Imperial Metals Corporation (the “Company”)
(TSX:III) reports financial results for the three months ended
March 31, 2018 and 2017, as summarized in this release and
discussed in detail in the Management’s Discussion &
Analysis. The Company’s financial results are prepared in
accordance with International Financial Reporting Standards.
The reporting currency of the Company is the Canadian (“CDN”)
Dollar.
Select Quarter Financial
Information
expressed in thousands,
except share and per share amounts |
Three Months Ended March 31 |
|
|
|
2018 |
|
2017 |
|
|
Total
revenues |
$ |
117,912 |
$ |
115,749 |
|
|
Net
loss |
$ |
16,166 |
$ |
18,752 |
|
|
Net
loss per share |
$ |
0.14 |
$ |
0.20 |
|
|
Diluted loss per share |
$ |
0.14 |
$ |
0.20 |
|
|
Adjusted net loss (1) |
$ |
4,754 |
$ |
22,296 |
|
|
Adjusted net loss per share (1) |
$ |
0.04 |
$ |
0.24 |
|
|
Adjusted EBITDA(1) |
$ |
36,392 |
$ |
15,187 |
|
|
Working capital deficiency |
$ |
743,096 |
$ |
214,646 |
|
|
Total
assets |
$ |
1,662,528 |
$ |
1,511,120 |
|
|
Total debt (including
current portion) |
$ |
829,698 |
$ |
846,067 |
|
|
Cash
flow (1)(2) |
$ |
35,958 |
$ |
15,065 |
|
|
Cash flow per share (1)(2) |
$ |
0.31 |
$ |
0.16 |
|
|
(1) Refer to Management’s Discussion & Analysis
heading Non-IFRS Financial Measures for further details.(2)
Cash flow is defined as the cash flow from operations before the
net change in non-cash working capital balances, income and mining
taxes, and interest paid. Cash flow per share is defined as
Cash flow divided by the weighted average number of common shares
outstanding during the period.
Revenues increased to $117.9 million in the
March 2018 quarter compared to $115.7 million in the 2017
comparative quarter, an increase of $2.2 million or 1.9%.
Revenue from the Red Chris mine in the March
2018 quarter was $81.9 million compared to $54.6 million in the
2017 comparative quarter. This increase was attributable to a
higher quantity of copper concentrate sold along with higher copper
prices compared to the 2017 quarter.
Revenue from the Mount Polley mine in the March
2018 quarter was $36.0 million compared to $61.0 million in the
2017 comparative quarter. The decrease was attributable to a lower
quantity of copper concentrate sold.
In the March 2018 quarter, there were 4.0
concentrate shipments from Red Chris mine (2017-3.0 concentrate
shipments) and 1.0 concentrate shipment from Mount Polley mine
(2017-1.7 concentrate shipments). Variations in revenue are
impacted by the timing and quantity of concentrate shipments, metal
prices and exchange rates, and period end revaluations of revenue
attributed to concentrate shipments where copper and gold prices
will settle at a future date.
The London Metals Exchange cash settlement
copper price per pound averaged US$3.16 in the March 2018 quarter
compared to US$2.65 in the 2017 comparative quarter. The London
Metals Exchange cash settlement gold price per troy ounce averaged
US$1,329 in the March 2018 quarter compared to US$1,219 in the
March 2017 quarter. The average CDN/US$ Dollar exchange rate was
1.265 in the March 2018 quarter, 4.38% lower than the exchange rate
of 1.323 in the March 2017 quarter. In CDN dollar terms the average
copper price in the March 2018 quarter was CDN$4.00 per pound
compared to CDN$3.51 per pound in the 2017 comparative quarter and
the average gold price in the March 2018 quarter was CDN$1,681 per
ounce compared to CDN$1,613 per ounce in the 2017 comparative
quarter.
Revenue in the March 2018 quarter decreased by
$5.6 million negative revenue revaluation compared to a $5.1
million positive revenue revaluation in the 2017 comparative
quarter. Revenue revaluations are the result of the copper price on
the settlement date and/or the current period balance sheet date
being higher or lower than when the revenue was initially recorded
or the copper price at the last balance sheet date.
Net loss for the March 2018 quarter was $16.2
million ($0.14 per share) compared to net loss of $18.8 million
($0.20 per share) in the 2017 comparative quarter. The decrease in
net loss of $2.6 million was primarily due to the following
factors:
- Income/loss from mine operations went from a loss of $5.7
million in March 2017 to income of $17.6 million in March 2018, a
decrease in net loss of $23.3 million.
