Imperial Reports 2017 Financial Results
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News Release
Imperial Reports 2017 Financial Results
Vancouver | March 28, 2018 | Imperial Metals Corporation (the “Company”) (TSX:III) reports financial results for its fiscal
year ended December 31, 2017. Revenues increased to $453.1 million in 2017 compared to $428.2 million in 2016, an increase
of $24.9 million or 5.8%. Revenue from the Red Chris mine in 2017 was $289.1 million compared to $295.3 million in 2016.
Revenue from the Mount Polley mine in 2017 was $163.5 million c ompared to $131.5 million in 2016. There were 15.0
concentrate shipments in 2017 from the Red Chris mine (2016-17. 0 concentrate shipments) and 4.7 concentrate shipments
from the Mount Polley mine in 2017 (2016-5 concentrate shipments). Variations in revenue are impacted by the timing and
quantity of concentrate shipments, metal prices and exchange ra tes, and period end revaluations of revenue attributed to
concentrate shipments where copper and gold prices will settle at a future date.
Revenue in 2017 was increased by a $15.2 million positive reven ue revaluation compared to a positive revenue revaluation
of $4.4 million in 2016. Positive revenue revaluations are the result of the commodity prices on the settlement date and/or
the current period balance sheet date being higher than when th e revenue was initially recorded or the commodity prices at
the last balance sheet date and vice versa for negative revenue revaluations.
Select Annual Financial Information Years Ended December 31
expressed in thousands, except share and per share amounts 2017 2016 2015
Total revenues $453,113 $428,218 $128,701
Net income (loss) $77,113 $(54,080) $(96,961)
Net income (loss) per share $0.82 $(0.66) $(1.25)
Diluted income (loss) per share $0.82 $(0.66) $(1.25)
Adjusted net loss (1) $(62,626) $(56,784) $(50,254)
Adjusted net loss per share (1) $(0.66) $(0.69) $(0.65)
Adjusted EBITDA (1) $88,457 $106,624 $3,370
Working capital deficiency (2) $238,269 $89,108 $197,952
Total assets $1,723,768 $1,527,778 $1,479,352
Total debt (including current portion) $852,378 $835,365 $914,461
Cash flow (1)(3) $88,381 $107,591 $14,135
Cash flow per share (1)(3) $0.94 $1.32 $0.18
(1) Refer to Non-IFRS Financial Measures in the Management’s Discussion and Analysis for further details. The 2015 amounts have been
revised to conform with the presentation adopted in 2016.
(2) Defined as current assets less current liabilities. The 2017 amount includes $201,562 related to the senior credit facility and the second lien
credit facility that was classified as current at December 31, 2017. The 2015 amount includes $166,072 related to the senior credit facility
that was classified as current at December 31, 2015 prior to the renewal of the facility.
(3) 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 year.
Select Items Affecting Net Income (Loss) (presented on an after-tax basis) Years Ended December 31
expressed in thousands 2017 2016
Net income before undernoted items $(6,182) $6,540
Interest expense (55,887) (51,979)
Foreign exchange gain on non-current debt, net of gains on cross currency swaps 29,280 10,004
Impairment of mineral properties - (7,300)
Gain on bargain purchase of Huckleberry and revaluation of equity investment
in Huckleberry 109,818 -
Gain on sale of Sterling 641 -
Share of loss in Huckleberry (557) (11,345)
Net Income (Loss) $77,113 $(54,080)
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Net income for 2017 was $77.1 million ($0.82 per share) compared to net loss of $54.1 million ($0.66 per share) in 2016. The
majority of increase in net income of $131.2 million was primarily due to the following factors:
Income from mine operations went from income of $27.9 million in 2016 to $19.5 million in 2017, a decrease in net income
of $8.4 million.
Interest expense increased from $70.2 million in 2016 to $75.5 million in 2017, a decrease to net income of $5.3 million.
Foreign exchange gain on current and non-current debt went from a gain of $14.6 million in 2016 to a gain of $30.2 million
in 2017, an increase in net income of $15.6 million.
Loss on derivative instruments went from a loss of $4.5 million in 2016 to $nil in 2017, an increase in net income of $4.5
million.
Impairment on mineral properties went from $7.3 million in 2016 to $nil million in 2017, an increase in net income of $7.3
million.
A gain on bargain purchase of Huckleberry and revaluation of equity investment in Huckleberry of $109.8 million in 2017
compared to $nil in 2016, an increase in net income of $109.8 million.
