Panama12-7,592--5,77313,365147,659161,024Balance as at December 31, 20121,541,7732,176,19764,82521,896(85,413)$3,719,278$252,526$3,971,804INMET MINING CORPORATIONConsolidated statements of earnings(unaudited)Three Months Ended December 31Year Ended December 31(thousands of US dollars except per share amounts)reference20122011(1)20122011(1)Gross sales$259,868$233,394$1,123,977$947,911Smelter processing charges and freight(26,155)(27,330)(113,996)(126,569)Cost of sales (excluding depreciation)(91,273)(90,177)(346,627)(316,675)Depreciation(30,079)(26,835)(126,972)(105,269)Earnings from operations112,36189,052536,382399,398Corporate development and exploration(8,620)(6,333)(35,616)(28,273)General and administration(14,896)(7,487)(53,522)(33,306)Investment and other income13(16,279)(3,883)24,20629,748Finance costs14(2,632)(2,314)(10,070)(9,182)Income before taxation69,93469,035461,380358,385Income tax expense15(31,713)(22,491)(131,304)(102,071)Income from continuing operations38,22146,544330,076$256,314Income from discontinued operation (net of taxes)---80,786Net income38,22146,544330,076$337,100Net income (loss) attributable to:Inmet equity holders38,77546,544331,211$337,100Non-controlling interests(554)-(1,135)-38,22146,544330,076$337,100Earnings per common share16Income from continuing operationsBasic$0.56$0.67$4.78$3.86Diluted$0.56$0.67$4.75$3.85Income from discontinued operationBasic$ --$ -$1.22Diluted$ --$ -$1.21Net incomeBasic$0.56$0.67$4.78$5.08Diluted$0.56$0.67$4.75$5.06(1) refer to note 3 for effect of change in presentation currency to the US Dollar (See accompanying notes)INMET MINING CORPORATIONSegmented statements of earnings(unaudited) 2012 For the year ended December 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS -OK TEDI TOTAL(thousands of US dollars)(Turkey)(Spain)(Finland)(Panama)(Papua New Guinea)Gross sales$-$358,964$538,981$226,032$-$-$1,123,977Smelter processing charges and freight-(67,348)(2,374)(44,274)--(113,996)Cost of sales (excluding depreciation)(17,104)(104,045)(165,320)(60,158)--(346,627)Depreciation-(24,692)(92,037)(10,243)--(126,972)Earnings from operations(17,104)162,879279,250111,357--536,382Corporate development and exploration(22,490)(1,347)(1,600)(4,368)(5,811)-(35,616)General and administration(53,522)-----(53,522)Investment and other income25,241(524)1,580(1,727)(364)-24,206Finance costs(3,340)(1,155)(4,753)(726)(96)-(10,070)Income tax expense(1,935)(32,923)(72,495)(23,951)--(131,304)Net income from continuing operations$(73,150)$126,930$201,982$80,585$(6,271)$-$330,076Income from discontinued operation (net of taxes)-------Net income (loss)$(73,150)$126,930$201,982$80,585$(6,271)$-$330,076 2011 For the year ended December 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS -OK TEDI TOTAL(thousands of US dollars)(Turkey)(Spain)(Finland)(Panama)(Papua New Guinea)Gross sales$-$342,458$345,568$259,885$-$-$947,911Smelter processing charges and freight-(69,424)(1,188)(55,957)--(126,569)Cost of sales (excluding depreciation)(16,190)(97,079)(147,076)(56,330)--(316,675)Depreciation-(21,337)(74,931)(9,001)--(105,269)Earnings from operations(16,190)154,618122,373138,597--399,398Corporate development and exploration(20,590)(1,612)(435)(3,478)(2,158)-(28,273)General and administration(33,306)-----(33,306)Investment and other income20,0747,5211,68644720-29,748Finance costs(3,720)(570)(4,027)(865)--(9,182)Income tax expense2,374(50,947)(22,788)(30,710)--(102,071)Net income from continuing operations$(51,358)$109,010$96,809$103,991$(2,138)$-$256,314Income from discontinued operation (net of taxes)-----80,78680,786Net income (loss)$(51,358)$109,010$96,809$103,991$(2,138)$80,786$337,100INMET MINING CORPORATION Segmented statements of earnings (unaudited) 2012 For the three months ended December 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS - OK TEDI TOTAL(thousands of US dollars)(Turkey)(Spain)(Finland)(Panama)(Papua New Guinea)Gross sales$-$58,742$136,909$64,217$-$-$259,868Smelter processing charges and freight-(12,856)(861)(12,438)--(26,155)Cost of sales (excluding depreciation)(9,924)(24,691)(40,320)(16,338)--(91,273)Depreciation-(4,702)(22,331)(3,046)--(30,079)Earnings from operations(9,924)16,49373,39732,395--112,361Corporate development and exploration(5,679)(355)5(1,028)(1,573)-(8,620)General and administration(14,896)-----(14,896)Investment and other income(12,970)376(2,238)(953)(494)-(16,279)Finance