Ill met for Inmet
Published by MAC on 2008-05-05Inmet shares take another hit as woes mount at mine projects
Legal dispute erupts over Panama venture
ANDY HOFFMAN, Toronto Globe & Mail
1st May 2008
For Inmet Mining Corp., this is turning into one ugly week.
On Tuesday, the company delivered a disappointing first-quarter financial report and said that a court ruling will force it to temporarily shut a copper project in Turkey, delaying the mine's startup date past 2009.
And yesterday, Inmet's growth plans suffered another double body blow as Spain's water authority raised concerns about the Las Cruces mine, while, at the same time, a three-way partnership to build a massive copper project in Panama erupted into a bitter legal dispute.
"We are a little perplexed," Inmet chairman and chief executive officer Richard Ross said on a conference call, referring to junior partner Petaquilla Copper Ltd.'s claim that Teck Cominco Ltd.'s interest in the Panama project has been terminated.
Vancouver-based Petaquilla has filed legal action in British Columbia seeking arbitration for the dispute.
Teck and Inmet reached a deal last month to develop the Panamanian mine, whose costs have doubled to $3.5-billion (U.S.). Inmet, which owns 48 per cent of the project, agreed to fund up to $50-million in development costs for the next 18-months, including Teck's 26-per-cent interest, in exchange for the right to be project operator.
Petaquilla, claims it still owns 52 per cent of the project because Teck has failed to deliver a bankable feasibility study and therefore has not satisfied the conditions necessary to claim the 26-per-cent stake.
"Let's face it, we're the owner of the project," Tom Byrne, Petaquilla's corporate communications manager, said in an interview.
"What are we supposed to do? Sit in the back of the bus and hope they drive it?" Mr. Byrne said Petaquilla needs the bankable feasibility study in order to be able to finance its interest, most likely through off-take agreements with Asian metals companies, which would then process and sell the finished copper.
Mr. Byrne said Petaquilla wants to avoid the same fate as fellow Vancouver junior Novagold Resources Inc., whose Galore Creek project was halted by Teck just a few months after the two companies signed an agreement to build the northwestern B.C. mine.
"Look what they did with Novagold and Galore Creek. We can't just let them dictate terms," Mr. Byrne said.
Teck spokesman Doug Horswill said the company will fight Petaquilla's claim. "We think we've acted in accordance with the agreement so we will vigorously defend our position," he said.
Inmet also believes Petaquilla's claim is without merit and says it is curious that Petaquilla is still asking Teck and Inmet to carry its funding commitments.
But the looming legal battle has also added to concerns about Inmet's own production growth plans.
"It puts the whole project in jeopardy again," said Canaccord Adams analyst Orest Wowkodaw.
Mr. Ross warned that Inmet could cease funding the Petaquilla project because of the legal dispute.
"What we are definitely saying is that if we perceive there is a risk to any of our funds going into this project as a result of this process, we would have to consider suspending our activities," he said.
Inmet also warned that ore shipments and mining at its Las Cruces project in Spain could be impacted if concerns the Spanish Water Authority has expressed about the mine's dewatering system are not addressed quickly.
Inmet shares slipped 6.4 per cent yesterday, adding to a 4 per cent slide on Tuesday.
Inmet halts Turkish project after failed appeal, posts Q1 profit of $106.7M
Canadian Press
29th April 2008
Inmet Mining Corp.is being forced to mothball a copper project in Turkey after a court in that country rejected the company's appeal of an injunction against development activities at the site.
The news came after Inmet reported a first quarter profit of $106.7 million on Tuesday.
Inmet said the Trabzon Regional Administrative Court had rejected an appeal by the Turkish Ministry of Energy and Natural Resources over the injunction against its Cerattepe copper property.
With the appeal's rejection, Inmet said ``the injunction will continue to prevent (its subsidiary) from carrying out further development work on the Cerattepe property until the end of this year.''
That's when Inmet expects the Rize Administrative Court to render its decision on applications filed with it to cancel operating licences for the project.
Inmet said it is working with the Ministry of Energy and Natural Resources ``to defend against these applications ... and believes they are without merit.''
But it no longer expects production to begin at the Cerattepe project next year.
In late March, Inmet had said it received notice of a court injunction preventing further development work at Cerattepe and threatening to delay the project.
The injunction had been issued against its wholly-owned subsidiary Artvin Bakir Maden Isletmeleri A.S. while another Turkish court considers applications by two non-governmental groups looking to cancel the subsidiary's operating licences.
Inmet said earlier Tuesday that its first quarter profit had risen six per cent to $2.21 per diluted share from $101.1 million or $2.09 per share last year on higher copper and gold prices.
Gross sales were down four per cent to $276.2 million in the first quarter, compared to $286.6 million in the year earlier period.
Cash flow provided by operating activities fell to $77 million, down from $105 million.
The company said earnings would have been higher except for the significant increase in the value of the Canadian dollar relative to the U.S. dollar.
``This lowered gross sales this quarter by $40 million and net income by $26 million,'' Inmet said.
Toronto-based Inmet mines copper, zinc and gold around the world.
On the TSX, Inmet shares were trading down $5.39, or nearly six per cent, at $86.81.