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Press Release

Inmet Announces Basic Engineering Results and Financing Plan for the Cobre Panama Project

TORONTO, CANADA--(Marketwire - May 6, 2012) - Inmet Mining Corporation (TSX:IMN) (Inmet) is pleased to announce the completion of Basic Engineering for the Cobre Panama project and the launch of a financing plan to fully fund Inmet's 80 percent share of the related development costs.
The Cobre Panama project, located in the Donoso District of Panama, is owned by Minera Panama, S.A. (MPSA), an 80 percent owned subsidiary of Inmet. Cobre Panama is one of the largest undeveloped copper porphyry deposits in the world. MPSA has completed the most important steps of permitting and Basic Engineering, and is now ready to start construction. Korea Panama Mining Corporation (KPMC), a consortium of LS-Nikko Copper Inc. and Korea Resources Corporation, owns 20 percent of MPSA and is our partner in the project. Upon closing of the proposed offering of senior, unsecured notes described in a separate press release issued today, Inmet would authorize the issuance of a "Full Notice to Proceed" for major construction.
Jochen Tilk, Inmet's President and CEO said "Inmet has been involved in the development of Cobre Panama for the past 20 years. Since the early days, three separate areas of advancement have converged to strengthen our commitment: first, the deposit has grown substantially; secondly, the communities in the area have participated in and supported the development plans; and finally, Basic Engineering has presented a clear execution strategy. We have focused on the social and environmental commitments for this project as it is our priority to ensure the protection of these values. The results of Basic Engineering have demonstrated robust economics, and we are executing a solid financing plan that does not include issuing equity. The coming four years will be transformative for Inmet as we expect to grow significantly as a low cost copper producer."
We will hold a conference call and webcast with a PowerPoint presentation tomorrow, May 7, at 8:00 am ET to provide you with further detail on Cobre Panama. A summary of Basic Engineering has also been posted separately to our website at www.inmetmining.com.
Results of Basic Engineering
Project Highlights
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Description
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Reserves(1) 9.3M t Cu 5.2M oz Au 104M oz Ag 169k t Mo
Resources(measured & 14.7M t Cu 9.0M oz Au 168M oz Ag 238k t Mo
indicated)(1)
Resources (inferred)(1) 8.7M t Cu 4.8M oz Au 121M oz Ag 156k t Mo
Annual production (Yr 2-16) 298k t Cu 106k oz Au 1.6M oz Ag 3,100 t Mo
Annual production (LOM) 266k t Cu 87k oz Au 1.5M oz Ag 2,900 t Mo
NSR breakdown at US$2.75/lb Cu 87% Au 6% Mo 5% Ag 2%
Cu
Life of Mine (reserves 31+ years
only)
C1 cash costs (Yr 2-16) US$0.72/lb Cu
C1 cash costs (LOM) US$0.82/lb Cu
Ore throughput capacity 160ktpd to 240ktpd throughput with further
expansion capacity
Average strip ratio 0.58:1
Concentrate Clean concentrate with no penalties for
deleterious elements
Logistics On tidewater with immediate proximity to Panama
Canal
Power Supply MPSA-owned 300 megawatt coal-fired power plant
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(1)Reserves and resources are quoted on a contained metal basis; measured
and indicated resources are quoted including reserves. Mineral reserve and
resource table as disclosed in our 2011 Annual Information Form is attached
as Appendix A.
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Economics
The table below shows the levered net present value and rate of return at various metal prices. Rate of returns are after tax, taking working capital into consideration.
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Price Scenarios
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Copper (US$/lb) 2.75 3.00 3.25 3.50
Gold (US$/oz) 1250 1,364 1,477 1591
Silver (US$/oz) 20.00 21.82 23.64 25.45
Molybdenum (US$/lb) 15.00 16.36 17.73 19.09
IRR 14.3% 16.5% 18.5% 20.4%
Net present value 8% (US$ B) 3.2 4.4 5.6 6.8
Average LOM Annual Free Cash Flow (US$ M) 809 932 1,056 1,179
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Assumes US$ 1.6 billion in senior debt, with 2% one time fees and 7.25%
nominal interest rate on a 100% basis.
