Imperial Reports Third Quarter 2018 Financial Results
imperialmetals.com
News Release
Imperial Reports Third Quarter 2018 Financial Results
Vancouver | November 8, 2018 | Imperial Metals Corporation (the “Company”) (TSX:III) reports financial results for the
three and nine months ended September 30, 2018 and 2017, as sum marized in this release and discussed in detail in the
Management’s Discussion & Analysis. The Company’s financial res ults 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
2018 2017 2018 2017
Total revenues $70,481 $90,157 $268,459 $312,647
Net income (loss) $(28,609) $(1,572) $(81,330) $79,220
Net income (loss) per share $(0.24) $(0.02) $(0.69) $0.85
Diluted income (loss) per share $(0.24) $(0.02) $(0.69) $0.85
Adjusted net loss (1) $(37,099) $(18,058) $(69,676) $(62,134)
Adjusted net loss per share (1) $(0.31) $(0.19) $(0.59) $(0.66)
Adjusted EBITDA(1) $(13,287) $17,903 $20,927 $45,943
Working capital deficiency $(819,730) $(919,038) $(819,730) $(919,038)
Total assets $1,665,647 $1,616,953 $1,665,647 $1,616,953
Total debt (including current portion) $873,789 $858,291 $873,789 $858,291
Cash flow (1)(2) $(11,766) $17,966 $21,599 $45,372
Cash flow per share (1)(2) $(0.10) $0.19 $0.18 $0.48
(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 $70.5 million in the September 2018 quart er compared to $90.2 million in the 2017 comparative
quarter, a decrease of $19.7 million or 21.8%.
Revenue from the Red Chris mine in the September 2018 quarter w as $52.7 million compared to $66.0 million in the 2017
comparative quarter. This decrease was attributable to a lower quantity of copper concentrate sold along with similar copper
and slightly lower gold prices and the impact of negative revenue revaluation noted below.
Revenue from the Mount Polley mine in the September 2018 quarte r was $17.8 million compared to $24.1 million in the
2017 comparative quarter due to lower production and negative revenue revaluation noted below.
In the September 2018 quarter, there were 2.7 concentrate shipments from Red Chris mine (2017-3.5 concentrate shipments)
and 0.5 concentrate shipments from Mount Polley mine (2017-0.8 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 pou nd averaged US$2.77 in the September 2018 quarter
compared to US$2.88 in the 2017 comparative quarter. The London Metals Exchange cash settlement gold price per troy
ounce averaged US$1,213 in the September 2018 quarter compared to US$1,278 in the September 2017 quarter. The average
CDN/US Dollar exchange rate was 1.307 in the September 2018 quarter, 4.3% higher than the exchange rate of 1.253 in the
September 2017 quarter. In CDN Dollar terms the average copper price in the September 2018 quarter was CDN$3.62 per
pound compared to CDN$3.61 per pound in the 2017 comparative quarter and the average gold price in the September 2018
quarter was CDN$1,585 per ounce compared to CDN$1,601 per ounce in the 2017 comparative quarter.
Revenue in the September 2018 quarter decreased by $5.1 million due to a negative revenue revaluation as compared to a
$5.9 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 shee t date and finalization of contained metal as a result of final
assays.
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Net loss for the September 2018 quarter was $28.6 million ($0.2 4 per share) compared to net loss of $1.6 million ($0.02 per
share) in the 2017 comparative quarter. The increase in net loss of $27.0 million was primarily due to the following factors:
Income/loss from mine operations went from income of $3.0 milli on in September 2017 to a loss of $28.8 million in
September 2018, an increase in net loss of $31.8 million.
Interest expense went from $19.4 million in September 2017 to $19.9 million in September 2018, an increase in net loss
of $0.5 million.
Foreign exchange gains/losses on current and non-current debt went from a gain of $16.6 million in September 2017 to a
gain of $7.5 million in September 2018, an increase in net loss of $9.1 million.