- Interest expense went from $18.2 million in March 2017 to $19.0
million in March 2018, an increase in net loss of $0.8
million.
- Foreign exchange gains/losses on current and non-current debt
went from a gain of $3.4 million in March 2017 to a loss of $11.4
million in March 2018, an increase in net loss of $14.8
million.
- The Company’s equity loss in Huckleberry went from loss of $1.6
million in March 2017 to $nil in March 2018, a decrease in net loss
of $1.6 million.
- Idle mine costs went from $nil in March 2017 to $1.4 million in
March 2018, an increase in net loss of $1.4 million.
- Tax position went from a recovery of $5.0 million in March 2017
to $nil in March 2018, an increase in net loss of $5.0
million.
The March 2018 quarter net loss included foreign
exchange loss related to changes in CDN/US Dollar exchange rate of
$11.8 million compared to foreign exchange gain of $3.1 million in
the 2017 comparative quarter. The $11.8 million foreign exchange
loss is comprised of an $11.3 million loss on the senior notes, a
$0.1 million loss on long term equipment loans, and a $0.4 million
loss on operational items. The average CDN/US Dollar exchange rate
in the March 2018 quarter was 1.265 compared to an average of 1.323
in the 2017 comparative quarter.
Cash flow was $36.0 million in the March 2018
quarter compared to cash flow of $15.1 million in the 2017
comparative quarter. Cash flow is a measure used by the Company to
evaluate its performance, however, it is not a term recognized
under IFRS. The Company believes Cash flow is useful to investors
and it is one of the measures used by management to assess the
financial performance of the Company.
Capital expenditures were $9.1 million in the
March 2018 quarter, down from $24.0 million in the 2017 comparative
quarter. The March 2018 expenditures included $1.8 million for
tailings dam construction, $5.0 million on mobile equipment and
$2.3 million for other capital items. The 2017 quarter included
$7.2 million of mobile equipment purchases as well as higher costs
for tailings dam construction and other capital items.
NON-IFRS FINANCIAL MEASURES
The Company reports four non-IFRS financial
measures: Adjusted net income, adjusted EBITDA, cash flow and cash
cost per pound of copper produced which are described in detail
below. The Company believes these measures are useful to investors
because they are included in the measures that are used by
management in assessing the financial performance of the
Company.
Adjusted net income, adjusted EBITDA, and cash
flow are not generally accepted earnings measures and should not be
considered as an alternative to net income (loss) and cash flows as
determined in accordance with IFRS. As there is no
standardized method of calculating these measures, these measures
may not be directly comparable to similarly titled measures used by
other companies. Reconciliations are provided below.
Adjusted Net Loss and Adjusted Net Loss
Per Share
Adjusted net loss in the March 2018 quarter was
$4.8 million ($0.04 per share) compared to an adjusted net loss of
$22.3 million ($0.24 per share) in the 2017 comparative quarter.
Adjusted net loss reflects the financial results excluding the
effect of items not settling in the current period and
non-recurring items. Adjusted net loss is calculated by removing
the gains or losses, resulting from mark to market revaluation of
derivative instruments, net of tax, unrealized foreign exchange
gains or losses on non-current debt, net of tax and other
adjustments.
Adjusted EBITDA
Adjusted EBITDA in the March 2018 quarter was
$36.4 million compared to $15.2 million in the 2017 comparative
quarter. We define Adjusted EBITDA as net income (loss) before
interest expense, taxes, depletion and depreciation, and as
adjusted for certain other items.
Cash Flow and Cash Flow Per
Share
Cash flow in the March 2018 quarter was $36.0
million compared to $15.1 million in the 2017 comparative quarter.
Cash flow per share was $0.31 in the March 2018 quarter compared to
$0.16 in the 2017 comparative quarter.
Cash flow and cash flow per share are measures
used by the Company to evaluate its performance however they are
not terms recognized under IFRS. Cash flow is defined as cash flow
from operations before the net change in non-cash working capital
balances, income and mining taxes, and interest paid and cash flow
per share is the same measure divided by the weighted average
number of common shares outstanding during the year.
