Inmet Shares Take Another Hit as Problems at Mining Sites Mount

By Eric Shackleton
30 Apr 2008 at 05:29 PM GMT-04:00

TORONTO (CP) -- Inmet Mining Corp.'s [TSX:IMN] shares fell nearly 6% Wednesday as problems continued to mount at its various mining sites around the world - in Panama, Spain and Turkey.

Inmet said it was “extremely disappointed” by Petaquilla Copper Ltd.'s [TSX:PTC] decision to dispute Teck Cominco Ltd.'s [TSX:TCK.B; NYSE:TCK] ownership of 26% of the Petaquilla copper property in Panama, in which Inmet holds a stake.

The company also said the Spanish Water Authority had expressed concerns regarding the dewatering and re-injection system at its Las Cruces project.

On Wednesday afternoon on the TSX, Inmet shares were down C$5.05, or nearly 6%, at C$83.25.

The shares shed more than 4% of their value on Tuesday to close at C$88.30, after the company was forced to mothball a copper project in Turkey when a court in that country rejected the company's appeal of an injunction against development activities at the site.

Inmet said it is working with Turkey's Ministry of Energy and Natural Resources to defend against applications filed with a higher court to cancel operating licences for the Cerattepe copper project.

But it no longer expects production to begin at the Cerattepe project next year.

These issues come after Inmet on Tuesday reported a first-quarter profit of C$106.7 million, up 6%, or C$2.21 per share from C$101.1 million or C$2.09 per share last year on higher copper and gold prices.

Petaquilla Copper said Tuesday in ?a notice to request to arbitrate? that Teck Cominco has failed to satisfy the conditions of its deal for a stake in the Petaquilla copper property in Panama, a claim denied by the company.

Inmet said ?the notice does not dispute Inmet's 48% interest in the Petaquilla project.?

Petaquilla Copper said it believes Teck Cominco failed to satisfy the conditions for making a final commitment to the project.

Inmet disagreed, saying that Teck Cominco has ?fulfilled all of its obligations towards Inmet and Petaquilla Copper? to it to take the 26% interest, adding it ?strongly believes that PTC's claim under the notice is completely without merit.?

The company said it will take legal steps to refute Petaquilla Copper's claim.

Also Wednesday, Inmet said its Spanish subsidiary Cobre Las Cruces, S.A. has been notified by the Spanish Water Authority that it is concerned about the dewatering and re-injection system at the Las Cruces project.

The system of wells at the Las Cruces open pit mine removes water from the surrounding aquifer and re-injects it into adjacent wells in order to prevent water from flowing into the pit, thereby protecting the regional aquifer.

Inmet said the Spanish Water Authority, or Confederation Hidrografica del Guadalquivir, is concerned about ?the specific conditions of the authorization for the construction and operation of the system that was issued in 2003.?

The authority has warned Inmet that any non-compliance with the 2003 authorization ?may result in the temporary suspension of the authorization for the system.?

Inmet said ?Las Cruses will make every effort to fully co-operate with CHG to resolve its concerns.?

Meanwhile, Petaquilla Copper said the only document supporting Teck Cominco's final commitment is a draft interim FEED study delivered on January 31, 2008.

A Teck Cominco spokesman said the company has done nothing wrong.

Petaquilla Copper said its position is that Teck Cominco no longer has an interest in the Petaquilla copper property and that it now holds a 52% stake in the project.

Last month, Teck Cominco and Inmet signed a deal to go ahead with the development of the project where the expected costs to build the mine have more than doubled.

Orest Wowkodaw, an analyst with Canaccord Adams, said the Spanish Water Authority's concerns could mean a delay in the startup of the Las Cruses project, and hurt Inmet's bottom line.

?Las Cruses really represents all of their short term growth,? said Wowkodaw, ?It there is a delay in that, that would be materially negative to the valuation of the stock price.?

He said a delay at Las Cruses would have more impact on the stock than the Turkish project as Las Cruses is a ?much bigger project? than Cerateppe.

As for Petaquilla, it is a longer term growth project for Inmet, he said.

?What's happening here is more of a delay,? said Wowkodaw. ?But the project is still five years out from production, so it will not really have that much immediate impact on Inmet's stock.?

In Spain, ?I really have no idea how this will go,? he said. ?I don't have a sense of how long if any delay there could be.?

And ?that's the risk, it's just the uncertainty. The dewatering system is quite important to the project.?

Wowkodaw said he has a ?hold? rating on Inmet.

Inmet, based in Toronto, mines copper, zinc and gold around the world.

? The Canadian Press 2008