/T/
Capital Cost Estimates
Basic Engineering Capital Cost by Major Area
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CAPEX Total
Area (US$ M) % of Project
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Mining 760 12
Process Plant 1,184 19
Site & Services 550 9
Port Site Facilities 543 9
Power Plant 646 10
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Total Direct Costs 3,682 59
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Construction Indirects 844 14
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Total Field Costs 4,526 73
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EPCM Services 355 6
Owner Costs 885 14
Contingency 415 7
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Project Total Costs 6,181 100
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Note: Figures may not sum due to rounding
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The following table reconciles this estimate to the capital cost estimate of US$ 4.3 billion announced in the Front End Engineering and Design study dated March 2010 (based on Q2 2009 dollars):
FEED Study to Basic Engineering Capital Cost Estimate Variances
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CAPEX Total
(US$ M)
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FEED study capital costs (power plant not included) 4,320
Power plant 646
Increased process plant capital cost estimate 403
Increased mining capital cost estimate 312
Increased port site capital cost estimate 285
Other 215
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Basic Engineering Capital Cost Estimate 6,181
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The total capital estimate includes the direct field cost for executing the project, the contractor's costs for engineering, procurement and construction management, the indirect costs of construction, as well as the cost of the owner-provided mining fleet, our owners' costs incurred after May 1, 2012, contingency and growth. The capital estimate does not include any amount for escalation.
Sustaining capital, including a third line expansion operating from Year 10 onward, is estimated to be US$ 2.92 billion for the estimated 31-year life of mine and includes replacement of mobile equipment, tailings facility development, and water management systems.
If we move forward with Full Notice to Proceed in May, we expect total capital spending (on a 100 percent basis) excluding changes in net working capital and interest on long-term debt to be $885 million in 2012.
Operating Costs
Operating costs are estimated to be US$ 6.88 per tonne of ore milled with mining costs benefitting from a low life of mine strip ratio of 0.58 tonnes waste per tonne of ore. The power cost would be US $1.01 per tonne of ore milled, or 4.4 cents per kWh (LOM) and 2.7 cents per kWh in the first nine years of mine life if we sell excess power back to the grid.
Summary of Operating Costs per Component (US$/t of ore milled)(i)
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Cost Centre Total Labour Material Power Other
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Mine 2.44 0.27 1.87 0.05 0.24
Process Plant 3.29 0.24 2.13 0.91 0.01
G&A 0.88 0.15 0.01 0.04 0.69
Site Services 0.28 0.11 0.07 0.01 0.09
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Total 6.88 0.77 4.08 1.01 1.03
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(i)Based on US$2.75/lb consensus long-term copper price.
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C1 Cash Costs (US$/lb) Y2-16 and Life of Mine Average(i)
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Cost Item Years 2 - 16 LOM Average
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Mine 0.30 0.32
Plant 0.37 0.44
G&A 0.11 0.12
Site services 0.03 0.04
Offsite costs 0.30 0.30
By-product credits (0.40) (0.40)
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C1 0.72 0.82
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(i)Based on US$2.75/lb consensus long-term copper price.
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C3 total costs are C1 cash costs, plus a net smelter royalty (NSR) of 5 percent on copper and molybdenum and 4 percent on precious metals, plus interest expense on assumed debt, project capital and sustaining capital and are meant to represent all costs required to produce a pound of recovered copper net of by-product credits.
C3 Total Cost (US$/lb) Y2-16 and Life of Mine Average(i)
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Cost Item Years 2 - 16 LOM Average
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C1 0.72 0.82
Depreciation and closure 0.50 0.48
Royalty and front end taxes 0.14 0.14
Interest cost (debt) 0.04 0.03
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C3 1.41 1.47
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(i)Based on US$2.75/lb consensus long-term copper price.
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Cobre Panama's life of mine C3 costs of US$ 1.47/lb would rank in the 29th percentile on Brook Hunt's projected C3 cost curve, and be attractive based on the consensus long-term copper price of US$ 2.75/lb. With C1 cash costs over the life of mine at US$ 0.82/lb and total C3 costs of US$ 1.47/lb, Cobre Panama would rank as one of the lowest cost future copper producers in the world.
Third Party Reviews
Inmet recognizes the industry trend of escalating costs as a significant risk and has commissioned numerous third party reviews to ensure the quality and reliability of the estimates, and to mitigate this risk. Independent reviews encompassed:
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-- Capital cost estimates
-- Operating cost estimates for both process and mining
-- Project schedule
-- Compliance with the International Finance Corporation Performance
Standards on Social and Environmental Sustainability
-- Tailings management facility
-- Project controls
-- Project execution readiness
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The results of these studies confirmed the conservative cost assessment as well as the overall execution readiness of the project. These are summarized in the Basic Engineering Summary Report at www.inmetmining.com.
