Imperial Reports Third Quarter 2017 Financial Results
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News Release
Imperial Reports Third Quarter 2017 Financial Results
Vancouver | November 14 , 2017 | Imperial Metals Corporation (the “Company”) (TSX:III) reports comparative financial
results for the three and nine months ended September 30, 2017 and 2016, as summarized in th is release and discussed in
detail in the Management’s Discu ssion & 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
September 30
Nine Months Ended
September 30
2017 2016 2017 2016
Total revenues $90,157 $97,108 $312,647 $350,093
Net income (loss) $(2,129) $(20,589) $43,199 $(7,020)
Net income (loss) per share ($0.02) $(0.25) $0.46 $(0.09)
Diluted income (loss) per share ($0.02) $(0.25) $0.46 $(0.09)
Adjusted net loss (1)
$(18,615) $(19,710) $(63,161) $(19,725)
Adjusted net loss per share (1)
$(0.20) $(0.24) $(0.67) $(0.24)
Adjusted EBITDA(1)
$16,275 $16,726 $44,316 $107,065
Working capital deficiency $(919,038) $(48,951) $(919,038) $(48,951)
Total assets $1,616,953 $1,462,756 $1,616,953 $1,462,756
Total debt (including current portion) $858,291 $854,445 $858,291 $854,445
Cash flow (1)(2)
$17,966 $18,244 $45,372 $107,996
Cash flow per share (1)(2)
$0.19 $0.22 $0.48 $1.32
(1) Refer to table under 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 year.
Revenues decreased to $90.2 million in the September 2017 quart er compared to $97.1 million in the 2016 comparative
quarter, a decrease of $6.9 million or 7%.
Revenue from the Red Chris mine in the September 2017 quarter w as $66.0 million compared to $67.3 million in the 2016
comparative quarter. This decreas e was attributable to lower qu antity of copper concentrate sold compared to the 2016
quarter. This was slightly mitigated with a positive revenue revaluation of $3.3 million during the 2017 quarter.
Revenue from the Mount Polley mine in the September 2017 quarte r was $24.1 million compared to $29.8 million in the
2016 comparative quarter. The d ecrease was attributable to a lo wer quantity of copper concentrate sold; lower foreign
exchange rate and lower realized pricing on gold concentrate. H owever, this was slightly offset by a positive revenue
revaluation of $2.6 million.
In the September 2017 quarter, there were 3.5 concentrate shipments from Red Chris mine (2016-four concentrate shipments)
and a 0.8 concentrate shipment from Mount Polley mine (2016-one concentrate shipment). 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 pou nd averaged US$2.88 in the September 2017 quarter
compared to US$2.17 in the 2016 comparative quarter. The London Metals Exchange cash settlement gold price per troy
ounce averaged US$1,278 in the September 2017 quarter compared to US$1,335 in the September 2016 quarter. The average
CDN/US$ Dollar exchange rate was 1.253 in the September 2017 quarter, 4.0% lower than the exchange rate of 1.309 in the
September 2016 quarter. In CDN dollar terms the average copper price in the September 2017 quarter was CDN$3.61 per
pound compared to CDN$2.83 per pound in the 2016 comparative quarter and the average gold price in the September 2017
quarter was CDN$1,601 per ounce compared to CDN$1,742 per ounce in the 2016 comparative quarter.
Revenue in the September 2017 quarter increased by $5.9 million positive revenue revaluation compared to $3.1 million
negative revenue revaluation in the 2016 comparative quarter. Revenue revaluations are the result of the copper price on the
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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 September 2017 quarter was $2.1 million ($0.02 per share) compared to net loss of $20.6 million ($0.25 per
share) in the 2016 comparative quarter. The decrease in net loss of $18.5 million was primarily due to the following factors:
Income/loss from mine operations went from a loss of $2.1 milli on in September 2016 to income of $3.0 million in
September 2017, a decrease in net loss of $5.1 million.
