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Q2 2008 Inmet Mining Corp. Earnings Conference Call - Final.

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Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning ladies and gentlemen, thank you for standing by. Welcome to the Inmet Mining Corporation second-quarter results conference call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS). I would like to remind everyone that this conference call is being recorded on Wednesday July 30, 2008 at 8:30 AM Eastern time. I will now terminated over to Mr. Richard Ross, Chairman and Chief Executive Officer. Please go ahead sir.

RICHARD ROSS, CHAIRMAN AND CEO, INMET MINING CORP.: Thank you and good morning everybody. Welcome to Inmet's second-quarter conference call. With me today are members of Inmet's management team. I will start with the overview of the past quarter and then Jochen Tilk, our President and Chief Operating Officer, will review the progress we have made at our operations and development properties. Jen Slattery, our Chief Financial Officer will then review our financial results and financial position.

Yesterday we announced our second-quarter earnings of CAD67.7 million or CAD1.40 per share. Earnings for this quarter compared to the same quarter in 2007 were lower due to a significant reduction in realizing prices as well as a foreign exchange loss following the repatriation of cash from our subsidiaries.

The drop in realized zinc prices denominated in Canadian dollar terms was quite dramatic compared to the second quarter of 2007. Between these two periods, zinc prices dropped more by more than half from CAD1.92 per pound to CAD0.95 per pound and those are in Canadian dollar terms.

The impact of this reduction has been felt throughout the industry as we're now seeing a number of zinc mines being shut down or placed on standby. Even though zinc prices are still at levels that in historical terms are high, there has been significant cost escalation in the past few years throughout the industry and many mines are cash negative at these metal prices.

These shutdowns of course do not address one of the major sources of zinc production which comes as a byproduct of copper mines. Therefore it's hard to foresee a significant change in zinc prices over the balance of the year.

As the main source of our earnings is from copper production, we continue to be pleased with the stability of copper prices which have been trading in the range between about CAD3.60 per pound and CAD4.0 per pound. But we are also seeing the positive impact of higher pyrite prices being realized from (inaudible) this quarter.

Our copper production levels in the quarter were similar to last year. Our forecast of copper production for the full year is now just over 93,000 tons. Included in this estimate is 7400 tons of copper production from our share of the Las Cruces production in the fourth quarter.

For Las Cruces to commence operation in the fourth quarter we are dependent on the relevant regulators to lift our suspension for the dewatering and reinjection system and we do need to demonstrate the long-term stability of the waste dams going forward. We continue to work on addressing these issues and believe we're making good progress in resolving them.

The other significant news to call upon is the CAD2.0 all-cash bid we have made for Petaquilla Copper. We mailed the offer circular on Monday to Petaquilla Copper shareholders. Our offer will expire at 5 PM Toronto time on September 3 and our minimum bid condition under the offer is to acquire at least 50.1% of the Petaquilla Copper shares on a fully diluted basis.

If we are successful with the offer, we will own directly and through Petaquilla Copper 74% of the Petaquilla development project. We have received a very positive response from a number of Petaquilla Copper shareholders to the offer and therefore believe that we will be successful. That concludes my remarks and I would now like to turn it over to Jochen.

JOCHEN TILK, PRESIDENT AND COO, INMET MINING CORP.: Thank you Richard. I would like to commence my remarks with an update on the Las Cruces situation. There are three specific areas that I would like to cover.

Firstly I would like to give you an update on the suspension of the authorization to operate the dewatering and reinjection system or DRS. Secondly, I will speak to the ground movement we experienced in the residue storage area and the measures we've taken. And thirdly, I will comment on the status of the [plant] construction and prospect of initiating copper production in the fourth quarter.

On the authorization to operate the DRS, as you may recall from our recent Webcast, the authorization to operate the DRS was suspended on May 13. Following the suspension, we ceased all mining activities at the bottom of the pit but continued operating the DRS to prevent water from flowing into the pit.

We presented to the authorities on June 13 our global plan to address the water management issues and after a series of meetings with the regulators commenced with the implementation of interim water treatment on July 7. Three portable reverse osmosis units with the combined treatment capacity of 45 liters per second were mobilized and commissioned by July 18.

On July 24, we received formal approval from the authorities to treat water with these units but cannot yet reinject the treated water into the aquifer. Going forward, our next steps will be as follows.

We will treat water from sector five of the DRS which is the sector containing constituents above the Spanish drinking water standards and store that water in the surface reservoir over the next few days. We will request approval from the water authorities to reinject treated water into the aquifer and assuming we receive approval, reinject that water into the aquifer.

We will increase the water treatment capacity by the end of August to ensure that there is sufficient treatment capacity available for the DRS even though it may not be required. We will request that the suspension be lifted at that point.

Assuming the suspension is lifted, we would resume mining at the bottom the pit including mining [ore] for the commissioning of the plant as well as [ore] for direct shipping. Over the longer term, we would construct a permanent treatment facility and eventually replace the mobile units it required. We would also relocate some of the extraction and reinjection wells to move them further away from the potential influence of the mining operation.

As you can see, we made significant progress in implementing our (inaudible) plan and we're pleased with the cooperation from the regulators. Having said that, we still have a number of steps before us and while we're confident that we will achieve a satisfactory outcome, there is no assurance that the regulator will ultimately lift the suspension once water treatment is available for the entire DRS.

On the ground movement in the residue storage area, on July 9 we experienced a [slope] failure at the process residue storage area. The area has been stable since that time. We immediately retained Spanish and international experts and (inaudible) technical engineering to begin an investigation into the cause of the failure and how we could move forward with the rehabilitation of the facility. The investigation is ongoing.

Based upon preliminary findings of the field investigation, we have uninitiated steps to unload the area by removing the material from the vicinity of the [slope] failure. This action will ensure the [slope] is...