Imperial Reports Third Quarter 2019 Financial Results
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News Release
Imperial Reports Third Quarter 2019 Financial Results
Vancouver | November 14, 2019 | Imperial Metals Corporation (the “Company”) (TSX:III) reports financial results for the
three and nine months ended September 30, 2019, as summarized in this release and discussed in detail in the
Management’s Discussion & Analysis. The Company’s financial results are prepared in accordance with International
Financial Reporting Standards. The reporting currency of the Company is the Canadian (“CDN”) Dollar.
QUARTER HIGHLIGHTS
FINANCIAL
On March 10, 2019, the Company entered into an agreement to sell a 70% interest in the Red Chris mine to Newcrest. The
Company completed the sale to Newcrest on August 15, 2019 for a final purchase price of US$804.4 million subject to debt
and working capital adjustments.
In accordance with IFRS, the Company has classified Red Chris mine as a discontinued operation effective January 1, 2019
up to closing of the transaction with Newcrest on August 14, 2019, and the prior year comparative quarter consolidated
statement of income (loss) has been restated accordingly. Effective August 15, 2019 onwards, the results from the Red Chris
Mine are presented on a proportional basis relative to Imperial’s 30% ownership in the joint venture. Unless otherwise
stated this MD&A will report the total of continuing and discontinued operations as one total for ease of comparison with
the prior comparative period.
The majority of the proceeds received were used to repay most of the outstanding debt and eliminating interest expense
on the debt on August 15, 2019.
Total revenue decreased to $46.9 million in the September 2019 quarter compared to $70.5 million in the 2018 comparative
quarter, a decrease of $23.6 million or 33.0%.
Revenue from the Red Chris mine in the September 2019 quarter was $46.5 million compared to $52.7 million in the 2018
comparative quarter. This decrease was attributable to the Company’s ownership decreasing to 30% from 100% on August
15, 2019 compared to picking up 100% share throughout the entire prior year comparative quarter.
Revenue from the Mount Polley mine in the September 2019 quarter was ($0.3) million compared to $17.8 million in the
2018 comparative quarter. The decrease was attributable to the mine being on care and maintenance during the 2019
quarter.
In the September 2019 quarter there were 3.3 concentrate shipments from the Red Chris mine (2018-2.7 concentrate
shipments). There were no concentrate shipments from the Mount Polley mine (2018-0.5 concentrate shipment) due to
the closure of the mine in May 2019. 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$2.64 in the September 2019 quarter
compared to US$2.77 in the 2018 comparative quarter. The London Metals Exchange cash settlement gold price per troy
ounce averaged US$1,474 in the September 2019 quarter compared to US$1,213 in the 2018 comparative quarter. The
average CDN/US Dollar exchange rate was 1.321 in the September 2019 quarter, 1.0% higher than the exchange rate of
1.307 in the September 2018 quarter. In CDN Dollar terms the average copper price in the September 2019 quarter was
CDN$3.49 per pound compared to CDN$3.62 per pound in the 2018 comparative quarter, and the average gold price in the
September 2019 quarter was CDN$1,947 per ounce compared to CDN$1,585 per ounce in the 2018 comparative quarter.
Revenue in the September 2019 quarter decreased by $4.6 million due to a negative revenue revaluation as compared to a
$5.1 million negative revenue revaluation in the 2018 comparative quarter. Revenue revaluations are the result of the metal
prices 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 metal prices at the last balance sheet date and finalization of contained metal as a result of
final assays.
Net loss from continuing operations for the September 2019 quarter was $16.0 million ($0.12 per share) compared to net
loss of $12.7 million ($0.11 per share) in the 2018 comparative quarter. The increase in net loss of $3.3 million was primarily
due to the following factors:
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Loss from mine operations went from $13.4 million in September 2018 to income of $0.4 million in September 2019, a
decrease in net loss of $13.8 million.
