Imperial Metals Reports Q3 2017 Financial Results
VANCOUVER, British Columbia, Nov. 14, 2017 (GLOBE NEWSWIRE) - 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 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.
Select Quarter Financial Information
| expressed in thousands, except
share and per share amounts
|Three Months Ended
|Nine Months Ended
|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)|
|Working capital deficiency||$(919,038)||$(48,951)||$(919,038)||$(48,951)|
|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 quarter 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 was $66.0 million compared to $67.3 million in the 2016 comparative quarter. This decrease was attributable to lower quantity 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 quarter was $24.1 million compared to $29.8 million in the 2016 comparative quarter. The decrease was attributable to a lower quantity of copper concentrate sold; lower foreign exchange rate and lower realized pricing on gold concentrate. However, 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 pound 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 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 million 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 went 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 million 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 million 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 senior 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 and 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 quarter, 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 environmental compliance expenditure and $2.5 million for other capital items.
Non-IFRS Financial Measures
The Company reports four non-IFRS financial measures: Adjusted net income, adjusted EBITDA, cash flow and cash cost per pound of copper produced which are described in detail below. The Company believes these measures are useful to investors because they are included in the measures that are used by management in assessing the financial performance of the Company.
Adjusted net income, adjusted EBITDA, and cash flow are not generally accepted earnings measures and should not be considered as an alternative to net income (loss) and cash flows as determined in accordance with IFRS. As there is no standardized method of calculating these measures, these measures may not be directly comparable to similarly titled measures used by other companies.
|expressed in thousands, except share and per share amounts||Three Months Ended
|Adjusted net loss||$(18,615)||$(19,710)|
|Adjusted net loss per share||$(0.20)||$(0.24)|
|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 million ($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-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.
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 $0.22 in the 2016 comparative quarter.
Cash flow and cash flow per share are measures used by the Company to evaluate its performance however they are not terms recognized under IFRS. Cash flow is defined as cash flow from operations before the net change in non-cash working capital balances, income and mining taxes, and interest paid and cash flow per share is the same measure divided by the weighted average number of common shares outstanding during the year.
Cash Cost Per Pound of Copper Produced
The cash cost per pound of copper produced is a non-IFRS financial measure that does not have a standardized meaning under IFRS, and as a result may not be comparable to similar measures presented by other companies. Management uses this non-IFRS financial measure to monitor operating costs and profitability. The Company is primarily a copper producer and therefore calculates this non-IFRS financial measure individually for its three copper mines, Red Chris, Mount Polley and Huckleberry, and on a composite basis for these mines.
The cash cost per pound of copper produced is derived from the sum of cash production costs, transportation and offsite costs, treatment and refining costs, royalties, net of by-product and other revenues, divided by the number of pounds of copper produced during the period.
Variations from period to period in the cash cost per pound of copper produced are the result of many factors including: grade, metal recoveries, amount of stripping charged to operations, mine and mill operating conditions, labour and other cost inputs, transportation and warehousing costs, treatment and refining costs, the amount of by-product and other revenues, the US$ to CDN$ exchange rate and the amount of copper produced. Idle mine costs during the periods when the Huckleberry 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|
|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||$1.89|
|Three Months Ended September 30, 2016|
|Cash cost of copper produced in US$||$12,826||$6,411||$32,274||$9,332||$48,017|
|Copper produced - pounds||4,447||2,224||18,713||6,868||27,805|
|Cash cost per lb copper produced in US$||$2.88||$2.88||$1.72||$1.36||$1.73|
|Nine Months Ended September 30, 2017|
|Cash cost of copper produced in US$||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||$2.10|
|Nine Months Ended September 30, 2016|
|Cash cost of copper produced in US$||$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|
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 main 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 million pounds copper and 4,005 ounces gold. In November deeper Main zone ores have provided the majority of the mill feed, 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
|Nine Months Ended
|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 million 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.
|Mount Polley Production||Three Months Ended
|Nine Months Ended
|Ore milled - tonnes||1,444,625||1,769,779||4,916,789||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.
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 Japanese 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 Huckleberry that was accounted for on the equity basis of accounting. The Company has accounted for the acquisition of the 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 acquired is expected to be reported no later than the Company’s December 31, 2017 financial statements. The final fair values may 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
|Accrued receivable due to the Company||$1,009|
|Fair value of the Company’s initial 50% investment in Huckleberry||77,832|
|Identifiable Assets Acquired and Liabilities Assumed|
|Prepaid and other receivables||648|
|Trade and other payables||(1,668)|
|Deferred trade payables||(4,925)|
|Future site reclamation provisions||(45,171)|
|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 appointed Vice President Exploration. Sheila Colwill was appointed Vice President Marketing, rising from Marketing Manager, a position she has held since 2011.
- - -
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:
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#
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.