Cash Cost Per Pound of Copper
Produced
The cash cost per pound of copper produced is a
non-IFRS financial measure that does not have a standardized
meaning under IFRS, and as a result may not be comparable to
similar measures presented by other companies. Management uses this
non-IFRS financial measure to monitor operating costs and
profitability. The Company is primarily a copper producer and
therefore calculates this non-IFRS financial measure individually
for its three copper mines, Red Chris, Mount Polley and
Huckleberry, and on a composite basis for these mines.
The cash cost per pound of copper produced is
derived from the sum of cash production costs, transportation and
offsite costs, treatment and refining costs, royalties, net of
by-product and other revenues, divided by the number of pounds of
copper produced during the period.
Variations from period to period in the cash
cost per pound of copper produced are the result of many factors
including: grade, metal recoveries, amount of stripping
charged to operations, mine and mill operating conditions, labour
and other cost inputs, transportation and warehousing costs,
treatment and refining costs, the amount of by-product and other
revenues, the US$ to CDN$ exchange rate and the amount of copper
produced. Idle mine costs during the periods when the Huckleberry
mine was not in operation have been excluded from the cash cost per
pound of copper produced.
expressed
in thousands, except cash cost per pound of copper |
|
|
Three Months Ended March 31, 2018 |
|
Red Chris |
|
Mount Polley |
|
Composite |
Cash cost
of copper produced in US$ |
$ |
34,260 |
|
$ |
7,463 |
|
$ |
41,723 |
Copper
produced – pounds |
|
19,725 |
|
|
5,372 |
|
|
25,097 |
Cash cost per lb copper produced in US$ |
$ |
1.74 |
|
$ |
1.39 |
|
$ |
1.66 |
|
|
|
Three Months Ended March 31, 2017 |
|
Red Chris |
|
Mount Polley |
|
Composite |
Cash cost
of copper produced in US$ |
$ |
39,695 |
|
$ |
10,852 |
|
$ |
50,547 |
Copper
produced – pounds |
|
16,328 |
|
|
5,461 |
|
|
21,789 |
Cash cost per lb copper produced in US$ |
$ |
2.43 |
|
$ |
1.99 |
|
$ |
2.32 |
OPERATIONS
Metal production target ranges from Red Chris
mine and Mount Polley mine for 2018 are 89-96 million pounds copper
and 75-80 thousand ounces gold. At March 31, 2018, the Company has
not hedged any copper, gold or CDN/US Dollar exchange. Quarterly
revenues will fluctuate depending on copper and gold prices, the
CDN/US Dollar exchange rate, and the timing of concentrate sales,
which is dependent on concentrate production and the availability
and scheduling of transportation.
Red Chris Mine
Metal production for the March 2018 quarter was
19.7 million pounds copper and 12,215 ounces gold, up 21% and 110%
respectively from the 2017 comparative quarter.
Copper recoveries were lower for the March 2018
quarter than the last quarter of 2017, as more high clay ore was
found in the mineralized fault in the lower benches of the phase 3
pushback. Diagnostic and modelling work is underway to identify the
extent of this zone, and whether special processing of these high
clay zones may yield better recovery. The gold recovery
improved significantly (about 26%) on higher gold
grade.
Five haul trucks from the Huckleberry mine are
now in operation at Red Chris, and a new electric shovel is
expected to arrive on site by mid-year. This equipment will enable
an increased mining rate, and access to deeper higher grade
ore.
Mining in the phase 3 pushback in the Main zone
pit was completed. Mill feed for the remainder of 2018 will come
from the phase 4 pushback of the Main zone.
Red Chris
Production |
Three Months Ended March 31 |
|
|
2018 |
2017 |
|
|
Ore milled -
tonnes |
2,590,490 |
2,403,501 |
|
|
Ore milled per calendar
day - tonnes |
28,783 |
26,706 |
|
|
Grade % -
copper |
0.447 |
0.388 |
|
|
Grade g/t -
gold |
0.310 |
0.201 |
|
|
Recovery % -
copper |
77.22 |
79.49 |
|
|
Recovery % -
gold |
47.37 |
37.43 |
|
|
Copper – 000’s
pounds |
19,725 |
16,328 |
|
|
Gold – ounces |
12,215 |
5,811 |
|
|
Silver –
ounces |
34,881 |
27,952 |
|
|
Exploration, development and capital
expenditures were $4.9 million in the March 2018 quarter compared
to $11.0 million in the comparative 2017 quarter.