Interest expense went from $18.7 million in September 2018 to $9.4 million in September 2019, a decrease in net loss of
$9.3 million. Lower interest expense was due to the majority of the debt being repaid on August 15, 2019.
Foreign exchange gains/losses went from a gain of $6.9 million in September 2018 to a loss of $10.1 million in September
2019, an increase in net loss of $17.0 million. The average CDN/US Dollar exchange rate in the September 2019 quarter
was 1.321 compared to an average of 1.307 in the 2018 comparative quarter.
Tax recovery went from $13.5 million in September 2018 to $8.8 in the September 2019, an increase in net loss of $4.7
million.
Cash flow from continuing operations was negative $1.8 million in the September 2019 quarter compared to negative $8.2
million in the 2018 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 attributed to continuing operations was $8.2 million in the September 2019 quarter, up from $5.2
million in the 2018 comparative quarter. The increase was due to the inclusion of Red Chris expenditures from August 15,
2019 onwards representing Imperial’s 30% proportionate share compared to the prior year quarter where these
expenditures were classified as discontinued operations.
At September 30, 2019, 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.
OPERATIONS
Red Chris Mine
On August 15, 2019, Imperial completed the sale of a 70% interest in the Red Chris mine to Newcrest Mining Limited.
Imperial’s portion of the third quarter production was 13.1 million pounds copper and 5,634 ounces gold representing 100%
of production for the period July 1 through August 14, 2019, and 30% of production for the period August 15 through
September 30, 2019.
Third quarter metal production from Red Chris was 19.5 million pounds copper and 8,419 ounces gold. These results
represent 100% of production at Red Chris. Copper and gold production were up 11% in the third quarter compared to the
second quarter of 2019. Mill throughput for the quarter averaged 30,568 tonnes per calendar day.
Three Months Ended
September 30*
Nine Months Ended
September 30*
2019 2018 2019 2018
Ore milled - tonnes 2,812,236 2,810,076 7,874,663 7,930,517
Ore milled per calendar day – tonnes 30,568 30,544 28,845 29,050
Grade % - copper 0.421 0.292 0.385 0.343
Grade g/t - gold 0.226 0.212 0.219 0.253
Recovery % - copper 74.81 74.92 75.03 75.39
Recovery % - gold 41.15 45.65 43.76 45.82
Copper – 000’s pounds 19,505 13,546 50,206 44,781
Gold – ounces 8,419 8,741 24,316 29,569
Silver – ounces 35,318 22,780 88,371 77,050
* 100% Red Chris mine production
Exploration drilling commenced during the third quarter, and there are currently six drill rigs on site at Red Chris. Drilling to
October 26, 2019 totalled 6,054 metres.
In the Gully zone, one 1,356.5 metre diamond drill hole is complete, and two holes in progress. All three holes are testing
the extension of a high-grade copper-gold zone intersected in RC12-580 . RC12-580 drilled in 2012 and intercepted 660.8
metres grading 0.41 g/t gold and 0.37% copper starting at 280 metres down the hole. This interval included a smaller 50
metre interval grading 1.1g/t gold and 0.90% copper.
In the Saddle zone, located between the Main and East zones, eight shallow holes up to 300 metres in depth are complete.
This drilling was conducted in-fill a sparsely explored area between the main and east zones to provide information for the
scheduling and design of the open pits.
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At the East Zone, a deep in-fill resource definition drilling program is underway to provide additional geological,
metallurgical and geotechnical data to support studies for future underground operations. Four rigs located in this zone are
all drilling angle holes to cross the East Zone at depth and test the margins of the higher grade zones outlined by the historic
vertical drilling.
Exploration, development and capital expenditures to the account of the Company were $13.2 million in the September
2019 quarter compared to $32.1 million in the comparative 2018 quarter.
Mount Polley Mine
The Mount Polley mine remains on care and maintenance since shut down of operations in May 2019.
