TORONTO, June 2 /PRNewswire-FirstCall/ -- Inmet Mining Corporation (IMN-TSX) announced that it has reached an understanding to exchange its 18 percent equity interest in Ok Tedi Mining Limited (OTML) for a 5 percent net smelter return (NSR) royalty on revenues of product from the Ok Tedi mine.
The proposed transaction has been structured to be neutral on a net asset value basis and to enable OTML to pursue certain projects outside the scope of its current activities while insulating Inmet's economic interest from the financial impact of OTML's future operating and capital costs.
The understanding has been reached with the 52 percent majority shareholder of OTML, PNG Sustainable Development Programme Limited (PNG SDPL). The consent of the Independent State of Papua New Guinea, which owns the remaining 30 percent of OTML, as well as BHP Billiton Ltd., which previously ceded its 52 percent interest in OTML to PNG SDPL, is required to give effect to the understanding and proceed with the settlement and execution of definitive documents for that purpose between Inmet and OTML.
Inmet understands that PNG SDPL has presented the non-binding draft term sheet that reflects the understanding between it and PNG SDPL to the Government of Papua New Guinea for approval and that the term sheet will be discussed as a matter of public record. It is possible that the Government may not find the terms of the understanding reached between Inmet and PNG SDPL acceptable, in which case the proposed transaction would not proceed as currently contemplated.
If the understanding is ultimately given effect, the NSR would apply to proceeds from the sale of all mineral products from the Ok Tedi mine as operated under the current mine plan less treatment charges and penalties, insurance, freight and sampling/assaying costs as well as a royalty aggregating 2 percent of revenues that are presently paid by OTML to the government of Papua New Guinea the Western Province and local landowners (the "PNG Royalty"). For the purpose of determining proceeds under the NSR, only gains and losses from hedging and forward sales in effect as of May 18, 2009 would be included.
The term of the NSR would be expected to commence on or about August 1, 2009. Based on the current mine plan, the term is anticipated to continue until December 31, 2013. This end date would be adjusted to reflect any acceleration, delay, sterilization or change in cut-off grade ore that is contained in the approved pit shell and budget.
In addition to the NSR, Inmet would, at closing, receive a payment equal to 18 percent of OTML's working capital, which we estimate would be approximately US$30 million. Thereafter, Inmet would receive quarterly payments in respect of the NSR. The NSR would rank in priority to all liens and security interests on the property and assets of OTML other than the PNG Royalty. It would also be assignable by Inmet to a third party on written notice to OTML.
At closing, Inmet would cease to be a shareholder of OTML, would give up its representation on the Board of Directors of OTML and would have no further rights or funding obligations in respect of OTML in that capacity.
The closing of a transaction to give effect to the understanding would be subject to certain conditions precedent, including receipt of favourable advance rulings from the Papua New Guinea tax authorities concerning the transaction. Assuming the consents of the Government of Papua New Guinea and BHP Billiton are obtained we anticipate that closing would take place on or before July 31, 2009.
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, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in the Petaquilla development property in Panama.
This press release is also available at http://www.inmetmining.com/.
Inmet Mining Corporation
CONTACT: Jochen Tilk, President and Chief Operating Officer, (416)
860-3972