Mount Polley Mine
Metal production for the March 2018 quarter was
5.4 million pounds copper and 12,280 ounces gold, down 1.6% and 11%
respectively from the 2017 comparative quarter.
Compared to the 2017 fourth quarter, metal
recoveries in the March 2018 quarter increased, with copper
recovery at 75.67% compared to 56.77% and gold recovery at 73.75%
compared to 62.47%. Throughput in the March 2018 quarter was 17,917
tonnes per day compared to 19,635 tonnes per day in 2017 fourth
quarter. The decrease was the result of milling a greater
proportion of harder but less oxidized ore from the lower benches
of the Cariboo pit. Dredging of tailings from the Springer pit
began this quarter.
Mount Polley
Production |
Three Months Ended March 31 |
|
|
2018 |
2017 |
|
|
Ore milled -
tonnes |
1,612,486 |
1,692,762 |
|
|
Ore milled per calendar
day - tonnes |
17,917 |
18,808 |
|
|
Grade % -
copper |
0.200 |
0.205 |
|
|
Grade g/t -
gold |
0.321 |
0.355 |
|
|
Recovery % -
copper |
75.67 |
71.29 |
|
|
Recovery % -
gold |
73.75 |
71.55 |
|
|
Copper – 000’s
pounds |
5,372 |
5,461 |
|
|
Gold – ounces |
12,280 |
13,811 |
|
|
Silver –
ounces |
8,965 |
10,877 |
|
|
Exploration, development and capital
expenditures were $4.2 million in the March 2018 quarter compared
to 13.0 million in the comparative 2017 quarter.
The collective agreement with the unionized
workforce at the Mount Polley mine expired on December 31, 2017.
Since late 2017 the Company has been in the process of negotiating
a new contract. On May 7, 2018 the Company served the Union
with 72 hour lockout notice. After expiry of the 72 hour period,
the Company will have the legal right to lockout the employees at a
date and time of the Company’s choosing.
Refer to Imperial’s 2018 First Quarter Report on
imperialmetals.com and sedar.com for detailed information.
An Earnings Announcement Conference Call is
scheduled for Friday, May 11, 2018 at 10:00am PDT
| 1:00pm EDT Management will discuss the Company’s
First Quarter 2018 Financial Results. To participate in the
earnings announcement conference call dial 1.833.231.8250
(North America–toll free) A recording of the conference call will
be available for playback until 8:59pm on May 21, 2018 by calling
1.855.859.2056 (North America-toll free) playback code 9188769 |
About Imperial
Imperial is a Vancouver exploration, mine
development and operating company. The Company, through its
subsidiaries, owns the Red Chris, Mount Polley and Huckleberry
copper mines in British Columbia. Imperial also holds a 50%
interest in the Ruddock Creek lead/zinc property.
Company Contacts
Brian Kynoch | President |
604.669.8959 Andre Deepwell | Chief Financial
Officer | 604.488.2666 Gordon Keevil
| Vice President Corporate Development
| 604.488.2677 Sabine Goetz |
Shareholder Communications | 604.488.2657
| investor@imperialmetals.com
Forward-Looking Information and Risks
Notice
The information in this news release provides a
summary review of the Company’s operations and financial position
as at and for the period ended March 31, 2018, and plans for the
future based on facts and circumstances as of May 10, 2018. Except
for statements of historical fact relating to the Company, certain
information contained herein constitutes forward-looking
information which are prospective in nature and reflect the current
views and/or expectations of Imperial. Often, but not always,
forward-looking information can be identified by the use of
statements such as "plans", "expects" or "does not expect", "is
expected", "scheduled", "estimates", "forecasts", "projects",
"intends", "anticipates" or "does not anticipate", or "believes",
or variations of such words and phrases or statements that certain
actions, events or results "may", "could", "should", "would",
"might" or "will" be taken, occur or be achieved. Such information
in this news release includes, without limitation, statements
regarding: the necessity to extend or refinance the Senior Credit
Facility and the Second Lien Credit Facility prior to their
maturity in the fourth quarter of 2018 and the Senior Unsecured
Notes in the first quarter of 2019; metal production target ranges
from Red Chris and Mount Polley for 2018; ongoing diagnostic and
modelling work to identify the extent of high clay ore at Red Chris
and determine whether special processing of these high clay zones
may yield better recovery; a new electric shovel anticipated to
arrive on site by mid-year which is expected to increase the mining
rate and access to deeper higher grade ore at Red Chris;
expectations that mill feed for the remainder of 2018 will come
from the phase 4 pushback of the Red Chris Main zone; the use of
proceeds from financings and credit; production and
marketing; capital expenditures; the adequacy of funds for projects
and liabilities; the receipt of necessary regulatory approvals or
other consents; the expected outcome and impact of litigation; cash
flow; working capital requirements; the requirement for additional
capital; results of operations, production, revenue, margins and
earnings; future prices of copper and gold; future foreign currency
exchange rates and impact; future accounting changes; and future
prices for marketable securities.