The Company’s equity loss in Huckleberry went from loss of $11. 3 million in 2016 to a loss of $0.6 million in 2017, an
increase in net income of $10.7 million.
Rehabilitation costs of $5.8 million in 2017 compared to $nil in 2016, a decrease in net income of $5.8 million.
An income and mining tax recovery of $10.6 million in 2017 comp ared to a recovery of $3.2 million in 2016, an increase
in net income of $7.4 million.
The 2017 net income included foreign exchange gain r elated to changes in CDN$/US$ e xchange rate of $30.4 million
compared to foreign exchange gain of $13.6 million in 2016. The $30.4 million foreign exchange gain in 2017 is comprised
of a $29.3 million gain on the senior notes, a $0.9 million gai n on short term loans, and a $0.2 million gain on operational
items. The average CDN$/US$ exchange rate in the 2017 was 1.298 compared to an average of 1.326 in 2016.
Cash flow was $88.4 million in 2017 compared to cash flow of $1 07.6 million in 2016. 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 $92.9 million in 2017, down from $150.5 million in 2016. The 2017 expenditures included $45.4
million for equipment and com ponents, $31.6 million for tailing s dam construction, $6.8 million relating to non‐cash
consideration received by the Company in the Sterling gold mine sale in the form of a Net Smelter Royalty (“NSR”) and Net
Operating Profit (“NOP”) which have been included in mineral properties, $3.5 million relating to environmental capital
expenditures and $5.6 million for other capital.
At December 31, 2017 the Company had $51.9 million in cash (Dec ember 31, 2016-$14.3 million). The Company has
classified $213.9 million of its non-current debt as current at December 31, 2017 (December 31, 2016-$18.7 million).
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 belo w. The Company believes these measures are useful to
investors because they are included in the measures that are us ed by management in assessing the financial performance of
the Company.
Adjusted net income, adjusted EBITDA, and cash flow are not gen erally accepted earnings measures and should not be
considered as an alternative to net income (loss) and cash flow s as determined in accordance with IFRS. As there is no
standardized method of calculating these measures, these measur es may not be directly comparable to similarly titled
measures used by other companies.
Adjusted Net Loss and Adjusted Net Loss per Share
Adjusted net loss in 2017 was $62.6 million ($0.66 per share) c ompared to an adjusted net loss of $56.8 million ($0.69 per
share) in 2016. Adjusted net income or loss shows the financial results excluding the effect of items not settling in the current
period and non-recurring items. Adjusted net income or loss is calculated by removing the gains or loss, resulting from
acquisition and disposal of property, mark to market revaluatio n of derivative instruments not r elated to the current period,
net of tax, unrealized foreign exchange gains or losses on non-current debt, net of tax.
Adjusted EBITDA
Adjusted EBITDA in 2017 was $88.5 million compared to $106.6 mi llion in 2016. We define Adjusted EBITDA as net
income (loss) before interest expense, taxes, depletion and depreciation, and as adjusted for certain other items.
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Cash Flow and Cash Flow Per Share
Cash flow in 2017 was $88.4 million compared to $107.6 million in 2016. Cash flow per share was $0.94 in 2017 compared
to $1.32 in 2016. Cash flow and cash flow per share are measures used by the Company to evaluate its performance however
they are not terms recognized under IFRS. Cash flow is defined as cash flow from operations before the net change in non-
cash working capital balances, income and mining taxes, and interest paid and cash flow per share is the same measure divided
by the weighted average number of common shares outstanding during the year.
Cash Cost Per Pound of Copper Produced
The Company is primarily a coppe r producer and therefore calcul ates this non-IFRS financial m easure individually for its
three copper producing mines, Red Chris, Mount Polley and Huckl eberry, and on a composite basis for these mines.
Management uses this non-IFRS financial measure to monitor operating costs and profitability.
Variations from period to period in the cash cost per pound of copper produced are the resu lt of many factors including:
grade, metal recoveries, amount of stripping charged to operations, mine and mill operating conditions, labour and other cost
inputs, transportation and warehousing costs, treatment and refining costs, the amount of by-product and other revenues, the
US$ to CDN$ exchange rate and the amount of copper produced. Idle mine costs during the periods when Huckleberry was
not in operation have been excluded from the cash cost per pound of copper produced.
Variations from period to period in the cash cost per pound of copper produced are the resu lt 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. Id le 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.