Idle mine costs went from $1.9 million in September 2017 to $1. 3 million in September 2018, a decrease in net loss of
$0.6 million.
Tax recovery went from $1.9 million in September 2017 to $14.4 million in September 2018, a decrease in net loss of
$12.5 million.
The September 2018 quarter net loss included foreign exchange gain related to changes in CDN/US Dollar exchange rate of
$7.5 million compared to foreign exchange gain of $16.6 million in the 2017 comparative quarter. The $7.5 million foreign
exchange gain is comprised of a $7.2 million gain on the senior notes, a $0.1 million gain on long term equipment loans, and
a $0.2 million gain on operational items. The average CDN/US Dollar exchange rate in the September 2018 quarter was 1.307
compared to an average of 1.253 in the 2017 comparative quarter.
Cash flow was negative $11.8 million in the September 2018 quarter compared to positive cash flow of $18.0 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 $37.5 million in the September 2018 q uarter, up from $22.3 million in the 2017 comparative
quarter. The September 2018 expenditures included $15.3 million for tailings dam construction, $21.1 million on mobile
equipment and $1.1 million for other capital items.
At September 30, 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.
Liquidity & Capital Resources and Financing
At September 30, 2018, the Company had cash of $4.8 million, available capacity of $9.7 million for future draws under the
Senior Credit Facility, $10.0 million undrawn on the 2017 LOC l oan facility and a working capital deficiency of $819.7
million, which includes $728.4 million of current debt.
Cash balances on hand, the projected cash flow from the Red Chr is and Mount Polley mines, as well as the available credit
facilities are expected to be sufficient to fund the working ca pital deficiency and the Company’s obligations as they come
due assuming the Company is able to successfully complete the r estructuring process. In addition, there are inherent risks
related to the operation of the Company’s mines which could req uire additional sources of financing. There can be no
assurance that the Company will be able to successfully complete the restructuring process, which process may include sales
of some of the Company’s assets, joint ventures, a recapitalization, and a sale or merger of the Company. The completion of
the restructuring process creates a material uncertainty that c ould have an adverse impact on the Company’s financial
condition and results of operations and may cast significant doubt on the Company’s ability to continue as a going concern.
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.
Adjusted Net Loss and Adjusted Net Loss Per Share
Adjusted net loss in the September 2018 quarter was $37.1 milli on ($0.31 per share) compared to an adjusted net loss of
$18.1 million ($0.19 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-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 and other adjustments.
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Adjusted EBITDA
Adjusted EBITDA in the September 2018 quarter was a loss of $13 .3 million compared to income of $17.9 million in the
2017 comparative quarter. We define Adjusted EBITDA as net inco me (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 2018 quarter was negative $11.8 mill ion compared to positive $18.0 million in the 2017
comparative quarter. Cash flow p e r s h a r e w a s $ ( 0 . 1 0 ) i n t h e S e ptember 2018 quarter compared to $0.19 in the 2017
comparative quarter.
Cash flow and cash flow per share are measures used by the Company to evaluate its performance however they are not terms
recognized under IFRS. Cash flow is defined as cash flow from operations before the net change in non-cash working capital
balances, income and mining taxes, and interest paid and cash f low per share is the same measure divided by the weighted
average number of common shares outstanding during the year.
Cash Cost Per Pound of Copper Produced
The cash cost per pound of copper produced is a non-IFRS financ ial measure that does not have a standardized meaning
under IFRS, and as a result may not be comparable to similar measures presented by other companies. Management uses this
non-IFRS financial measure to mon itor operating costs and profi tability. The Company is primarily a copper producer and
therefore calculates this non-IFRS financial measure individual ly for its three copper mines, Red Chris, Mount Polley and
Huckleberry, and on a composite basis for these mines.
The cash cost per pound of copper produced is derived from the sum of cash production costs, transportation and offsite costs,
treatment and refining costs, royalties, net of by-product and other revenues, divided by the number of pounds of copper
produced during the period.