Early Commitment and Securing Long-lead Items
To reduce exposure to capital cost escalation, we expect to have committed in excess of 50 percent of the estimated capital by the end of 2012.
The power plant has already been contracted under a lump sum, turn-key contract to SK Engineering & Construction Co. Ltd., a Korean engineering and construction firm, that has already secured suppliers for long-lead items such as Boilers, Steam Turbine Generators, and Flue Gas Desulphurization systems.
The detailed engineering and construction for the process plant would be contracted in the third quarter this year under an Engineering, Procurement and Construction arrangement and the bidding process is currently underway. The SAG mills, ball mills and wrap-around drives have been ordered, and are currently being fabricated with delivery expected next year.
The balance of project infrastructure is under contract with Joint Venture Panama (JVP), a joint venture led by SNC Lavalin Group Inc. (70 percent), with partners Techint International Construction Corp. (15 percent) and GyM.S.A., a member of Grana y Montero Group (15 percent) under an Engineering, Procurement and Construction Management agreement that was executed in November 2010. JVP's procurement activities are well underway and would result in the early award of all major earthworks, site capture, camps and site services packages during the second quarter this year.
Procurement of the initial mine fleet is well underway and we expect to make a commitment by the third quarter this year.
Strategic Decision on Ownership and Financing Plan
Recent Project Milestones
Over the past years, Inmet has constantly evaluated the appropriate ownership level in Cobre Panama, balancing the growth opportunity presented by future copper production against the capital and execution risk. As our evaluation advanced, the parallel progress in Cobre Panama has substantially lowered the risk and Inmet's capability to fund has increased significantly. The following milestones have facilitated our assessment, and have increased the project's value while reducing financing and execution risk:
/T/
-- The completion of Basic Engineering in April 2012 resulting in
favourable economics for the project
-- The development of a sound financing plan
-- The approval of the Environmental and Social Impact Assessment (ESIA) on
December 28, 2011
-- The closing of the KPMC option exercise on April 24, 2012
-- The discovery of Balboa in connection with a substantial increase in
mineral reserves and resources and the prospect of future discoveries
-- The establishment of a large and experienced owner's team
-- The establishment of a highly experienced and competent project
execution team by Joint Venture Panama (JVP), Inmet's Engineering,
Procurement and Construction Management (EPCM) contractor on the project
-- The award of the power plant under a lump sum, turn-key contract to a
reputable contractor
-- The completion of all necessary negotiations and resettlement planning
with those who will be economically or physically displaced by the
development of the project
/T/
On that basis, we believe our best course of action to enhance value is to initiate development with an 80 percent ownership interest in MPSA. As construction advances, we will continue to evaluate opportunities to optimize our holding, balancing the potential benefits of reduced ownership against exposure to this world class copper asset.
Financing Plan
As announced today by separate press release, Inmet intends to offer an issuance of US $1 billion principal amount of senior, unsecured notes.
We have also commenced a process to consider a precious metals stream transaction. We are currently engaged in discussions with interested parties to sell a portion of future gold and silver production attributable to our 80 percent interest in Cobre Panama. If we are successful in completing such precious metals stream transaction on acceptable terms, the stream transaction would provide an additional approximately US$1 billion for our share of the capital cost of the project.
The total project funding plan along with the approximate proportion of funding in place is outlined in the table below:
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(US$ billions) % financed
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Capital estimate $6.2
Funding sources:
KPMC $1.4 23%
Inmet cash on hand 1.7 50%
Inmet senior unsecured notes 1.0 66%
Inmet precious metals stream 1.0 82%
Inmet cash flow from operating mines 2012 to
2015 net of financing costs 1.5 106%
Other 1.0 123%
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Total Funding Sources $7.6 123%
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Funding classified as "other" represents steps to create additional financial flexibility and to further mitigate financial risk, including:
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-- Sale of additional equity in the project
-- Project level debt financing, including off-take financing and equipment
lease financing
-- Corporate level debt financing, including a corporate revolving credit
facility
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Change of Functional Currency to US Dollar
The development of Cobre Panama would significantly increase Inmet's exposure to the US dollar considering:
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-- Inmet's share of the development costs for the project, the vast
majority of which are denominated in US dollars; and
-- our expected issuance of US dollar denominated high yield bonds.