Calculation of Cash Cost Per Pound of Copper Produced
expressed in thousands, except cash cost per pound of copper produced
Year Ended December 31, 2017
Huckleberry Red Mount
100% 50% Chris Polley Composite
Cash cost of copper produced in US$ $ - $ - $143,891 $44,183 $188,073
Copper produced – pounds - - 74,636 19,071 93,707
Cash cost per lb copper produced in US$ - - $1.93 $2.32 $2.01
Year Ended December 31, 2016
Huckleberry Red Mount
100% 50% Chris Polley Composite
Cash cost of copper produced in US$ $41,765 $20,881 $114,166 $4 6,306 $181,353
Copper produced – pounds 20,438 10,219 83,614 25,338 119,171
Cash cost per lb copper produced in US$ $2.04 $2.04 $1.37 $1.83 $1.52
DEVELOPMENTS DURING 2017
Red Chris Mine
The Red Chris mill achieved 95% of design capacity averaging 28 ,433 tonnes per calendar day in 2017. Fourth quarter
production totaled 23.23 million pounds copper and 13,020 ounces gold, compared to 19.65 million pounds copper and 8,426
ounces gold in the 2017 third quarter, an increase of 18% and 5 5% respectively. Copper and gold grades were higher in the
fourth quarter and averaged 0.52% copper and 0.324 g/t gold, wi th the higher grades delivered to the mill from the lower
benches in the Main zone pit. Metal recoveries also increased to 81.03% for copper and 49.99% for gold. The average copper
recovery for the fourth quarter sets a new record high for Red Chris, and the gold recovery is a record high for a quarter
during which only Main Zone ores were treated.
There was significant rise in gold production between the 2017 first and fourth quarters from 5,811 to 13,020 ounces, as a
result of the gold grade increasing from 0.201 g/t to 0.324 g/t , and gold recovery increasing from 37.43% to 49.99%.
Quarterly copper production during the year increased approxima tely 42% from the first quarter to year end as a result of
better grade and recovery.
The 2018 production target for Red Chris is 72-77 million pounds copper and 31-33 thousand ounces gold.
Exploration, development and capital expenditures were $57.8 million in 2017 compared to $123.1 million in 2016.
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Mount Polley Mine
Fourth quarter production totaled 4.02 million pounds copper an d 10,252 ounces gold, a slight increase compared to 3.98
million pounds copper and 9,989 ounces gold in the 2017 third q uarter. Ore release from the Cariboo pit was slower than
planned at the beginning of the year as the forest fires in the Cariboo region affected mining operations this summer. The
reduction in mill feed available from the Cariboo pit resulted in a higher percentage of mill feed coming from stockpiles in
the fourth quarter.
Mining in 2017 was mainly in the Cariboo pit, and was supplemented at times from low grade stockpiles. The forest fires in
the region impacted both mining and milling operations. Copper production in 2017 was down about 25% from that achieved
in 2016 with lower head grades and recovery, while gold production was up slightly on higher grades.
The 2018 production target for Mount Polley is 17-19 million pounds copper and 44-47 thousand ounces gold.
Exploration, development, and capital expenditures were $27.0 million in 2017 compared to $26.7 million in 2016.
Huckleberry Mine
On April 28, 2017 the Company became the sole owner of Huckleberry by virtue of Huckleberry exercising its right of first
refusal to purchase for cancellation all the shares of Huckleberry held by a syndicate of Japanese companies in exchange for
cash consideration of $2.0 milli on. Huckleberry became a wholl y-owned subsidiary of the Company on that date. The
company recognized a gain of $109.8 million on the acquisition.
Sterling Mine
On May 30, 2017 the Company completed the sale of the Sterling gold mine property and related assets for consideration
comprised of cash, marketable securities, net smelter royalties , and a net profits interest in certain mine operations. The
Company recognized a gain of $0.6 million on the transaction.
FOURTH QUARTER RESULTS
Revenue in the fourth quarter of 2017 was $140.5 million compared to $78.1 million in 2016. Sales revenue is recorded when
title for concentrate is transferred on ship loading. Variation s in revenue are impacted by the timing and quantity of
concentrate shipments, metal prices and exchange rates, and per iod end revaluations of revenue attributed to concentrate
shipments where copper and gold prices will settle at a future date.
