Financial condition
Our strategy is to make sure we have sufficient liquidity (including cash and committed credit facilities) to finance our operating requirements as well as our growth projects. At December 31, 2012, we had $3,618 million in total funds, including $1,541 million of cash and short-term investments and $2,077 million invested in bonds and other securities.
Cash
At December 31, 2012 our cash and short-term investments of $1,541 million included cash and money market instruments that mature in 90 days or less.
Our policy is to invest excess cash in highly liquid investments of high credit quality, and to limit our exposure to individual counterparties to minimize the risk associated with these investments. We base our decisions about the length of maturities on our cash flow requirements, rates of return and other factors.
At December 31, 2012, we held cash and short-term investments in the following:
-- A to AAA rated treasury funds and money market funds managed by leading international fund managers, who are investing in money market and short-term debt securities and fixed income securities issued by leading international financial institutions and their sponsored securitization vehicles.-- Cash, term and overnight deposits with leading Canadian and international financial institutions.
See note 4 on page 45 in the consolidated financial statements for more details about where our cash is invested.
Bonds and other securities
We hold a portfolio of bonds and other securities to provide better yields while minimizing our investment risk. As at December 31, 2012, our portfolio was $2,077 million. The portfolio includes:
-- 34 percent US Treasury bonds-- 25 percent Canadian and provincial government bonds-- 37 percent corporate bonds-- 4 percent Supranational bonds.
The securities mature between 2013 and 2018.
Restricted cash
Our restricted cash balance of $78 million as at December 31, 2012 included:
-- $20 million in cash collateralized letters of credit for Inmet-- $57 million at Las Cruces related to a reclamation bond, issuing letters of credit to suppliers and the local water authority and for its labour bond to the government-- $1 million for future reclamation at Pyhasalmi.
COMMON SHARES
----------------------------------------------------------------------------Common shares outstanding as of December 31, 2012 and February 21, 2013 69,365,748----------------------------------------------------------------------------Deferred share units outstanding as of December 31, 2012 109,022(redeemable on a one-for-one basis for common shares)----------------------------------------------------------------------------
Additional risk factor
We have significantly increased our cash balance following the issuance of our senior unsecured notes for the construction of Cobre Panama. For U.S. federal income tax purposes a non-U.S. corporation may be classified as a "passive foreign investment company" (PFIC) for U.S. federal income tax purposes in any taxable year in which either (1) at least 75 percent of its gross income is passive income, or (2) on average at least 50 percent of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income. Based on our analysis, we do not believe that we are a PFIC in the current taxation year. The methods used to determine income and assets for the purpose of this test are subject to interpretation and judgement, and based on the manner in which fair value is determined, the analysis could show that we are a PFIC. If we are classified as a PFIC, U.S. taxpayers that hold our common shares could be subject to adverse U.S. federal income tax consequences, including increased tax liabilities and possible additional reporting requirements. As the determination of PFIC status is made annually at the close of each tax year and is dependent on a number of assumptions, there can be no assurance that Inmet is not a PFIC in the current year or will not become a PFIC in any future tax year. U.S. taxpayers that hold our common shares are urged to consult their tax advisors concerning the potential U.S. federal income tax consequences of holding common shares if Inmet were considered a PFIC in any year.
