Imperial Metals Corporation (the “Company”)
(TSX:III) reports financial results for the three months ended
March 31, 2020, 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 February 20, 2019 the Company initiated a
process for the sale of the Red Chris mine and in accordance with
IFRS, the Company classified Red Chris mine as a discontinued
operation effective January 1, 2019 up until the closing of the
transaction with Newcrest on August 14, 2019. Effective August 15,
2019 the results from the Red Chris Mine are presented on a
proportionate basis relative to Imperial’s 30% ownership in the
joint venture. Unless otherwise stated, this news release only
compares the comparative quarter results from continuing operations
and excludes discontinued operations even though the Red Chris mine
is in both discontinued operations pre and post August 15,
2019.
Total revenue from continuing operations
increased to $28.0 million in the March 2020 quarter compared to
$13.8 million in the 2019 comparative quarter, an increase of $14.2
million or 102.9%. The March 2019 amount only included revenue from
the Mount Polley Mine as the revenues from the Red Chris mine was
classified in discontinued operations. However, in the 2020
quarter, the Company included its portion of the 30% interest in
the Red Chris mine. In March 2019, the revenue from discontinued
operations was $62.9 million.
In the March 2020 quarter, the Red Chris mine
(100% basis) had 4.3 concentrate shipments (2019-2.6 concentrate
shipments). Variations in revenue are impacted by the timing and
quantity of concentrate shipments, metal prices and exchange rates,
and period end revaluations of revenue attributed to concentrate
shipments where copper and gold prices will settle at a future
date.
The London Metals Exchange cash settlement
copper price per pound averaged US$2.56 in the March 2020 quarter
compared to US$2.82 in the 2019 comparative quarter. The London
Metals Exchange cash settlement gold price per troy ounce averaged
US$1,583 in the March 2020 quarter compared to US$1,304 in the 2019
comparative quarter. The average CDN/US Dollar exchange rate was
1.345 in the March 2020 quarter, 1.1% higher than the exchange rate
of 1.329 in the March 2019 quarter. In CDN Dollar terms the average
copper price in the March 2020 quarter was CDN$3.44 per pound
compared to CDN$3.75 per pound in the 2019 comparative quarter, and
the average gold price in the March 2020 quarter was CDN$2,128 per
ounce compared to CDN$1,734 per ounce in the 2019 comparative
quarter.
Revenue in the March 2020 quarter decreased by
$4.6 million due to a negative revenue revaluation as compared to a
$2.5 million positive revenue revaluation in the 2019 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 and finalization
of contained metal as a result of final assays.
Net loss from continuing operations for the
March 2020 quarter was $6.2 million ($0.05 per share) compared to
net loss of $2.3 million ($0.02 per share) in the 2019 comparative
quarter. The increase in net loss of $3.9 million was primarily due
to the following factors:
- Loss from mine operations went from $2.5 million in March 2019
to $0.3 million in March 2020, a decrease in net loss of $2.2
million.
- Interest expense went from $18.4 million in March 2019 to $0.4
million in March 2020, an increase in net income of $18.0
million.
- Foreign exchange gains/losses went from a gain of $8.9 million
in March 2019 to a gain of $2.0 million in March 2020, an increase
in net loss of $6.9 million.
- Tax recovery went from $14.1 million in March 2019 to an
expense of $0.9 million in March 2020, an increase in net loss of
$15.0 million.
The average CDN/US Dollar exchange rate in the
March 2020 quarter was 1.345 compared to an average of 1.329 in the
2019 comparative quarter.
Cash flow was $2.5 million in the March 2020
quarter compared to $nil in the 2019 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 $11.6 million in the
March 2020 quarter, up from $0.7 million in the 2019 comparative
quarter.
At March 31, 2020, 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 (1)
Red Chris first quarter metal production was
22.5 million pounds copper and 17,427 ounces gold, up from 21.7
million pounds copper and 12,155 ounces gold in the fourth quarter
of 2019. Imperial’s 30% portion of the first quarter
production was 6.7 million pounds copper and 5,228 ounces gold.
Gold production in the 2020 first quarter
compared to 2019 fourth quarter increased by 43% as a result of a
56% increase in gold grade (0.32 g/t to 0.50 g/t) and a 21%
improvement in gold recovery (44.5% to 55.7%), partially offset by
a reduction in mill throughput. The higher grade in the quarter was
enabled by mining of the lower benches of Phase 4. During the first
quarter, the mill throughput was capped at a lower than normal rate
as part of a water conservation plan implemented to conserve water
during the winter. With Spring melt now occurring, the cap on
through put rate has been removed.
Mining has been declared an essential service in
the province of British Columbia. The Company has been advised that
Newcrest has implemented measures that meet or exceed Canadian and
Provincial requirements in British Columbia. The Tahltan Central
Government, Iskut First Nation and Tahltan Band have agreed with
Newcrest’s implementation of a package of further measures which
proactively protect and support communities and enable Tahltan
members to support their families and communities, while helping
Red Chris to continue to operate during the COVID-19 pandemic.