Three Months Ended
September 30
Nine Months Ended
September 30
2019 2018 2019* 2018
Ore milled - tonnes - 1,393,368 1,002,352 4,588,798
Ore milled per calendar day – tonnes - 15,145 16,432 16,809
Grade % - copper - 0.220 0.238 0.199
Grade g/t - gold - 0.266 0.298 0.284
Recovery % - copper - 38.39 28.92 58.49
Recovery % - gold - 65.06 46.60 69.66
Copper – 000’s pounds - 2,599 1,520 11,790
Gold – ounces - 7,748 4,472 29,138
Silver – ounces - 7,684 4,609 24,181
*production stated for period January 1 to May 26, 2019
For the quarter ending September 30, 2019, Mount Polley incurred idle mine costs comprised of $3.0 million in operating
costs and $1.3 million in depreciation expense.
Huckleberry Mine
Huckleberry remains on care and maintenance.
For the quarter ending September 30, 2019, Huckleberry incurred idle mine costs comprised of $1.1 million in operating
costs and $0.2 million in depreciation expense.
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EARNINGS AND CASH FLOW
The Company entered into an agreement for the sale of a 70% interest in the Red Chris mine to Newcrest Mining Limited
on March 10, 2019 which closed on August 15, 2019. As a result, this operation was classified as a discontinued operation
effective January 1, 2019 to August 14, 2019 and the comparative periods have been restated.
Select Quarter Financial Information
Expressed in thousands, except share and per share amounts Three Months Ended September 30 Nine Months Ended September 30
2019 2018 2019 2018
Continuing operations:
Total revenues $6,991 $17,829 $42,467 $76,647
Net loss $(15,963) $(12,716) $(27,977) $(66,184)
Net loss per share $(0.12) $(0.11) $(0.22) $(0.57)
Diluted loss per share $(0.12) $(0.11) $(0.22) $(0.57)
Adjusted net loss (1) $(6,940) $(21,206) $(36,981) $(54,530)
Adjusted net loss per share (1) $(0.05) $(0.18) $(0.28) $(0.46)
Adjusted EBITDA(1) $(1,668) $(9,796) $(1,885) $(3,427)
Cash flow (1)(2) $(1,823) $(8,197) $(1,331) $(2,677)
Cash flow per share (1)(2) $(0.01) $(0.07) $(0.01) $(0.02)
Discontinued operations:
Total revenues $39,872 $52,652 $164,695 $ 191,812
Net income (loss) $329,189 $(15,893) $331,485 $(15,146)
Net income (loss per) share $2.56 $(0.13) $2.61 $ (0.12)
Diluted income (loss) per share $2.56 $(0.13) $2.61 $(0.12)
Adjusted net income (loss) (1) $7,613 $(15,893) $9,356 $(15,146)
Adjusted net income (loss) per share (1) $0.06 $(0.13) $0.07 $(0.13)
Adjusted EBITDA(1) $129,410 $(3,491) $143,469 $24,354
Cash flow (1)(2) $10,179 $(3,569) $23,699 $24,276
Cash flow per share (1)(2) $0.08 $(0.03) $0.19 $0.20
Working capital (deficiency) $77,416 $(819,730) $77,416 $(819,730)
Total assets $1,024,082 $1,665,647 $1,024,082 $1,665,647
Total debt (including current portion) $4,214 $873,789 $4,214 $873,789
(1) Refer to table under heading Non-IFRS Financial Measures in the MD&A 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.
Select Items Affecting Net Loss (presented on an after-tax basis)
expressed in thousands Three Months Ended September 30 Nine Months Ended September 30
2019 2018 2019 2018
Net income (loss) before undernoted items from
continuing operations $79 $(6,540)
$(14,642) $(12,129)
Interest expense (7,383) (13,822) (33,990) (40,531)
Recovery of BC Mineral taxes including interest - - 11,288 -
Gain on sale of Sterling - 121 - 296
Foreign exchange gain (loss) on debt (7,370) 7,525 10,656 (13,820)
Loss on early repayment of debt (1,289) - (1,289) -
Net loss from continuing operations $(15,963) $(12,716) $(27,977) $(66,184)
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NON-IFRS FINANCIAL MEASURES
The Company reports four non-IFRS financial measures: adjusted net income, adjusted EBITDA, cash flow and cash cost per
pound of copper produced which are described in detail below. The Company believes these measures are useful to
investors because they are included in the measures that are used by management in assessing the financial performance
of the Company.