costs(867)(293)(1,190)(186)(96)-(2,632)Income tax expense(1,346)(3,983)(18,371)(8,013)--(31,713)Net income from continuing operations$(45,682)$12,238$51,603$22,215$(2,153)$-$38,221-------Net income (loss)$(45,682)$12,238$51,603$22,215$(2,153)$-$38,221 2011 For the three months ended December 31 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS -OK TEDI TOTAL(thousands of US dollars)(Turkey)(Spain)(Finland)(Panama)(Papua New Guinea)Gross sales$-$77,124$97,731$58,539$-$-$233,394Smelter processing charges and freight-(14,373)(351)(12,606)--(27,330)Cost of sales (excluding depreciation)(16,190)(22,692)(37,867)(13,428)--(90,177)Depreciation-(5,391)(19,129)(2,315)--(26,835)Earnings from operations(16,190)34,66840,38430,190--89,052Corporate development and exploration(4,466)(377)(429)(1,061)--(6,333)General and administration(7,487)-----(7,487)Investment and other income(5,544)480910156115-(3,883)Finance costs(941)(148)(1,009)(216)--(2,314)Income tax expense1,662(9,444)(8,097)(6,612)--(22,491)Net income from continuing operations$(32,966)$25,179$31,759$22,457$115$-$46,544Income from discontinued operation (net of taxes)-------Net income (loss)$(32,966)$25,179$31,759$22,457$115$-$46,544INMET MINING CORPORATIONConsolidated statements of comprehensive income(unaudited)Three Months Ended December 31Year Ended December 31 (thousands of US dollars)Note reference 2012 2011(1) 2012 2011(1)Net income$38,221$46,544$330,076$337,100Other comprehensive income for the period:Continuing operationsChanges in fair value of bonds and other securities(1,175)(649)296(3,552)Currency translation adjustments38,266(107,104)73,1764,026Reclassification to net income of losses on bonds and other securities6593,4406593,440Income tax recovery related to bonds and other securities - other comprehensive income---1537,750(104,313)74,1313,929Other comprehensive income from discontinued operation (net of taxes)---15,854Comprehensive income$75,971($57,769)$404,207$356,883(1)refer to note 3 for effect of change in presentation currency to the US Dollar(See accompanying notes)INMET MINING CORPORATIONConsolidated statements of cash flows(unaudited)Three Months Ended December 31Year Ended December 31 (thousands of US dollars)Note reference 2012 2011(2) 2012 2011(2)Cash provided by (used in) operating activities(1)Net income from continuing operations$38,221$46,544$330,076$256,314Add (deduct) items not affecting cash:Depreciation30,07926,835126,972105,269Deferred income taxes18,4319,23372,56925,504Accretion expense on provisions and capital leases2,1631,8558,2897,393Change in asset retirement obligations at closed sites9,92416,19017,10416,190Foreign exchange loss (gain)4,0566,0316,361(20,384)Stock based compensation5,1582,20917,3233,473Other4,2527,7156,1553,940Settlement of asset retirement obligations(4,969)(4,209)(8,503)(10,509)Net change in non-cash working capital179,536(41,635)(32,954)4,786116,85170,768543,392391,976Cash provided by (used in) investing activitiesPurchase of property, plant and equipment(342,467)(57,100)(785,761)(201,909)Acquisition of bonds and other securities6(537,345)(2,121)(2,291,513)(296,014)Maturity of bonds and other securities581,48815,613839,67366,508Funding received under Cobre Panama option agreement---12,310Sale (purchase) of short-term investments, net(507,636)80,055(249,177)(251,632)Other-(3,730)-255(805,960)32,717(2,486,778)(670,482)Cash provided by (used in) financing activitiesIssuance of common shares---486,199Long-term debt borrowing, net of transaction costs9492,837-1,921,868-Dividends on common shares(6,857)(6,719)(13,616)(13,432)Financial assurance payments(228)(202)(5,454)(2,493)Funding by non-controlling shareholder40,000-100,000-Sale of 20 percent interest in Cobre Panama12--160,952-Other(170)(522)(1,982)(2,767)525,582(7,443)2,161,768467,507Foreign exchange on cash heldin foreign currencies15,445(22,796)25,203(5,204)Cash provided by discontinuedoperation---297,220Increase in cash:(148,082)73,246243,585481,017Cash:Beginning of period1,181,665716,752789,998308,981End of period$1,033,583$789,998$1,033,583$789,998Short term investments507,636258,459507,636258,459Cash and short-term investments$1,541,219$1,048,457$1,541,219$1,048,457(See accompanying notes)(1)Supplementary cash flow information:Cash interest paid$70,365$ -$71,426$1,118Cash taxes paid$13,951$29,038$65,936$92,102(2)refer to note 3 for effect of change in presentation currency to the US