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On completion of the proposed offering of senior, unsecured notes and authorization for a Full Notice to Proceed, the functional currency of Inmet would become the US dollar effective May 31, 2012, and Inmet would report its financial results in US dollars beginning in the second quarter of 2012.
Project Execution
Project team
Our qualified and experienced owner's team now comprises 50 members, and would grow to 107 by 2013. This team comprises senior, seasoned individuals with extensive experience in mining and large project development. Profiles for key personnel are included in the Basic Engineering Summary Report. In addition to the owner's team, JVP has mobilized an equally qualified team of 154 members that would peak at 361 in 2013.
Current Activities
Approved early works are currently underway, including the upgrade of the 40-kilometre Llano Grande road from the Pan-American Highway to the project site. This upgrade incorporates enhanced drainage features, reduced longitudinal slopes and new bridge structures. Three other roads are under construction, and will provide ready access to the site while bypassing local communities to minimize the impact of increased traffic flow. We have received permits and started construction of camps to house up to 2,000 workers by the fourth quarter this year. At the port site at Punta Rincon, we have received the required permit for the installation of a temporary landing barge which will facilitate access for equipment, materials and personnel coming from the port of Colon.
Development Plan
Cobre Panama would be developed as a conventional truck and shovel open pit mine with a concentrator that employs proven technology (crushing, grinding, and flotation) to produce copper-gold and molybdenum concentrate. A 300 megawatt coal-fired power plant and ship loading port facilities would also be part of the project.
A series of analyses were conducted to determine economic pit limits and the mining phase development sequence for three mineral deposits in the concession area: Botija, Colina, and Valle Grande. The concentrator site would be centrally located within two kilometres of all three deposits as well as the stockpile. A fourth smaller deposit, Medio, is roughly 500 metres northeast of the Colina pit. The new block model incorporates a small Medio pit which was targeted by recent drilling and is part of the mine production schedule in Years 11 to 14. Neither the Balboa nor Brazo deposits are incorporated into the mine plan, and represent expansion upside and potential justification for an early expansion of the third line.
A third grinding circuit could be added to the concentrator that would commence operation in Year 10, increasing the base ore processing rate from 160,000 tonnes per day to 240,000 tonnes per day. Mine operations would be scheduled for two 12-hour shifts per day, 365 days per year. Four rotating crews would provide continuous operator and maintenance coverage in the mine. The concentrator would operate an estimated 31 years, including the processing of about 193 million tonnes of stockpiled ore during Years 28 to 31.
Project Timeline and Milestones
Project timelines cited below are subject to permitting and approvals, and will be confirmed in our ongoing reporting. The following are the expected main milestones ahead as we migrate through the project schedule.
/T/
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1 Completion of Basic Engineering April 2012
2 Closing of notes offering / Full Notice to Proceed May 2012
3 Site capture complete Q2 2013
4 Power plant complete Q4 2015
5 Tailings starter dam complete Q3 2015
6 First ore processed Q4 2015
7 Mine development (pre-strip) complete Q1 2016
8 First concentrate shipment Q1 2016
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Webcast Conference Call
On May 7, 2012 at 8:00 am Eastern Time, Inmet will hold a live webcast conference call as a follow-up to this press release that will include a comprehensive engineering presentation followed by a question and answer session. The call will be hosted by Jochen Tilk, President and Chief Executive Officer.
You are cordially invited to listen to the audio webcast through either:
http://events.digitalmedia.telus.com/inmet/050712/index.php
or
www.inmetmining.com
After the broadcast, an archive of the webcast will be available on both websites.
Interested persons who are unable to connect to the webcast can listen to the conference call by dialing +416-340-8530 (local/international) or toll-free +1 877-240-9772 (North America only).
Starting at approximately 10:30 am ET Monday, May 7, 2012, a conference call replay will be available.
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-- Local or international: +1 905-694-9451 passcode 5837135
-- Toll-free within North America: +1 800-408-3053 passcode 5837135
/T/
Forward-Looking Information
Securities regulators encourage companies to disclose forward-looking information to help investors understand a company's future prospects. This press release contains forward-looking information. These 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 such as may, expect, anticipate, and believe or other similar words. Capital and operating cost estimates are forward-looking statements, and are based on assumptions that we believe to be reasonable. However, actual events and results could be substantially different because of the risks and uncertainties associated with our respective business or events that happen after the date of this press release. You should not place undue reliance on forward-looking statements.