Foreign exchange gains/losses on current and non-current debt w ent from a loss of $3.8 million in September 2016 to a
gain of $16.6 million in September 2017, a decrease in net loss of $20.4 million.
The Company’s equity loss in Huckleberry went from loss of $2.3 million in September 2016 to $nil in September 2017,
a decrease in net loss of $2.3 million.
Idle mine costs went from $nil in September 2016 to $2.6 millio n in September 2017, an increase in net loss of $2.6
million.
Interest expense went from $16.8 million in September 2016 to $19.4 million in September 2017, an increase in net loss
of $2.6 million.
Tax recovery went from $4.2 million in September 2016 to $1.9 m illion in September 2017, an increase in net loss of
$2.3 million.
The September 2017 quarter net loss included foreign exchange gain related to changes in CDN/US Dollar exchange rate of
$16.6 million compared to foreign exchange loss of $3.8 million in the 2016 comparative quarter. The $16.6 million foreign
exchange gain is comprised of a $16.1 million gain on the senio r notes, a $0.4 million gain on long term equipment loans,
and a $0.1 million gain on short-term debt and operational items. The average CDN/US Dollar exchange rate in the September
2017 quarter was 1.253 compared to an average of 1.305 in the 2016 comparative quarter.
Cash flow was $18.0 million in the September 2017 quarter compared to cash flow of $18.2 million in the 2016 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 an d it is one of the measures used by management to assess
the financial performance of the Company.
Capital expenditures were $22.2 million in the September 2017 q uarter, down from $27.5 million in the 2016 comparative
quarter. The September 2017 expenditures included $8.1 million for tailings dam construction, $8.9 million for component
changes on mobile equipment, $2.2 million relating to environme ntal compliance expenditure and $2.5 million for 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.
expressed in thousands, except share and per share amounts Three Months Ended September 30
2017 2016
Adjusted net loss $(18,615) $(19,710)
Adjusted net loss per share $(0.20) $(0.24)
Adjusted EBITDA $16,275 $16,726
Cash flow $17,966 $18,244
Cash flow per share $0.19 $0.22
Adjusted Net Loss and Adjusted Net Loss per Share
Adjusted net loss in the September 2017 quarter was $18.6 milli on ($0.20 per share) compared to an adjusted net loss of
$19.7 million ($0.24 per share) in the 2016 comparative quarter. Adjusted net loss reflects the financial results excluding the
effect of items not settling in the current period and non-recu rring 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.
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Adjusted EBITDA
Adjusted EBITDA in the September 2017 quarter was $16.3 million compared to $16.7 million in the 2016 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 September 2017 quarter was $18.0 million compared to $18.2 million in the 2016 comparative quarter. Cash
flow per share was $0.19 in the September 2017 quarter compared to $0.22 in the 2016 comparative quarter.
Cash flow and cash flow per share are measures used by the Company to evaluate its performance however they are not terms
recognized under IFRS. Cash flow is defined as cash flow from operations before the net change in non-cash working capital
balances, income and mining taxes, and interest paid and cash f low per share is the same measure divided by the weighted
average number of common shares outstanding during the year.
Cash Cost Per Pound of Copper Produced
The cash cost per pound of copper produced is a non-IFRS financ ial measure that does not have a standardized meaning
under IFRS, and as a result may not be comparable to similar measures presented by other companies. Management uses this
non-IFRS financial measure to mon itor operating costs and profi tability. The Company is primarily a copper producer and
therefore calculates this non-IFRS financial measure individual ly for its three copper mines, Red Chris, Mount Polley and
Huckleberry, and on a composite basis for these mines.
The cash cost per pound of copper produced is derived from the sum of cash production costs, transportation and offsite costs,
treatment and refining costs, royalties, net of by-product and other revenues, divided by the number of pounds of copper
produced during the period.
Variations from period to period in the cash cost per pound of copper produced are the resu lt of many factors including:
grade, metal recoveries, amount of stripping charged to operations, mine and mill operating conditions, labour and other cost
inputs, transportation and warehousing costs, treatment and refining costs, the amount of by-product and other revenues, the
US$ 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.