Adjusted net income, adjusted EBITDA, and cash flow are not generally accepted earnings measures and should not be
considered as an alternative to net income (loss) and cash flows as determined in accordance with IFRS. As there is no
standardized method of calculating these measures, they may not be directly comparable to similarly titled measures used
by other companies.
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share
Adjusted net loss from continuing operations in the September 2019 quarter was $6.9 million ($0.05 per share) compared
to an adjusted net loss of $21.2 million ($0.18 per share) in the 2018 comparative quarter. Adjusted net loss reflects the
financial results excluding the effect of items not settling in the current period and non-recurring items. Adjusted net loss
is calculated by removing the gains or losses, resulting from mark to market revaluation of derivative instruments, net of
tax, unrealized foreign exchange gains or losses on non-current debt, net of tax and other adjustments.
Adjusted EBITDA
Adjusted EBITDA from continuing operations in the September 2019 quarter was a loss of $1.7 million compared to a loss
of $9.8 million in the 2018 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 2019 quarter from continuing operations was negative $1.8 million compared to negative $8.2
million in the 2018 comparative quarter. Cash flow per share was $(0.01) in the September 2019 quarter compared to
$(0.07) in the 2018 comparative quarter.
Cash flow and cash flow per share are measures used by the Company to evaluate its performance however they are not
terms recognized under IFRS. Cash flow is defined as cash flow from operations before the net change in non-cash working
capital balances, income and mining taxes, and interest paid and cash flow per share is the same measure divided by the
weighted average number of common shares outstanding during the year.
Cash Cost Per Pound of Copper Produced
The cash cost per pound of copper produced is a non-IFRS financial measure that does not have a standardized meaning
under IFRS, and as a result may not be comparable to similar measures presented by other companies. Management uses
this non-IFRS financial measure to monitor operating costs and profitability. The Company is primarily a copper producer
and therefore calculates this non-IFRS financial measure individually for its three copper mines, Red Chris (30% share
effective August 15, 2019) Mount Polley and Huckleberry, and on a composite basis for these mines.
The cash cost per pound of copper produced is derived from the sum of cash production costs, transportation and offsite
costs, treatment and refining costs, royalties, net of by-product and other revenues, divided by the number of pounds of
copper produced during the period.
Variations from period to period in the cash cost per pound of copper produced are the result of many factors including:
grade, metal recoveries, amount of stripping charged to operations, mine and mill operating conditions, labour and other
cost inputs, transportation and warehousing costs, treatment and refining costs, the amount of by-product and other
revenues, the US$ to CDN$ exchange rate and the amount of copper produced. Idle mine costs during the periods when
the Huckleberry and Mount Polley mines were not in operation have been excluded from the cash cost per pound of copper
produced.
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Cash Cost Per Pound of Copper Produced
expressed in thousands, except cash cost per pound of copper produced
Three Months Ended September 30, 2019
Red Chris* Mount Polley** Composite
Cash cost of copper produced in US$ $27,808 $ - $27,808
Copper produced – pounds 13,132 - 13,132
Cash cost per lb copper produced in US$ $2.12 $ - $2.12
Three Months Ended September 30, 2018
Red Chris* Mount Polley** Composite
Cash cost of copper produced in US$ $36,250 $7,816 $44,066
Copper produced – pounds 13,546 2,599 16,145
Cash cost per lb copper produced in US$ $2.68 $3.01 $2.73
Nine Months Ended September 30, 2019
Red Chris* Mount Polley** Composite
Cash cost of copper produced in US$ $107,891 $12,476 $120,367
Copper produced – pounds 43,832 3,825 47,657
Cash cost per lb copper produced in US$ $2.46 $3.26 $2.53
Nine Months Ended September 30, 2018
Red Chris* Mount Polley** Composite
Cash cost of copper produced in US$ $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
* The Red Chris Mine was classified as a discontinued operation effective January 1, 2019 to August 14, 2019 and prior periods
have been restated. Effective August 15, 2019 onwards, the results from Red Chris are presented on a proportional basis relative
to Imperials 30% ownership stake in the joint venture in continuing operations.