About Inmet
Inmet is a Canadian-based global mining company that produces copper and zinc. We have three wholly-owned mining operations: Cayeli (Turkey), Las Cruces (Spain) and Pyhasalmi (Finland). We also have an 80 percent interest in Cobre Panama, a development property in Panama.
This press release is also available at www.inmetmining.com.
APPENDIX A
Mineral reserve and resource table
The mineral reserves and resources shown below are as of December 31, 2011 for the three operating mines, and as of March 5, 2012 for Cobre Panama.
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Operating properties
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Tonnes Cu Zn Pb Au Ag
Category (x 1000) % % % g/t g/t
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Mineral reserves
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Las Cruces Proven 9,777 5.8 - - - -
Probable 4,881 4.9 - - - -
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Total 14,658 5.5 - - - -
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Cayeli Proven 5,007 3.0 3.4 - 0.3 28
Probable 2,946 3.3 4.3 - 0.4 40
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Total 7,953 3.1 3.7 - 0.4 32
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Pyhasalmi Proven 9,137 1.1 2.0 - 0.4 14
Probable - - - - - -
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Total 9,137 1.1 2.0 - 0.4 14
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Operating properties
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Contained Metal (x 1000)
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S Mo Cu Zn Pb Au Ag Mo Inmet's
% % tonnes tonnes tonnes ounces ounces tonnes Interest
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Mineral reserves
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Las Cruces - - 564 - - - - - 100%
- - 238 - - - - - 100%
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- - 802 - - - - - 100%
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Cayeli - - 152 170 - 55 4,507 - 100%
- - 98 126 - 42 3,789 - 100%
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- - 250 296 - 96 8,296 - 100%
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Pyhasalmi 41 - 99 183 - 118 4,113 - 100%
- - - - - - - - 100%
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41 - 99 183 - 118 4,113 - 100%
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Inmet's
share 1,151 478 214 12,409
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Mineral resources
(exclusive of
mineral Tonnes Cu Zn Pb Au Ag
reserves) Category (x 1000) % % % g/t g/t
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Las Cruces Measured - - - - - -
Indicated 194 4.2 - - - -
Indicated 958 - - 5.8 3.9 109
(Gossan)
Inferred 1,767 - - 1.6 2.5 48
(Gossan)
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Cayeli Measured 3,016 3.0 1.7 - 0.3 11
Indicated 2,089 3.1 3.3 - 0.6 27
Inferred 479 3.2 10.6 - - -
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Pyhasalmi Measured 7,168 0.6 0.5 - - -
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Contained Metal (x 1000)
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Mineral resources
(exclusive of
mineral S Mo Cu Zn Pb Au Ag Mo Inmet's
reserves) % % tonnes tonnes tonnes ounces ounces tonnes Interest
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Las Cruces - - - - - - - - 100%
- - 8 - - - - - 100%
- - - - 56 119 3,357 - 100%
- - - - 29 140 2,744 - 100%
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Cayeli - - 89 50 - 33 1,067 - 100%
- - 65 70 - 43 1,813 - 100%
- - 16 51 - - - - 100%
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Pyhasalmi 44 - 45 37 - - - - 100%
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Inmet's
share 207 157 56 195 6,237 -
(not including inferred resources)
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Development property
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Tonnes Cu Zn Pb Au Ag
Category (x 1000) % % % g/t g/t
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Mineral reserves
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Cobre Panama Proven 258,000 0.57 - - 0.14 1.6
Probable 2,061,000 0.38 - - 0.06 1.4
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Total 2,319,000 0.40 - - 0.07 1.4
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Development property
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Contained Metal (x 1000)
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S Mo Cu Zn Pb Au Ag Mo Inmet's
% % tonnes tonnes tonnes ounces ounces tonnes Interest
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Mineral reserves
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Cobre Panama - 0.010 1478 - - 1126 13,020 25 80%
- 0.007 7781 - - 4041 91,008 145 80%
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- 0.007 9258 - - 5167 104,028 169 80%
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Inmet's
share 7,406 - - 4,134 83,223 135
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Mineral
resources
(inclusive
of mineral Tonnes Cu Zn Pb Au Ag
reserves) Category (x 1000) % % % g/t g/t
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Cobre Panama Measured 262,000 0.56 - - 0.13 1.5
Indicated 3,905,000 0.34 - - 0.06 1.2
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Total 4,167,000 0.35 - - 0.07 1.3
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Cobre Panama Inferred 3,749,000 0.23 - - 0.04 1.0
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Contained Metal (x 1000)
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Mineral
resources
(inclusive
of mineral S Mo Cu Zn Pb Au Ag Mo Inmet's
reserves) % % tonnes tonnes tonnes ounces ounces tonnes Interest
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Cobre Panama - 0.009 1,476 - - 1,118 12,979 24 80%
- 0.005 13,237 - - 7,845 155,392 214 80%
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- 0.006 14,715 - - 8,963 168,454 238 80%
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Inmet's
share 11,772 - - 7,170 134,763 190
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Cobre Panama - 0.004 8,660 - - 4,805 120,534 156 80%
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Inmet's
share 6,928 - - 3,844 96,427 125
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/T/
For additional information regarding Inmet's reserves and resources please refer to Inmet's 2011 Annual Information Form dated March 28, 2012.