Variations from period to period in the cash cost per pound of copper produced are the resu lt of many factors including:
grade, metal recoveries, amount of stripping charged to operations, mine and mill operating conditions, labour and other cost
inputs, transportation and warehousing costs, treatment and refining costs, the amount of by-product and other revenues, the
US$ 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 produced
Three Months Ended September 30, 2018
Red Chris Mount Polley Composite
Cash cost of copper produced in US$ $36,250 $7,816 $44,067
Copper produced – pounds 13,546 2,599 16,145
Cash cost per lb copper produced in US$ $2.68 $3.01 $2.73
Three Months Ended September 30, 2017
Red Chris Mount Polley Composite
Cash cost of copper produced in US$ $37,575 $8,737 $46,312
Copper produced – pounds 19,651 3,981 23,632
Cash cost per lb copper produced in US$ $1.91 $2.19 $1.96
Nine Months Ended September 30, 2018
Red Chris Mount Polley Composite
Cash cost of copper produced in US$ $107,808 $20,035 $127,843
Copper produced – pounds 44,781 11,790 56,571
Cash cost per lb copper produced in US$ $2.41 $1.70 $2.26
Nine Months Ended September 30, 2017
Red Chris Mount Polley Composite
Cash cost of copper produced in US$ $111,951 $29,899 $141,850
Copper produced – pounds 51,402 15,048 66,450
Cash cost per lb copper produced in US$ $2.18 $1.99 $2.13
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Red Chris Mine
Red Chris metal production was 13.55 million pounds copper and 8,741 ounces gold, an increase of 18% and an increase of
1% respectively, from 11.51 million pounds copper and 8,614 oun ces gold produced in the second quarter of 2018. Mill
throughput averaged 30,544 tonnes per calendar day during the t hird quarter ended September 30, 2018. Metal recoveries
were 74.92% copper and 45.65% gold, up from the 72.96% copper and 43.94% gold achieved in the second quarter of 2018.
Gold recoveries and grades continue to exceed budget, while copper recoveries continued to be lower than planned.
Red Chris Production Three Months Ended September 30 Nine Months Ended September 30
2018 2017 2018 2017
Ore milled - tonnes 2,810,076 2,772,416 7,930,517 7,879,281
Ore milled per calendar day - tonnes 30,544 30,135 29,050 28,862
Grade % - copper 0.292 0.407 0.340 0.379
Grade g/t - gold 0.212 0.219 0.253 0.204
Recovery % - copper 74.92 78.94 75.39 78.13
Recovery % - gold 45.65 43.09 45.82 39.47
Copper – 000’s pounds 13,546 19,651 44,781 51,402
Gold – ounces 8,741 8,426 29,569 20,396
Silver – ounces 22,780 34,446 77,050 89,273
Exploration, development and capital expenditures were $32.1 mi llion in the September 2018 quarter compared to $17.4
million in the comparative 2017 quarter.
Mount Polley Mine
Mount Polley metal production during the September 2018 quarter was 2.60 million pounds copper and 7,748 ounces gold,
a decrease of 32% and 15% respectively from the 3.82 million pounds copper and 9,110 ounces gold produced in the second
quarter of 2018. Mill throughput averaged 15,145 tonnes per calendar day. Metal recoveries were 38.39% copper and 65.06%
gold, compared to 60.8% copper and 68.64% gold in the second quarter of 2018, copper recovery were negatively impacted,
as high oxide stockpiles provided an increased portion of the mill feed this quarter.
Mount Polley Production Three Months Ended September 30 Nine Months Ended September 30
2018 2017 2018 2017
Ore milled - tonnes 1,393,368 1,444,625 4,58 8,798 4,916,789
Ore milled per calendar day - tonnes 15, 145 15,702 16,809 18,010
Grade % - copper 0.220 0.203 0.199 0.207
Grade g/t - gold 0.266 0.320 0.284 0.337
Recovery % - copper 38.39 61.44 58.49 66.98
Recovery % - gold 65.06 67.22 69.66 70.92
Copper – 000’s pounds 2,599 3,981 11,790 15,048
Gold – ounces 7,748 9,989 29,138 37,758
Silver – ounces 7,684 7,324 24, 181 28,738
The unionized employees at Mount Polley returned to work in Aug ust following the strike that began on May 23, 2018.