Cash Cost Per Pound of Copper Produced
expressed in thousands, except cash cost per pound of copper produced
Three Months Ended September 30, 2017
Total per
Huckleberry Red Mount Sterling & Financial
100% 50% Chris Polley Corporate Statements Composite
Cash cost of copper produced in US$ $ - $ - $36,035 8,735 $44,770
Copper produced – pounds - - 19,651 3,981 23,632
Cash cost per lb copper produced in US$ $ - $ - $1.83 $2.19 $1.89
Three Months Ended September 30, 2016
Total per
Huckleberry Red Mount Sterling & Financial
100% 50% Chris Polley Corporate Statements Composite
Cash cost of copper produced in US$ $12,826 $6,411 $32,274 $9,3 32 $48,017
Copper produced – pounds 4,447 2,224 18,713 6,868 27,805
Cash cost per lb copper produced in US$ $2.88 $2.88 $1.72 $1.36 $1.73
Nine Months Ended September 30, 2017
Total per
Huckleberry Red Mount Sterling & Financial
100% 50% Chris Polley Corporate Statements Composite
Cash cost of copper produced in US$ 110.481 29,297 139,777
Copper produced – pounds - - 51,402 15,048 66,450
Cash cost per lb copper produced in US$ $ - $ - $2.15 $1.95 $2.10
Nine Months Ended September 30, 2016
Total per
Huckleberry Red Mount Sterling & Financial
100% 50% Chris Polley Corporate Statements Composite
Cash cost of copper produced in US$ $41,765 $20,881 $78,750 $32 ,412 $132,043
Copper produced – pounds 20,438 10,219 68,955 20,361 99,535
Cash cost per lb copper produced in US$ $2.04 $2.04 $1.14 $1.59 $1.33
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Operations
Metal production for 2017 is not expected to meet the targets set in July, given the delay in delivery of deeper and higher grade
ore to the mill at Red Chris, and the impact of the forest fires on operations at Mount Polley. The updated target ranges for 2017
metal production are 96-102 million pounds copper and 84-92 thousand ounces gold.
At September 30, 2017, 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 September 2017 quarter was 19.65 million pounds copper and 8,426 ounces gold, up 27% and 37%
respectively from the second quarter. Higher copper and gold grade ore was mined in September, later than expected, due to
lower than anticipated mining rates. Grades which averaged 0.38% copper and 0.18 g/t gold in July and August, increased to
0.47% copper and 0.29 g/t gold in September, as deep main zone ore became the main source of mill feed. Copper recovery
also increased to an average 80.88% in September. This deeper m ain zone ore will provide the majority of mill feed for the
remainder of the year. The plant achieved the design mill throughput for the third quarter averaging 30,135 tonnes per calendar
day.
Grades milled in October 2017 were 0.513% copper and 0.317 g/t gold, and recoveries were 80.83% copper and 46.58%
gold. As a result, metal production in October 2017 was 7.81 mi llion pounds copper and 4,005 ounces gold. In November
deeper Main zone ores have provided the majority of the mill fe ed, and mill recoveries have improved, averaging 84.1%
through to November 12.
The Company has begun work on mobilizing five rock trucks from the idled Huckleberry mine to Red Chris to increase the
mining rate. The increased mining rate will enable Red Chris to open up the Main zone pit and deliver more ore from deeper
in the Main zone to the mill in 2018.
Red Chris Production Three Months Ended
September 30
Nine Months Ended
September 30
2017 2016 2017 2016
Ore milled - tonnes 2,772,416 2,580,459 7,879,281 7,360,588
Ore milled per calendar day - tonnes 30,135 28,048 28,862 26,863
Grade % - copper 0.407 0.436 0.379 0.546
Grade g/t - gold 0.219 0.261 0.204 0.346
Recovery % - copper 78.94 75.50 78.13 77.86
Recovery % - gold 43.09 44.54 39.47 51.85
Copper – 000’s pounds 19,651 18,713 51,402 68,955
Gold – ounces 8,426 9,655 20,396 42,427
Silver – ounces 34,446 42,271 89,273 164,706
Exploration, development and capital expenditures were $17.4 mi llion in the September 2017 quarter compared to $22.7
million in the comparative 2016 quarter.