DollarINMET MINING CORPORATIONSegmented statements of cash flows(unaudited) For the year ended December 31, 2012 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS -OK TEDI TOTAL(thousands of US dollars)(Turkey)(Spain)(Finland)(Panama)(Papua New Guinea)Cash provided by (used in) operating activitiesBefore net change in non-cash working capital($40,830)$158,909$372,140$92,306($6,179)$ -$576,346Net change in non-cash working capital3,13111,307(52,337)4,945--(32,954)(37,699)170,216319,80397,251(6,179)-543,392Cash provided by (used in) investing activitiesPurchase of property, plant and equipment(3,732)(17,531)(43,217)(8,648)(712,633)-(785,761)Acquisition of bonds and other securities(2,271,677)(19,836)----(2,291,513)Maturity of bonds and other securities839,673-----839,673Sale (purchase) of short-term investments, net(249,177)-----(249,177)(1,684,913)(37,367)(43,217)(8,648)(712,633)-(2,486,778)Cash provided by (used in) financing activitiesFunding by non-controlling shareholder----100,000-100,000Long-term obligations1,921,868-----1,921,868Funding received - Cobre Panama option agreement----160,952-160,952Other(16,744)-(4,379)-71-(21,052)1,905,124-(4,379)-261,023-2,161,768Foreign exchange on cash held in foreign currencies20,289(977)9303894,572-25,203Cash provided by discontinued operation-------Intergroup funding (distributions)(35,318)(116,409)(247,033)(113,030)511,790--Increase (decrease) in cash167,48315,46326,104(24,038)58,573-243,585Cash:Beginning of year452,968133,215131,79946,10925,907-789,998End of period620,451148,678157,90322,07184,480-1,033,583Short term investments507,636-----507,636Cash and short-term investments$1,128,087$148,678$157,903$22,071$84,480$ -$1,541,219 For the year ended December 31, 2011 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS - OK TEDI TOTAL (thousands of US dollars) (Turkey) (Spain) (Finland) (Panama)(Papua New Guinea)Cash provided by (used in) operating activitiesBefore net change in non-cash working capital($55,319)$132,064$198,630$113,953($2,138)$ -$387,190Net change in non-cash working capital(4,615)19,755(10,177)(177)--4,786(59,934)151,819188,453113,776(2,138)-391,976Cash provided by (used in) investing activitiesPurchase of property, plant and equipment(1,055)(12,708)(51,935)(7,024)(129,187)-(201,909)Acquisition of bonds and other securities(280,830)(15,184)----(296,014)Maturity of bonds and other securities66,508-----66,508Funding received under Cobre Panama option agreement----12,310-12,310Sale (purchase) of short-term investments, net(258,678)-7,046---(251,632)Other255-----255(473,800)(27,892)(44,889)(7,024)(116,877)-(670,482)Cash provided by (used in) financing activities472,540-(5,033)---467,507Foreign exchange on cash held in foreign currencies-642(3,781)(2,608)543-(5,204)Cash provided by discontinued operation-----297,220297,220Intergroup funding (distributions)462,669(95,678)(53,848)(152,005)136,082(297,220)-Increase (decrease) in cash401,47528,89180,902(47,861)17,610-481,017Cash:Beginning of year51,493104,32450,89793,9708,297-308,981End of period452,968133,215131,79946,10925,907-789,998Short term investments258,459-----258,459Cash and short-term investments$711,427$133,215$131,799$46,109$25,907$ -$1,048,457INMET MINING CORPORATIONSegmented statements of cash flows(unaudited) For the three months ended December 31, 2012 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS - OK TEDI TOTAL (thousands of US dollars) (Turkey) (Spain) (Finland) (Panama)(Papua New Guinea)Cash provided by (used in) operating activitiesBefore net change in non-cash working capital($28,968)$17,617$94,801$25,926($2,061)$ -$107,315Net change in non-cash working capital6,40946,272(44,973)1,828--9,536(22,559)63,88949,82827,754(2,061)-116,851Cash provided by (used in) investing activitiesPurchase of property, plant and equipment(892)(8,343)(18,027)(2,618)(312,587)-(342,467)Acquisition of bonds and other securities(537,097)(248)----(537,345)Maturity of bonds and other securities581,488-----581,488Sale (purchase) of short-term investments(507,636)-----(507,636)(464,137)(8,591)(18,027)(2,618)(312,587)-(805,960)Cash provided by (used in) financing activitiesFunding by non-controlling shareholder----40,000-40,000Long-term obligations492,837----492,837Other(7,021)-(305)-71-(7,255)485,816-(305)-40,071-525,582Foreign exchange on cash held in foreign currencies11,224652,9841,172--15,445Intergroup funding (distributions)(192,066)1,678(3,889)(34,890)229,167--Increase (decrease) in cash(181,722)57,04130,591(8,582)(45,410)-(148,082)Cash:Beginning of year802,17391,637127,31230,653129,890-1,181,665End of period620,451148,678157,90322,07184,480-1,033,583Short term investments507,636-----507,636Cash and short-term investments$1,128,087$148,678$157,903$22,071$84,480$ -$1,541,219 For the three months ended December 31, 2011 CORPORATE & OTHER ÇAYELI LAS CRUCES PYHÄSALMI COBRE PANAMADISCONTINUED OPERATIONS - OK TEDI TOTAL (thousands of US dollars) (Turkey) (Spain) (Finland) (Panama)(Papua New Guinea)Cash provided by (used in) operating activitiesBefore net change in non-cash working capital($6,338)$33,654$60,044$24,928$115$ -$112,403Net change in non-cash working capital1,397(25,475)(15,959)(1,598)--(41,635)(4,941)8,17944,08523,330115-70,768Cash provided by (used in) investing activitiesPurchase of property, plant and equipment(345)(3,437)(9,666)(1,914)(41,738)-(57,100)Acquisition of bonds and other securities(1,807)(314)----(2,121)Maturity of bonds and other securities15,613-----15,613Sale (purchase) of short-term investments80,056-(1)---80,055Other(2,790)(940)----(3,730)90,727(4,691)(9,667)(1,914)(41,738)-32,717Cash provided by (used in) financing activities(6,836)-(607)---(7,443)Foreign exchange on cash held in foreign currencies-(5,422)(8,667)(7,224)(1,483)-(22,796)Cash provided by discontinued operation(297,220)----297,220-Intergroup funding (distributions)346,804(54)(14,675)(75,914)41,059(297,220)-Increase (decrease) in cash128,534(1,988)10,469(61,722)(2,047)-73,246Cash:Beginning of year324,433135,203121,331107,83127,954-716,752End of period452,967133,215131,80046,10925,907-789,998Short term investments258,459-----258,459Cash and short-term investments$711,426$133,215$131,800$46,109$25,907$ -$1,048,457Notes to the consolidated financial statements1. Corporate informationInmet 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, 2012, except as described in note 3. 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, 2012. These interim financial statements should be read in conjunction with our consolidated financial statements for the year ended December 31, 2012, which are included in our 2012 annual report.3. Change in functional and presentation currencies to the US dollarPrior to June 1, 2012, Inmet Mining's functional currency and our presentation currency were the Canadian dollar. The decision to proceed with full scale development of Cobre Panama has significantly increased Inmet Mining's exposure to the US dollar considering:Inmet Mining's share of the development costs for the project, the vast majority of which are denominated in US dollars; and our issuance of US $1.5 billion of senior unsecured notes Consequently, effective June 1, 2012, the US dollar was adopted as Inmet Mining's functional currency. Our operating entities continue to measure the items in their financial statements using their functional currencies; Çayeli and Cobre Panama use the US dollar, and Pyhäsalmi and Las Cruces use the euro. IFRS requires a change in functional currency to be accounted for prospectively. We therefore translated Inmet Mining's May 31, 2012 financial statement items from Canadian dollars to US dollars using the May 31, 2012 exchange rate US $0.97 per Canadian dollar (Transition Rate). The resulting translated amounts for non-monetary items are treated as their historical cost.Following the change in Inmet Mining's functional currency, we elected to change our presentation currency from Canadian dollars to US dollars as we believe that changing the presentation currency to US dollars will provide shareholders with a more accurate reflection of our underlying financial performance and position. The change in presentation currency represents a voluntary change in accounting policy. We have restated all comparative financial statements from previously reported Canadian dollar amounts to US dollars using the Transition Rate.4. Cash and short-term investmentsDecemberDecemberDecember31, 201231, 201131, 2010Cash and cash equivalents:Liquidity funds$806,269$375,523$188,415Term deposits51,2436,54851,306Overnight deposits31,38770,3894,182Bankers' acceptances-891-Money market funds14,410126,33638,774Corporate-11,593-Bank deposits130,27431,72226,304Provincial short-term notes-166,996-1,033,583789,998308,981Short-term investments:Corporate-48,588-Term deposits211,536-7,064Provincial15,079187,191-Bankers' acceptances21,49422,680-Asset backed securities259,527(i)--507,636258,4597,064Total cash and short-term instruments$1,541,219$1,048,457$316,045(i) Bank sponsored securitized programs with highest credit quality rating and supported by global liquidity lines. 