Notes to mineral reserves and resources table
Mineral reserves and resources are shown on a 100 percent basis for each property, including Cobre Panama which we own 80 percent of. Except for Cobre Panama, mineral resources are exclusive of mineral reserves.
The mineral reserve and resource estimates are prepared in accordance with the CIM Definition Standards On Mineral Resources and Mineral Reserves, adopted by CIM Council on November 14, 2004, and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines, adopted by CIM Council on November 23, 2003, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to each project. You will find the definitions and guidelines at www.cim.org.
Estimates for all operations are prepared by or under the supervision of a qualified person as defined in National Instrument 43-101 (usually an engineer or geologist).
There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the estimates of the mineral reserves.
Mineral resources which do not form part of the mineral reserves do not have demonstrated economic viability.
The Qualified Persons identified below have reviewed the technical content of this release.
Las Cruces
Reserve and resource estimates as at December 31, 2011 prepared by independent consultant Alan C. Noble, P.E., Ore Reserves Engineering.
Reserve estimates are based on the following assumptions:
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-- copper price: US $2.25 per pound
-- exchange rate: EUR1.00 = US $1.30
-- open pit cut-off: 1 percent copper (95 percent of copper in reserve)
-- underground cut-off: 3 percent copper (5 percent of copper in reserve).
/T/
Resource estimates for the gossan material are based on a cut-off grade of 1 gram per tonne gold.
Cayeli
Mineral resources as at December 31, 2011, were estimated by Robert Sim, P. Geo., of SIM Geological Inc. Reserve estimates as at December 31, 2011 were prepared under the supervision of Joseph Boaro, P. Eng. (Director, Mining, Inmet Mining).
Reserve estimates are based on the following assumptions:
/T/
-- copper price: US $2.25 per pound
-- zinc price: US $0.85 per pound
-- net smelter return cut-off: US $65 per tonne.
/T/
Resource estimates include only material in addition to those used to generate reserves and are based on the same metal prices and a lower net smelter return cut-off: US $59 per tonne.
Pyhasalmi
Reserve and resource estimates as at December 31, 2011 prepared under the supervision of Timo Maki, EurGeol., European Federation of Geologists (Chief Geologist, Pyhasalmi).
Reserve estimates are based on the following assumptions:
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-- copper price: US $2.25 per pound
-- zinc price: US $0.85 per pound
-- exchange rate: EUR1.00 = US $1.30
-- net smelter return cut-off: EUR31.73 per tonne.
/T/
Resource estimates are based on the geological limits of the massive sulphides.
Cobre Panama
Mineral resources as at March 5, 2012, were estimated by Robert Sim, P. Geo., of SIM Geological Inc. Mineral reserves as at December 31, 2011 were estimated by William Rose, P.E., of WLR Consulting, Inc., a qualified person under National Instrument 43-101.
Reserve estimates are based on the following assumptions:
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-- copper price: US $2.25 per pound
-- gold price: US $1,000 per ounce
-- silver price: US $16 per ounce
-- molybdenum price: US $13.50 per pound
-- Mining costs: US $1.66 per tonne of ore mined, US $1.96 per tonne of
waste mined and
-- Milling and general and administration cost: US $5.27 per tonne of ore
milled, average life of mine metallurgical recoveries: 89 percent for
copper, 52 percent for gold, 46 percent for silver and 53 percent for
molybdenum.
/T/
Mineral resources include mineral reserves.
Resource grades are estimated using ordinary kriging with a nominal block size of 25 metres by 25 metres by 15 metres. Resources are limited inside a pit shell defined by a copper price of US $2.60 per pound, $1.75 per tonne mining cost and $7.02 per tonne total site operating cost, and are tabulated at a cut-off grade of 0.15 percent copper.