The Company recorded a net income of $33.9 million ($0.36 per share) in the fourth quarter of 2017 compared to net loss of $47.1
million ($0.57 per share) in the prior year quarter. There was also an additional $35.0 million of the net income in the fourth
quarter of 2017 related to the finalization of the gain on bargain purchase of Huckleberry and revaluation of equity investment in
Huckleberry.
Expenditures for exploration and ongoing capital projects at Mount Polley, Red Chris and Huckleberry totaled $17.3 million
during the three months ended December 31, 2017 compared to the expenditures for exploration and ongoing capital projects
at Mount Polley, Red Chris and Sterling which totaled $88.3 mil lion in the 2016 comparative quarter. The fourth quarter of
2016 included $57.2 million for the Company’s share of construction of the Northwest Transmission Line that it was obligated
to reimburse to BC Hydro.
OUTLOOK
Operations, Earnings and Cash Flow
The 2017 annual base and precious metals production from Red Ch ris and Mount Polley mines was 93.7 million pounds
copper and 81.4 thousand ounces gold. Metal production targets for 2018 are 89-96 million pounds copper and 75-80
thousand ounces gold. At December 31, 2017 the Company had not hedged any copper, gold or CDN$/US$ exchange.
Quarterly revenues will fluctuate depending on copper and gold prices, the CDN$/US$ exchange rate, and the timing of
concentrate sales, which is dependent on concentrate production and the availability and scheduling of transportation.
Exploration
Imperial has interests in various other early stage exploration properties, and sufficient work will be conducted to keep these
properties in good standing.
Development
At the Red Chris mine, additional mining equipment, including f ive 150 ton haul trucks from the Huckleberry mine and a
new electric powered hydraulic e xcavator, are being mobilized t o increase the mining rate. The haul trucks have arrived at
site, and the excavator is expected to arrive during the second quarter of 2018. The increase in the mining rate to about
130,000 tonnes per day will provide for quicker access to the deeper higher grade portions of the Main and East zones.
Looking to the future at the Red Chris mine, preliminary engineering studies have been conducted to determine the optimum
method to mine the deep resource below the current designed pit s. Based on this work, it app ears that the best method will
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be a block cave mining of the deep resource beneath both the Ea st and Main pits. A drill program is being developed that
will provide information required to further advance the block cave studies.
At the Mount Polley mine, construction of a pipeline from the water treatment plant to the Quesnel Lake diffuser system was
completed at the end of November 2017. The treated water from t he treatment plant will no longer be discharged into
Hazeltine Creek. On January 8, 2018, treated water began being discharged via the newly installed pipeline deep into Quesnel
Lake. The Mount Polley site has a positive water balance, and now has means of discharging excess site water.
Dredging of tailings in the Springer pit (deposited in the pit in 2015-2016 to allow for restart of milling operations prior t o
repair of the tailings storage facility) recently commenced. Once mining operations in the Cariboo pit are completed in mid-
2018, Mount Polley will rely on low grade stockpiles to provide mill feed, until the dredging of the Springer pit is completed.
Dredging of the Springer pit is targeted to be complete around the end of the year.
During the second half of 2018, while low-grade stockpiles are providing mill feed, mining operations are to be cut back to
minimal levels. When the dredgi ng is complete, providing acces s to the bottom of the Springer pit, a return of mining
operations to normal levels is planned. At that point, the Springer pit will begin supplying mill feed to the concentrator.
South Springer is another area with potential to significantly increase the mineral resource. The mineralization is under the
saddle separating the Cariboo and Springer Phase 6 pits, which presents an ideal location for additional low stripping ratio
reserves, assuming planned drilling is positive. With the configuration of the Cariboo pit providing an excellent platform to
conduct an exploration drilling, follow up on the 2012 drilling is planned with a small exploration program to commence
during the second half of 2018.
At Huckleberry, a preliminary plan to reopen the mine has been developed and is under consideration for implementation in
2019 if the copper price continues to strengthen in 2018.
- - -
For detailed financial information, refer to the Company’s 2017 Annual Report available on imperialmetals.com and sedar.com.
An Earnings Announcement Conference Call
is scheduled for Thursday, March 29, 2018 at 10:00am PDT | 1:00pm EDT
Management will discuss the Company’s 2017 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 11:59pm on
April 10, 2018 by calling 855.859.2056 (North America-toll free) playback code 6767849
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 | [email protected]
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 fo r
the year ended December 31, 2017, and has been prepared based on information available as at March 28, 2018.