5. Restricted cash DecemberDecemberDecember31, 201231, 201131, 2010Collateralized cash for letter of credit facility - Inmet$19,804$16,306$16,368MiningCollateralized cash for letters of credit - Las Cruces56,92052,45150,480Collateralized cash for Pyhäsalmi reclamation1,6171,5651,58078,34170,32268,428Less current portion:Collateralized cash for letters of credit - Las Cruces(1,291)(784)(597)$77,050$69,538$67,8316. Bonds and other securitiesThe table below provides a breakdown of our bonds and other securities as at the balance sheet date by financial instrument classification.DecemberDecemberDecember31, 201231, 201131, 2010Current available for sale securities (a)$736,387$ -$ -Current held to maturity securities (b)147,212175,92152,201883,599175,92152,201Available for sale securities (a)824,092--Held to maturity securities (b)366,513427,727308,4831,190,605427,727308,483Other2,4833,0602,608$2,076,687$606,708$363,292 (a)In 2012, we invested US cash of $2,223 million in US dollar-denominated Treasury, corporate and Supranational bonds and other securities with credit ratings of A- to AAA. These securities mature between 2013 and 2018 and have a weighted average yield to maturity of 0.29 percent. We designated these securities as available for sale and recognized them at fair value. During the year, $662 million securities matured (2011 - nil). (b)In 2012, we purchased $69 million (2011 - $292 million) of US Treasury bonds, US Corporate bonds and Canadian and Provincial government bonds. During the year, securities with a face value of $178 million matured (2011 - $67 million). The securities have an annual yield to maturity of 1.1 percent. We designated these bonds as held to maturity, measuring them initially at fair value and subsequently at amortized cost.7. Accounts payable and accrued liabilities The table below shows the significant components of our accounts payable and accrued liabilities balance.DecemberDecemberDecember31, 201231, 201131, 2010Accounts payables and accrued liabilities$258,024$117,725$91,778Amounts payable related to metal sales3,788737573Income taxes payable20,86420,13439,658$282,676$138,596$132,0098. ProvisionsWe recorded an additional $14 million of asset retirement obligations this year ($10 million this quarter), for liabilities at our closed properties. $7 million of this increase is the result of a decrease in the discount rates we applied in determining the liabilities. Additionally, we recognized $7 million due to an increase in our estimated closure costs, primarily at Troilus for on-going treatment of tailings and associate labour costs. We also recognized liabilities of $20 million at Cobre Panama as a result of development activities that took place during the year.In 2011, we recorded increased asset retirement obligations of $16 million: $5 million for additional closure liabilities at Troilus, and $11 million from a decrease in the discount rates we applied.9. Long-term debtDecember 31,December 31,December 31,201220112010Senior unsecured notes(a):8.75% notes$1,449,315$ -$ -7.5% notes492,674--1,941,989--Promissory note17,87016,58116,0911,959,85916,58116,091Less current portion:Promissory note17,870--Total long-term debt$1,941,989$16,581$16,091(a) On May 18, 2012, we issued $1,500 million aggregate principal amount of 8.75 percent senior unsecured notes (8.75 percent Notes) due June 2020. The 8.75 percent Notes were priced at 98.584 percent of their face value, yielding proceeds of $1,445 million net of the discount and directly attributable transaction costs.We may redeem, prior to June 1, 2016, up to 35 percent of the 8.75 percent Notes with the net proceeds of certain equity offerings at a redemption price equal to 108.75 percent of the principal amount plus accrued interest. Prior to June 1, 2016, we may redeem the 8.75 percent Notes in whole or in part at 100 percent of their principal amount, plus accrued interest, plus a premium that effectively compensates the holder fully for lost interest between the redemption date and June 1, 2016. We may redeem the 8.75 percent Notes at any time on or after June 1, 2016 at the redemption prices and periods