July 28, 2009 / 1:55 PM / 9 years ago

UPDATE 2-Inmet Mining profit slips on weak prices

* Warns of possible labor disruption at Cayeli mine

* Lowers 2009 production outlook

TORONTO, July 28 (Reuters) - Canada’s Inmet Mining Corp IMN.TO said on Tuesday its quarterly profit slipped on weak base metals prices, while the company warned of a possible labor disruption at its Cayeli copper mine in Turkey.

The company also cut is 2009 production objectives due to weaker-than-expected output during the first half of the year.

Toronto-based Inmet said the three-year agreement at Cayeli expired in May and the company is currently in negotiations with the union. The mine produced 32,700 tonnes of copper and 47,600 tonnes of zinc last year.

“Pay increases for the Cayeli workers have typically been higher than Turkish inflation levels, which we believe is not sustainable,” the company said in a statement.

Inmet said it was committed to keeping labor costs low, a position which the company said could lead to a short-term labor disruption at the mine.

Net profit dropped to C$66.5 million ($61.6 million), or C$1.36 a share, in the quarter ended June 30 from a year-earlier profit of C$67.7 million, or C$1.40.

The result was hurt by a year-on-year drop in copper and zinc prices, which was sharply offset by stronger gold prices.

Despite a rebound in base metal prices so far this year, Inmet said it continues to consider market conditions unsettled.

Production was hurt by lower ore grades at Cayeli and lower mined volumes at the Ok Tedi mine in Papua New Guinea, of which Inmet owns 18 percent.

Because of this, Inmet cut its 2009 full-year output objectives to 100,000 tonnes of copper 78,000 tonnes of zinc, 230,000 ounces of gold.

The company had been aiming to produce 125,600 tonnes of copper, 79,000 tonnes of zinc and 241,500 ounces of gold.

By mid-afternoon, the company’s shares were down 30 Canadian cents, at 0.66 percent, at C$45.32, outperforming most of the Canadian base metals sector.

$1=$1.08 Canadian Reporting by Cameron French and Euan Rocha; Editing by Frank McGurty

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