** The Mount Polley Mine is a continuing operation. The mine was placed on care and maintenance on May 26, 2019.
For detailed information, refer to Imperial’s 2019 Third Quarter Report available on imperialmetals.com and sedar.com.
- - -
About Imperial
Imperial is a Vancouver exploration, mine development and operating company. The Company, through its subsidiaries,
owns a 30% interest in the Red Chris mine, and a 100% interest in both the Mount Polley and Huckleberry copper mines in
British Columbia. Imperial will hold 45.3% interest in the Ruddock Creek lead/zinc property upon completion of 2019
exploration expenditures.
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 STATEMENTS & 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 quarter ended September 30, 2019, and plans for the future based on facts and circumstances as of November
14, 2019. Except for statements of historical fact relating to the Company, certain information contained herein constitutes
forward-looking information which are prospective in nature and reflect the current views and/or expectations of Imperial.
Often, but not always, forward-looking information can be identified by the use of statements such as "plans", "expects" or
"does not expect", "is expected", "scheduled", "estimates", "forecasts", "projects", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results
"may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such information in this document
includes, without limitation, statements regarding: expectations regarding the care and maintenance activities at Mount
Polley; expectations regarding current drilling programs; expectations regarding the Company’s ownership interest in its
Ruddock Creek project; production and marketing; capital expenditures; adequacy of funds for projects and liabilities;
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.
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Forward-looking information is not based on historical facts, but rather on then current expectations, beliefs, assumptions,
estimates and forecasts about the business and the industry and markets in which the Company operates, including, but
not limited to, assumptions that: the Company will have access to capital as required and will be able to fulfill its funding
obligations as the Red Chris minority joint venture partner; the Company will be able to advance and complete remaining
planned rehabilitation activities within expected timeframes; there will be no significant delay or other material impact on
the expected timeframes or costs for completion of rehabilitation of the Mount Polley mine and implementation of Mount
Polley’s long term water management plan; the Company’s initial rehabilitation activities at Mount Polley will be successful
in the long term; all required 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 mine; equipment will operate as expected; there will not be significant power outages; there will be no
material adverse change in the market price of commodities and exchange rates; the Red Chris mine will achieve expected
production outcomes (including with respect to mined grades and mill recoveries and access to water as needed). Such
statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. We can
give no assurance that the forward-looking information will prove to be accurate.
Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause
Imperial’s actual results, revenues, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the statements constituting forward-looking information. Important
risks that could cause Imperial’s actual results, revenues, performance or achievements to differ materially from Imperial’s
expectations include, among other things: the risk that the Company’s ownership of the Red Chris mine may be diluted over
time should it not have access to capital as required and will not be able to meet its funding obligations as the Red Chris minority
joint venture partner; that additional financing that may be required may not be available to Imperial on terms acceptable to
Imperial or at all; uncertainty regarding the outcome of sample testing and analysis being conducted on the area affected 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 Polley 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; 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, power outages,
and natural phenomena such as weather conditions and water shortages negatively impacting the operation of the Red Chris
mine; changes in commodity and power prices; changes in market demand for our concentrate; inaccurate geological and
metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources); and
other hazards and risks disclosed within the MD&A for the three and nine months ended September 30, 2019 and other public
filings, available on Imperial’s profile at sedar.com. For the reasons set forth above, investors should not place undue reliance
on forward-looking information. Imperial does not undertake to update any forward-looking information, except in accordance
with applicable securities laws.