Inmet will focus on copper resources as it awaits price rebound: president
April, 28, 2009 - 05:30 pm Owram, Kristine - (THE CANADIAN PRESS)
TORONTO - Inmet Mining (TSX:IMN) hasn’t ruled out the possibility of depressed base-metal prices “for several years to come,” but will focus on the development of its copper resources amid hopes that production cutbacks will lead to a shortage of the metal.
“There’s almost been an assumption that the economic downturn requires the termination of productivity, regardless of the status of the project and the economic condition of the sponsor company,” Inmet president and chief operating officer Jochen Tilk said at the company’s annual general meeting Tuesday.
“We therefore strongly believe that an inevitable recovery in the economy will coincide with the realization that there’s a significant shortage of copper under development,” Tilk said.
“This situation can only lead to a strong copper price until supply finally catches up with demand.”
The plunge in base metal prices in the latter part of 2008 was “astonishing,” he said, with copper taking a nosedive from US$4.04 to $1.27 a pound in six months - a drop of almost 70 per cent.
Tilk said Inmet is positioning itself to take advantage of a spike in copper prices with two mines that have not yet reached production: Las Cruces in Spain, slated to begin production by June, and Petaquilla in Panama.
Inmet bought a 26 per cent interest in Petaquilla held by Teck Resources (TSX:TCK.B) in November and now owns 100 per cent of the mine.
Tilk said the company will produce 132,000 tonnes of copper per year by 2010 with the addition of Las Cruces, an increase of 64 per cent from its 2008 output.
With Petaquilla slated to come on stream by 2014, Inmet will be producing 238,000 tonnes of copper annually, “essentially tripling our current production” even with the winding down of the Ok Tedi mine in Papua New Guinea.
Inmet has $295 million in available cash and expects earnings from operations of about $240 million this year. It is working to maintain its strong balance sheet, preserve liquidity, protect its low operating costs - 52 cents per pound of copper in 2008 - and “responsibly pursue near-and long-term growth opportunities,” Tilk said.
It is looking for potential partners for Petaquilla, “and have set ourselves a target to retain at least 50 per cent interest in the project,” Tilk said.
He added that Inmet is keeping an eye out for acquisitions, although “the availability of high-quality producing copper assets is likely to be limited and we will be careful not to dilute our existing asset base.”
Earlier Tuesday, Inmet reported its first-quarter net income fell 52 per cent to $51.3 million or $1.06 per share, on weaker metal prices. This compared with $106.7 million or $2.21 a share in the first three months of last year.
The company, active in Canada, Turkey, Papua New Guinea and Finland, said sales declined to $239.1 million from $276.3 million.
Its stock fell $1.20 or 3.2 per cent to $36.70 on the Toronto Stock Exchange, down from $95 a year ago but up from $12.15 in December.
Read more News Items from around the web on our blog LionsGateMetals/Blog.com