set forth below, plus accrued and unpaid interest:June 1, 2016104.375 percentJune 1, 2017102.188 percentJune 1, 2018 and thereafter100.000 percentOn December 18, 2012, we issued $500 million aggregate principal amount of 7.5 percent senior unsecured notes (7.5 percent Notes) due June 2021. The 7.5 percent Notes were priced at 100 percent of their face value, yielding proceeds of $493 million net of the directly attributable transaction costs.We may redeem, prior to December 1, 2015, up to 35 percent of the 7.5 percent Notes with the net proceeds of certain equity offerings at a redemption price equal to 107.5 percent of the principal amount plus accrued interest. Prior to December 1, 2016, we may redeem the 7.5 percent Notes in whole or in part at 100 percent of their principal amount, plus accrued interest, plus a premium that effectively compensates the holder fully for lost interest between the redemption date and December 1, 2016. We may redeem the 7.5 percent Notes at any time on or after December 1, 2016 at the redemption prices and periods set forth below, plus accrued and unpaid interest:December 1, 2016103.750 percentDecember 1, 2017101.875 percentDecember 1, 2018 and thereafter100.000 percentThese senior unsecured notes have been designated as Other liabilities and accounted for initially at fair value and subsequently at amortized cost using the effective interest rate method. Interest is payable on the notes semi-annually on December 1 and June 1 of each year. As the proceeds are being used to fund the development of Cobre Panama, interest costs are being capitalized to project assets during the construction period of this project. The notes are unconditionally guaranteed on a senior unsecured basis by Inmet and certain subsidiaries. The notes contain certain customary covenants and restrictions for a financing instrument of this type.10. Stock-based compensationDuring 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 Cdn $64.17, graded vesting and an expiry date of February 21, 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 per option of Cdn $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 21, 2012, the Board granted 36,580 PSUs to senior executives based on a 5 day Volume Weighted Average Price prior to the grant date of Cdn $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, historical average volatilities and a risk free interest rate of 1.0 percent, resulting in December 31, 2012 fair values per PSU of Cdn $133.61 and Cdn $109.26, respectively, for the 2011 and 2012 awards.We recognized the following share-based compensation expense in general and administration relating to all outstanding equity-based awards:three months endedyear endedDecember 31December 312012201120122011Stock option plan$1,068$1,383$5,090$3,688Performance share unit plan2,5924553,038750Long-term incentive plan (LTIP)1,121-7,880735Deferred share unit plan3272241,119997Share award plan50147196601$5,158$2,20917,336$6,77111. Accumulated other comprehensive lossAccumulated other comprehensive loss includes:DecemberDecemberDecember31, 201231, 201131, 2010Unrealized losses on gold forward sales contracts sales(net of tax of $nil) (December 31, 2011 - $nil, December 31, 2010 - $2,350)$ -$ -($5,481)Unrealized gains (losses) on bonds and other securities(net of tax of $91) (December 31, 2011 - $91, December 31, 2010 - $76)421(534)(438)Currency translation adjustment(85,834)(159,010)(173,408)Accumulated other comprehensive loss($85,413)($159,544)($179,327)Currency translation adjustmentsThe table below is breakdown of our currency translation adjustments.DecemberDecemberDecember31, 201231, 201131, 2010Pyhäsalmi (euro functional currency)($18,981)($27,378)($23,580)Las Cruces (euro functional currency)(63,557)(103,071)(90,456)Çayeli (US dollar functional currency)(12,003)(15,068)(20,243)Cobre Panama (US dollar functional currency)8,707(13,493)(28,757)Ok Tedi (US dollar functional currency)--(10,372)($85,834)($159,010)($173,408)12. Sale of 20 percent interest in Cobre PanamaOn April 25, 2012, Korea Panama Mining Corporation (KPMC) completed its acquisition of a 20 percent interest in Minera Panama, owner and developer of Cobre Panama. KPMC acquired its interest for $161 million in cash, representing, together with US $30 million it already paid, its 20 percent share of development costs to that date. As we continued to control Minera Panama after the closing