Except for statements of historical fact relating to the Compan y, certain information contained herein constitutes forward-loo king
information which are prospective in nature and reflect the cur rent views and/or expectations of Imperial. Often, but not alwa ys,
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: use of proceeds from
financings and credit; expectations for cash savings arising fr om the payment of interest due on certain debt facilities in co mmon
shares; the 2018 production targets for the Red Chris and Mount Polley mines; expectations that Red Chris will receive its new
electric powered hydraulic excavator during the second quarter of 2018 and that the addition of the new excavator and the rece ipt
of the five 150 ton haul trucks will support an increase of the mining rate to about 130,000 tonnes per day and provide quicke r
access to the deeper higher grade portions of the Main and East zones; results of preliminary engineering studies indicating that
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block caving may be the best method to develop Red Chris’ deep resource below the current designed pit and the drill program
currently under development will provide information required t o further advance the block cave studies; the reduction of mini ng
operations at Mount Polley to minimal levels during the second half of 2018; reliance on low grade stockpiles to provide mill feed
for Mount Polley until the dredging of the Springer pit is comp leted (targeted for the end of the year), following which minin g
operations are expected to return to normal levels with Springe r pit supplying mill feed to the concentrator; plans for a smal l
exploration program at Mount Polley to commence during the second half of 2018; expectations that South Springer has the potential
to significantly increase the Mount Polley mineral resource, assuming planned drilling is positive; the development of a preliminary
plan to reopen Huckleberry mine in 2019 subject to further stre ngthening of the price of copper; mine plans; costs and timing of
current and proposed exploration and development; production and marketing; capital expenditures; adequacy of funds for projects
and liabilities; the receipt of necessary regulatory permits, approvals or other consents; outcome and impact of litigation; cash flow;
working capital requirements; the requirement for additional ca pital; 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 i n which the Company operates, including, but not limited to,
assumptions that: the Company will be able to advance and compl ete remaining planned rehabilitation activities within expected
timeframes; there will be no significant delay or other materia l impact on the expected timeframes or costs for completion of
rehabilitation of the Mount Polley mine and implementation of M ount 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 permits, approvals and arrangements
to proceed with planned rehabilitation and Mount Polley’s long term water management plan will be obtained in a timely manner;
there will be no material operational delays at the Red Chris o r Mount Polley mines; Huckleberry mine will restart in 2019;
equipment will operate as expected; there will not be significant power outages; the Company’s use of derivative instruments from
time to time will enable the Company to achieve expected pricing protection; there will be no material adverse change in the market
price of commodities and exchange rates; the Red Chris and Moun t Polley mines will achieve expected production outcomes
(including with respect to mined grades and mill recoveries and access to water as needed); and Imperial will have access to capital
as required and satisfy financial covenants contained in its credit facilities and other loan documents. 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 resu lts, performance or achievements
expressed or implied by the statements constituting forward-looking information.
Important risks that could cause Imperial’s actual results, rev enues, performance or achieveme nts to differ materially from
Imperial’s expectations include, among other things: that additional financing that may be required may not be available to Imperial
on terms acceptable to Imperial or at all; that Imperial may be unable to satisfy financial covenants contained in its credit facilities
and other loan documents; uncertainty regarding the outcome of sample testing and analysis being conducted on the area affecte d
by the Mount Polley Breach; risks relating to the timely receipt of necessary approvals and consents to proceed with the rehabilitation
plan and Mount Polley’s long term water management plan; risks relating to the remaining costs and liabilities and any unforeseen
longer-term environmental consequences arising from the Mount P olley Breach; uncertainty as to actual timing of completion of
rehabilitation activities and the implementation of Mount Polley’s long term water management plan; risks relating to the impact of
the Mount Polley Breach on Imperial’s reputation; that Huckleberry mine will not restart in 2019; 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, unavailab ility of materials and equipment, labour unrest, power outages, and
natural phenomena such as weather conditions and water shortages negatively impacting the operation of the Red Chris mine or the
Mount Polley mine; changes in commodity and power prices; changes in market demand for our concentrate; inaccurate geological
and metallurgical assumptions (including with respect to the si ze, grade and recoverability of mineral reserves and resources); and
other hazards and risks disclosed within the Management’s Discu ssion and Analysis for the year ended December 31, 2017 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 d oes not undertake to update any forward looking information,
except in accordance with applicable securities laws.