Forward-looking information is not based on
historical facts, but rather on then current expectations, beliefs,
assumptions, estimates and forecasts about the business and the
industry and markets in which the Company operates, including, but
not limited to, assumptions that: the Company will be able to
successfully extend or refinance the Senior Credit Facility, the
Second Lien Credit Facility and the Senior Unsecured Notes prior to
their maturity dates and adequate additional financing will be
available on terms acceptable to the Company; the Company will have
access to capital as required and satisfy and/or obtain amendments
of financial covenants and/or terms contained in its credit
facilities and other loan documents; the high clay ore encountered
in the mineralized fault in the lower benches of the phase 3
pushback at Red Chris is limited and special processing of these
zones may yield better recovery; expectations that Mount Polley
mine will reach a new contract with the unionized workforce; the
Company will be able to advance and complete remaining planned
rehabilitation activities within expected timeframes; there will be
no significant delay or other material impact on the expected
timeframes or costs for completion of rehabilitation of the Mount
Polley mine and implementation of Mount Polley’s long term water
management plan; the Company’s initial rehabilitation activities at
Mount Polley will be successful in the long term; all required,
project-related permits and approvals will be obtained in a timely
manner; there will be no material operational delays at the
Company’s mines; equipment will operate as expected; there will not
be significant power outages; there will be no material adverse
change in the market price of commodities and exchange rates; and
the Company’s mines will achieve expected production outcomes
(including with respect to mined grades and mill recoveries). Such
statements are qualified in their entirety by the inherent risks
and uncertainties surrounding future expectations. We can give no
assurance that the forward-looking information will prove to be
accurate.
Forward-looking information involves known and
unknown risks, uncertainties and other factors which may cause
Imperial’s actual results, revenues, performance or achievements to
be materially different from any future results, performance or
achievements expressed or implied by the statements constituting
forward-looking information.
Important risks that could cause Imperial’s
actual results, revenues, performance or achievements to differ
materially from Imperial’s expectations include, among other
things: that the Company may not be able to successfully extend or
refinance the Senior Credit Facility, the Second Lien Credit
Facility and the Senior Unsecured Notes prior to their maturity
dates and adequate additional financing may not be available on
terms acceptable to the Company or at all; that the Company may be
unable to satisfy and/or obtain amendments of financial covenants
or terms contained in its credit facilities and other loan
documents; that the Red Chris mine may encounter unexpectedly
extensive high clay ore and is unable to achieve better recovery
through special processing of such ore; risks relating to the
timely receipt of necessary, project-related approvals and
consents; risks relating to the remaining costs and liabilities and
any unforeseen longer-term environmental consequences arising from
the Mount Polley Breach; uncertainty as to actual timing of
completion of rehabilitation activities; risks relating to the
impact of the Mount Polley Breach on Imperial’s reputation; the
quantum of claims, fines and penalties that may become payable by
Imperial and the risk that current sources of funds are
insufficient to fund liabilities; risks that Imperial will be
unsuccessful in defending against any legal claims or potential
litigation; risks of protesting activity and other civil
disobedience restricting access to the Company’s properties;
failure of plant, equipment or processes to operate in accordance
with specifications or expectations; cost escalation,
unavailability of materials and equipment, labour strike, unrest or
lockout, power outages or shortages, and natural phenomena
negatively impacting the operation or maintenance of the Company’s
mines; changes in commodity and power prices; changes in market
demand for the Company’s concentrate; inaccurate geological and
metallurgical assumptions (including with respect to the size,
grade and recoverability of mineral reserves and resources); and
other hazards and risks disclosed within Management’s Discussion
and Analysis for the three months ended March 31, 2018 and
other public filings which are available on Imperial’s profile at
sedar.com. For the reasons set forth above, investors should not
place undue reliance on forward-looking information. Imperial does
not undertake to update any forward-looking information, except in
accordance with applicable securities laws.
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