Imperial Reports First Quarter 2018 Financial Results
imperialmetals.com
News Release
Imperial Reports First Quarter 2018 Financial Results
Vancouver | May 10, 2018 | Imperial Metals Corporation (the “Company”) (TSX:III) reports financial results for the three
months ended March 31, 2018 and 2017, as summarized in this rel ease 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 f rom the Red Chris m ine 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 wa s $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 neg ative 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.
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Net loss for the March 2018 quarter was $16.2 million ($0.14 pe r 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 milli on 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 th e 2017 comparative quarter. The $11.8 million foreign
exchange loss is comprised of an $11.3 million loss on the seni or 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 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 n et 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. 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 i tems. 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 quart er 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 $0.16 in the 2017 comparative quarter.
Cash flow and cash flow per share are measures used by the Company to evaluate its performance however they are not terms
recognized under IFRS. Cash flow is defined as cash flow from operations before the net change in non-cash working capital
balances, income and mining taxes, and interest paid and cash f low per share is the same measure divided by the weighted
average number of common shares outstanding during the year.
Cash Cost Per Pound of Copper Produced
The cash cost per pound of copper produced is a non-IFRS financ ial measure that does not have a standardized meaning
under IFRS, and as a result may not be comparable to similar measures presented by other companies. Management uses this
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non-IFRS financial measure to mon itor operating costs and profi tability. The Company is primarily a copper producer and
therefore calculates this non-IFRS financial measure individual ly for its three copper mines, Red Chris, Mount Polley and
Huckleberry, and on a composite basis for these mines.
The cash cost per pound of copper produced is derived from the sum of cash production costs, transportation and offsite costs,
treatment and refining costs, royalties, net of by-product and other revenues, divided by the number of pounds of copper
produced during the period.
Variations from period to period in the cash cost per pound of copper produced are the resu lt of many factors including:
grade, metal recoveries, amount of stripping charged to operations, mine and mill operating conditions, labour and other cost
inputs, transportation and warehousing costs, treatment and refining costs, the amount of by-product and other revenues, the
US$ 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.
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 po unds 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 pushb ack. 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 mil lion in the March 2018 quarter compared to $11.0 million
in the comparative 2017 quarter.
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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 62.4 7%. 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 c ontract. 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.
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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 | [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 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", "schedu led",
"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, wi thout limitation, statements regarding: the necessity to extend or
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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 prod uction 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 an d
marketing; capital expenditures; the adequacy of funds for proj ects and liabilities; the receipt of necessary regulatory appro vals 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 i n which the Company operates, including, but not limited to,
assumptions that: the Company will be able to successfully exte nd or refinance the Senior Credit Facility, the Second Lien Cre dit
Facility and the Senior Unsecured Notes prior to their maturity dates and adequate additional financing will be available on t erms
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 bet ter
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 activi ties within expected timeframes; there will be no significant d elay
or other material impact on the expected timeframes or costs fo r 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-rela ted 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 significa nt
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 resul ts, 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 the C ompany 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 adequ ate
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 contai ned 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 Imp erial’s
reputation; the quantum of claims, fines and penalties that may become payable by Imperial and the risk that current sources o f
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 disobe dience 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 assumption s (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 forwa rd-looking information. Imperial does not undertake to update a ny
forward-looking information, except in accordance with applicable securities laws.