of this transaction, the sale was treated as a capital transaction with the $8 million difference between 20 percent of our book value of Cobre Panama and the consideration received recognized in retained earnings.13. Investment and other incomethree months endedyear endedDecember 31December 312012201120122011Interest income$3,818$4,668$15,144$16,099Foreign exchange gain (loss)(19,608)(8,327)6,27010,446Dividend and royalty income7591,4602,9882,944Other(1,248)(1,684)(196)259($16,279)($3,883)$24,206$29,748Foreign exchange gain (loss) is a result of: three months ended year ended December 31December 312012201120122011Translation of US dollar cash held in euro based entities($14,771)$ -($15,998)$ -Translation of US dollar cash held by Corporate prior to June 2012-527,338(8,001)Translation of US dollar senior unsecured notes prior to June 2012--(16,884)-Translation of US dollar bonds and other securities prior to June 2012-(8,321)4,33011,232Translation of Cdn dollar cash held by Corporate subsequent to May 2012(357)-2,231-Translation of Cdn dollar bonds and other securities subsequent to May 2012(2,067)-7,912-Translation of other monetary assets and liabilities(2,413)(11)(2,659)7,215($19,608)($8,327)$6,270$10,44614. Finance coststhree months endedyear endedDecember 31December 312012201120122011Interest on note payable$277$282$1,067$1,119Accretion on note payable192176714670Accretion on provisions and capital lease obligations2,1631,8568,2897,393$2,632$2,314$10,070$9,18215. Income taxFor the three months ended December 31, 2012:CorporateÇayeliLas CrucesPyhäsalmiand other(Turkey)(Spain)(Finland)TotalCurrent income taxes$474$5,838($795)$7,765$13,282Deferred income taxes872(1,855)19,16624818,431Income tax expense$1,346$3,983$18,371$8,013$31,713For the three months ended December 31, 2011:CorporateÇayeliLas CrucesPyhäsalmiand other(Turkey)(Spain)(Finland)TotalCurrent income taxes($1,577)$7,907$81$6,847$13,258Deferred income taxes(85)1,5378,016(235)9,233Income tax expense($1,662)$9,444$8,097$6,612$22,491For the year ended December 31, 2012:LasCorporateÇayeliCrucesPyhäsalmiand other(Turkey)(Spain)(Finland)TotalCurrent income taxes$1,002$33,536$255$23,942$58,735Deferred income taxes933(613)72,240972,569Income tax expense$1,935$32,923$72,495$23,951$131,304For the year ended December 31, 2011:CorporateÇayeliLas CrucesPyhäsalmiand other(Turkey)(Spain)(Finland)TotalCurrent income taxes($2,171)$46,840$606$31,292$76,567Deferred income taxes(203)4,10722,182(582)25,504Income tax expense($2,374)$50,947$22,788$30,710$102,07116. Net income per sharethree months ended year ended December 31 December 31(thousands)2012201120122011Income from continuing operations available to common shareholders$38,221$46,544$331,211$256,314Income from discontinued operations available to common shareholders---80,786Net income available to common shareholders$38,221$46,544$331,211$337,100 three months ended year ended December 31 December 31(thousands)2012201120122011Weighted average common shares outstanding69,36669,33269,36266,432Plus incremental shares from assumed conversions:Deferred share units109122109122Long term incentive plan units312-31218Diluted weighted average common shares outstanding69,78769,45469,78366,572The table below shows our earnings per common share for the three months ended December 31.three months ended December 31(US dollars per share)20122011BasicDilutedBasicDilutedNet income from continuing operations per share$0.56$0.56$0.67$0.67Income from discontinued operations per share----Net income per share$0.56$0.56$0.67$0.67The table below shows our earnings per common share for the year ended December 31.year ended December 31(US dollars per share)20122011BasicDilutedBasicDilutedNet income from continuing operations per share$4.78$4.75$3.86$3.85Income from discontinued operations per share--1.221.21Net income per share$4.78$4.75$5.08$5.0617. Statements of cash flowsFor the three months ended December 31, 2012: CorporateÇayeliLas CrucesPyhäsalmiand other(Turkey)(Spain)(Finland)TotalAccounts receivable($1,241)$39,020($47,627)($5,399)($15,247)Inventories-(4,956)266(79)($4,769)Accounts payable and accrued liabilities7,30114,2812,62323324,438Taxes payable348(2,059)(1,842)7,0753,522Provisions(283)-1,607-1,324Other284(14)-(2)268$6,409$46,272($44,973)$1,828$9,536For the three months ended December 31, 2011:CorporateÇayeliLas CrucesPyhäsalmiand other(Turkey)(Spain)(Finland)TotalAccounts