Mount Polley Mine
Mount Polley operations were suspended July 15 to July 31 due to the forest fire situation in the Cariboo region. Operations were
impacted to a lesser degree both before and after the period of suspension. Mill throughput for the third quarter was 1.44 million
tonnes, down 23% from the second quarter, and milling of material from low grade stockpiles was required to augment lower
mining rates. As a result of the unexpected suspension of operations, production from Mount Polley in the third quarter was 3.98
million pounds copper and 9,989 ounces gold, and the 2017 metal production targets were revised to 20-22 million pounds copper
and 51-55 thousand ounces gold, from the previously set target of 22-24 million pounds copper and 55-60 thousand ounces gold.
Mining operations are nearly caught up with the stripping lost because of the forest fires in the summer. The mine will soon begin
delivering ore from the bottom of the Cariboo pit.
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Mount Polley Production
Three Months Ended
September 30
Nine Months Ended
September 30
2017 2016 2017 2016
Ore milled - tonnes 1,444,625 1,769,779 4,91 6,789 5,052,469
Ore milled per calendar day - tonnes 15, 702 19,237 18,010 18,440
Grade % - copper 0.203 0.243 0.207 0.260
Grade g/t - gold 0.320 0.306 0.337 0.305
Recovery % - copper 61.44 72.38 66.98 70.46
Recovery % - gold 67.23 73.41 70.92 71.08
Copper – 000’s pounds 3,981 6,868 15,048 20,361
Gold – ounces 9,989 12,763 37,758 35,153
Silver – ounces 7,324 26, 752 28,738 78,887
Exploration, development and capital expenditures were $4.6 million in the September 2017 quarter compared to $4.5 million
in the comparative 2016 quarter.
Huckleberry Mine
On April 28, 2017 the Company became the sole owner of Huckleberry Mines Ltd. (“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 Japane se
companies in exchange for cash consideration of $2.0 million. Huckleberry became a wholly -owned subsidiary of the
Company on that date. The mine is currently on care and maintenance.
Prior to April 28, 2017 the Company had a 50% interest in Huckl eberry that was accounted for on the equity basis of
accounting. The Company has account ed for the acquisition of th e remaining 50% interest in Huckleberry as a business
combination whereby the net assets acquired are recorded at fair value. The fair values disclosed at September 30, 2017 are
provisional estimates due to the complexity of valuing mineral property interests at various stages of development. The
finalization of the fair values of the assets and liabilities a cquired is expected to be reported no later than the Company’s
December 31, 2017 financial statements. The final fair values m ay be materially different than the provisional fair values
outlined below.
The Company has provisionally estimated the acquisition date fair values of the acquired assets and liabilities of Huckleberry
and the fair value of the Company’s previously held 50% interest in Huckleberry by reference to their pre-acquisition carrying
values, a level 3 fair value measurement. These pre-acquisition carrying values had been subject to normal impairment
assessment pre and post-acquisition with no impairment charges recorded.
The following table summarizes the consideration transferred to acquire 100% interest in Huckleberry and the provisional
fair values of identified assets acquired and liabilities assumed at the acquisition date:
expressed in thousands of dollars
Assets Relinquished
Accrued receivable due to the Company $1,009
Fair value of the Company’s initial 50% investment in Huckleberry 77,832
$78,841
Identifiable Assets Acquired and Liabilities Assumed
Cash $18,440
Reclamation bonds 14,135
Prepaid and other receivables 648
Inventory 7,941
Mineral properties 164,265
Trade and other payables (1,668)
Deferred trade payables (4,925)
Future site reclamation provisions (45,171)
$153,665
Gain on bargain purchase of Huckleberry $74,824
From the date of acquisition on April 28, 2017 to September 30, 2017, Huckleberry incurred idle mine costs comprised of
$2.2 million in operating costs and $2.2 million in depreciation expense.