Following the return to work, mining in the Cariboo pit was res tarted and the mill no longer relied solely on low grade
stockpiles. Mining at the Cariboo pit is anticipated to be completed by mid-November, following which the mill will process
feed from the low grade stockpiles for the remainder of the year.
Exploration, development and capital expenditures were $5.1 million in the September 2018 quarter compared to $4.6 million
in the comparative 2017 quarter.
Huckleberry Mine
Huckleberry continues to be on care and maintenance. For the quarter ending September 30, 2018, Huckleberry incurred idle
mine costs comprised of $1.1 million in operating costs and $0.2 million in depreciation expense.
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Refer to Imperial’s 2018 Third Quarter Report on imperialmetals.com and sedar.com for detailed information.
imperialmetals.com
An Earnings Announcement Conference Call
is scheduled for Friday November 9, 2018 at 10:00am PST | 1:00pm EST
Management will discuss the Company’s Third Quarter 2018 Financial Results. To participate in
the earnings announcement conference call dial 833.231.8250 (North America–toll free)
A recording of the conference call will be available for playback until November 19, 2018 by
calling 855.859.2056 (North America-toll free) playback code 2484458
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
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 September 30, 2018, and plans for the future b ased on facts and circumstances as of November 7, 2018. Except
for statements of historical fact relating to the Company, cert ain information contained herein constitutes forward-looking
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 inc ludes, without limitation, statements regarding: Red Chris gold
recoveries and grade continuing to exceed budget while copper r ecoveries fall short; revisions to 2018 production targets for the
Red Chris and Mount Polley mines; the anticipated completion of mining at Mount Polley’s Cariboo pit by mid-November,
following which the mill is anticipated to process feed from th e low grade stock piles; the expectation that the cash balances on
hand, the projected cash flow from the Red Chris and Mount Poll ey mines, and the available credit facilities will be sufficien t to
fund the working capital deficiency and the Company’s obligations as they come due assuming the Company is able to successfully
complete the restructuring process, which process may include s ales of some of the Company’s assets, joint ventures, a
recapitalization, and a sale or merger of the Company; the use of proceeds from financings and credit; production and marketin g;
capital expenditures; the adequacy of funds for projects and li abilities; the receipt of necessary regulatory approvals or oth er
consents; the expected outcome and impact of litigation; cash f low; working capital requirements; the requirement for addition al
capital; results of operations, production, revenue, margins an d earnings; future prices of copper and gold; future foreign cu rrency
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 comp lete the restructuring process and obtain, as needed, adequate
additional financing on terms acceptable to the Company; the Co mpany will be able to advance and complete remaining planned
rehabilitation activities within expected timeframes; there wil l be no significant delay or other material impact on the expec ted
timeframes or costs for completion of rehabilitation of the Mou nt Polley mine and implementation of Mount Polley’s long term
water management plan; the Company’s initial rehabilitation act ivities at Mount Polley will be successful in the long term; al l
required, project-related permits and approvals will be obtaine d in a timely manner; there will be no material operational del ays at
the Company’s mines; equipment will operate as expected; there will not be significant power outages; there will be no materia l
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 pr ove
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 the C ompany may not be able to successfully complete the restructuri ng
process and obtain, as needed, adequate additional financing on terms acceptable to the Company thereby creating a material
uncertainty that could have an adverse impact on the Company’s financial condition and results of operations and may cast
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significant doubt on the Company’s ability to continue as a going concern; that the Company may default on its credit facilities and
other loans; 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 the Management’s Discussion & Analysis for the three
months and nine months ended September 30, 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 und ue reliance on forward-looking information. Imperial does not
undertake to update any forward-looking information, except in accordance with applicable securities laws.