receivable$342($17,642)($6,758)$6,314($17,744)Inventories-(3,009)(4,984)(1,286)(9,279)Accounts payable and accrued liabilities2,253816(4,297)1,486258Taxes payable(1,146)(6,593)80(7,856)(15,515)Provisions(52)---(52)Other-953-(256)697$1,397($25,475)($15,959)($1,598)($41,635)For the year ended December 31, 2012:CorporateÇayeliLas CrucesPyhäsalmiand other(Turkey)(Spain)(Finland)TotalAccounts receivable($4,066)$2,318($56,492)($801)($59,041)Inventories-1,296(150)4411,587Accounts payable and accrued liabilities5,27411,0963,5401,14821,058Taxes payable2,206(3,395)(842)4,1612,130Provisions(283)-1,607-1,324Other-(8)-(4)(12)$3,131$11,307($52,337)$4,945($32,954)For the year ended December 31, 2011:CorporateÇayeliLas CrucesPyhäsalmiand other(Turkey)(Spain)(Finland)TotalAccounts receivable($180)$12,895($10,913)$15,875$17,677Inventories-(1,121)(7,713)(1,328)(10,162)Accounts payable and accrued liabilities1,1427,6158,535(234)17,058Taxes payable(4,887)(803)(86)(14,234)(20,010)Provisions(690)---(690)Other-1,169-(256)913($4,615)$19,755($10,177)($177)$4,78618. CommitmentsCapital commitmentsAs at December 31, 2012, Cobre Panama had committed $3.6 billion (net of spending to that date) on a 100 percent basis for the design and supply of coal-fired power plant, two SAG mills, four ball mills, and the related gearless drive, engineering and other construction activities.Las Cruces committed $5 million for the upgrade of its safety infrastructure.Sale of precious metal stream to Franco-Nevada Corporation (Franco-Nevada)In August 2012, we announced the completion of a precious metals stream agreement with Franco-Nevada. Under the terms of the agreement, a wholly-owned subsidiary of Franco-Nevada will provide a $1 billion deposit which will be used to fund a portion of Cobre Panama project capital costs. The deposit will become available after Inmet's funding since issuing a Full Notice to Proceed reaches $1 billion and will be provided pro-rata on a 1:3 ratio with Inmet's subsequent funding contributions.The amount of precious metals deliverable under the stream is indexed to the copper in concentrate produced from the entire project and approximates 86 percent of the payable precious metals attributable to Inmet's 80 percent ownership based on the current mine plan. Beyond the currently contemplated mine life, the precious metals deliverable under the stream will be based on a fixed percentage of the precious metals in concentrate.Franco-Nevada will pay to MPSA an amount for each ounce of precious metals delivered equal to $400 per ounce for gold and $6 per ounce for silver (subject to an annual adjustment for inflation) for the first 1,341,000 ounces of gold and 21,510,000 ounces of silver (approximately the first 20 years of expected deliveries) and thereafter the greater of $400 per ounce for gold and $6 per ounce for silver (subject to an adjustment for inflation) or one half of the then prevailing market price. In all cases the amount paid is not to exceed the prevailing market price per ounce of gold and silver.Çayeli tax auditOur tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. In 2012 Çayeli became the subject of an audit of its 2008 to 2011 taxation years. On February 4, 2013, Çayeli received an assessment from the Turkish tax authorities adjusting the amount of withholding taxes to be remitted on dividends paid by Çayeli to its direct shareholder. The shares of Çayeli are owned by an indirect wholly-owned Spanish subsidiary of Inmet. The Turkish tax authorities have taken the position that Inmet and not the Spanish subsidiary is the beneficial owner of the dividends. The Turkish tax authorities are therefore taking the position that the withholding tax on the dividends should be the 15 percent domestic rate and not the reduced rate of 5 percent under the Turkey-Spain tax treaty. The dividends paid during the period assessed total TL 628 million. The proposed tax liability is TL 63 million (US $35 million) plus interest and penalties. Our view is that the relevant facts and circumstances support the position that Çayeli fulfilled its tax remittance obligations and Çayeli intends to vigorously dispute the assessment.FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: Inmet Mining CorporationJochen TilkPresident and Chief Executive Officer+1.416.860.3972Inmet Mining CorporationFlora WoodDirector, Investor Relations+1.416.361.4808www.inmetmining.com