Executive Resignation and Appointments
Steve Robertson, Vice President Corporate Affairs, tendered his resignation to accept the role of CEO in another
company. The Company wishes to extend its gratitude to Mr. Robertson for his 24 years of service with Imperial. Jim Miller-
Tait, who joined Imperial as Exploration Manager in 2009, was a ppointed Vice President Exploration. Sheila Colwill was
appointed Vice President Marketing, rising from Marketing Manager, a position she has held since 2011.
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- - -
Refer to Imperial’s 2017 Third Quarter Report on imperialmetals.com and sedar.com for detailed information.
Earnings Announcement Conference Call : November 15, 2017 at 10:00am PDT | 1:00pm EDT
Management will discuss the 2017 Third Quarter Report. Conference call-in numbers:
778.383.7413 Vancouver
416.764.8688 Toronto
888.390.0546 North America – toll free
Conference call playback is available until 11:59pm on November 22, 2017 by
calling toll free 888.390.0541 or Toronto 416.764.8677 | playback passcode 767807#
About Imperial
Imperial is a Vancouver based 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 in British Columbia.
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 for the period
ended September 30, 2017, and plans for the future based on fac ts and circumstances as of November 14, 2017. Except for statements of
historical fact relating to the Company, including our past 50% interest in Huckleberry, 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 us e 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 inform ation in this news release inc ludes, without limitation, statements regarding: revised lower 2017 metal
production targets due to the delay in delivery of deeper and higher grade ore to the mill at Red Chris and the impact of the forest fires on
operations at Mount Polley; expectations that the deeper main zone ore will provide the majority of mill feed for the remainder of the year;
expectations that the final fair values for the Huckleberry ass ets and liabilities acquired will be reported no later that the Company’s
December 31, 2017 financial statements; expectations for receipt of contingent sales proceeds in the form of marketable securities from the
sale of Sterling because of a financing announced by the purcha ser of Sterling; plans to commenc e a rights offering and to clo se same
before year-end; use of proceeds from financings and credit; production and marketing; capital expenditures; adequacy of funds for projects
and liabilities; the receipt of necessary regulatory approvals or other consents; outcome and impact of litigation; cash flow; working capital
requirements; the requirement f or additional capital; results o f 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, b ut rather on then current expect ations, 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 advance and complete remaining plan ned 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 commo dities and exchange rates; the Company’s mines will achieve exp ected
production outcomes (including with respect to mined grades and mill recoveries); and 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. 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 achieveme nts to be materially differen t from any future results, performance or achievements expresse d or
implied by the statements constituting forward-looking information.
Important risks that could cause Imperial’s actual results, rev enues, performance or achievement s to differ materially from Im perial’s
expectations include, among other things: that additional finan cing that may be required may not be available to Imperial on t erms
acceptable to Imperial or at all; that Imperial may be unable to satisfy and/or obtain amendments of financial covenants or terms contained
in its credit facilities and other loan documents; risks relati ng to the timely receipt of nece ssary, project-related approvals and consents;
risks relating to the remaining c osts and liabilities and any u nforeseen longer-term environmental consequences arising from t he Mount
Polley Breach; uncertainty as to actual timing of completion of rehabilitation activities; risks relating to the impact of the Mount Polley
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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
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 an d
metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources); and other hazards
and risks disclosed within the Management’s Discussion and Analysis for the three and nine months ended September 30, 2017 and other
public filings which are availab le on Imperial’s profile at sedar.com. For the reasons set forth ab ove, investors should not place u ndue
reliance on forward-looking information. Imperial does not unde rtake to update any forward-look ing information, except in acco rdance
with applicable securities laws.