Changes include alteration of the employee work schedule during the
COVID-19 pandemic to provide for longer on and off-site periods, to
decrease the amount of travel required and enable First Nation
employees increased time to self-isolate before returning to their
local communities.
|
Three Months Ended March 31* |
|
2020 |
2019 |
Ore milled - tonnes |
1,964,226 |
2,368,337 |
Ore milled per calendar day –
tonnes |
21,585 |
26,315 |
Grade % - copper |
0.618 |
0.034 |
Grade g/t - gold |
0.496 |
0.227 |
Recovery % - copper |
83.9 |
73.84 |
Recovery % - gold |
55.7 |
48.06 |
Copper – 000’s pounds |
22,451 |
13,100 |
Gold – ounces |
17,427 |
8,317 |
Silver
– ounces |
44,549 |
22,627 |
* 100% Red Chris mine production
Two drilling programs are underway at Red Chris.
The East zone Resource Definition Programme is designed to obtain
geological, geotechnical and metallurgical data to support future
studies for underground block cave mining. The Brownfields
Exploration Programme is focused on searching for additional zones
of higher grade mineralization within the Red Chris porphyry
corridor. A total of 14,641 metres of drilling was completed
in the March 2020 quarter, contributing to a total of 29,383 metres
of drilling completed since Newcrest acquired its 70% interest in
Red Chris on August 15, 2020.
A new high grade zone has been intersected by
RC616 within the East zone, returning a partial intercept of 238
metres grading 1.5 g/t gold and 0.85% copper, including 104 metres
grading 2.7 g/t gold and 1.4% copper, and 32 metres grading 6.2 g/t
gold and 3% copper. This high grade zone has not been intersected
by previous drilling and is located 300 metres west of the high
grade zone previously intersected by RC611. This drilling confirms
the potential of finding additional discrete high grade pods of
mineralization within the East zone. Follow up drilling to define
the extent of the RC616 high grade zone is being planned.
The final results from RC611 (partial results
reported March 10, 2020) has confirmed that the hole has
intersected a broad zone of higher grade mineralization, 628 metres
grading 1.7 g/t gold and 0.91% copper that contains a discrete high
grade zone averaging more than 5 g/t gold. This zone was previously
intersected by Imperial in RC09-350 which returned an interval of
152.5 metres grading 4.12% copper and 8.83 g/t gold starting at a
depth of 540 metres. Hole RC611 was the first angled hole
intersection which has confirmed this high grade pod as being
approximately 100 metres long, 100 metres wide and 200 metres in
height. An additional 10 resource definition holes are planned to
be drilled to further understand the full potential of this zone
and search for additional high grade pods within the East zone.
Drilling continues to expand the footprint of
mineralization in the Gully zone and Far West zone. Mineralization
has been observed over a broad area 800 metres long, 800 metres
wide and over 1,000 metres vertically. The best grades within this
area, which are more than 0.5 g/t gold, are in at least five
discrete zones open in multiple directions requiring additional
follow-up drilling to determine their full extent. Results from
RC609 demonstrate the potential of the porphyry corridor, the first
test of the Far West by Newcrest and Imperial, intersecting
mineralization some 200 metres below historical drilling and is the
most westerly drill hole on the property. Significant
intercepts were released on April 29, 2020.
The Company’s share of exploration, development
and capital expenditures were $11.3 million in the March 2020
quarter compared to $9.3 million in the 2019 comparative
quarter.
Mount Polley Mine
Mount Polley mine operations were shut down in
May 2019, and the mine is on care and maintenance status pending
improvement of the economics of mining. Site personnel are
maintaining access, fire watch, and managing the collection,
treatment and discharge of site contact water.
Mount Polley has an option to earn a 100%
interest in seven mineral claims (3,331 ha), adjacent to the mine.
Three target settings occur within the optioned claims and adjacent
Mount Polley claims, including a potential northern projection of
the high-grade Quarry zone beneath a post-mineral conglomerate
unit, a partially tested glacial till covered area where regional
magnetics suggests a faulted offset of the Mount Polley Intrusive
complex, which hosts the Mount Polley orebodies, is present and
a till covered prospective area immediately east of the
Southeast zone. A deep looking IP survey, along with a soil
sampling program, was completed over the optioned claims. Drill
programs have been designed to test the targets outlined on the
optioned claims and to expand the copper and gold resource near
historic deposits, with a focus on gold rich zones.
For the quarter ending March 31, 2020, Mount
Polley incurred idle mine costs comprised of $2.8 million in
operating costs and $1.2 million in depreciation expense.
Huckleberry Mine
Huckleberry mine operations were shut down in
August 2016, and the mine is on care and maintenance status,
pending improvement of the economics of mining. Activities at the
mine site have focused on water management, snow removal,
maintenance of site infrastructure and equipment and environmental
compliance monitoring. The tailings management facilities are
actively monitored.
The Huckleberry East zone pit has historically
provided the highest grade mill feed, and the majority drilling in
the zone was only to a depth of about 300 metres, and often ended
in above cut-off grade copper mineralization. A drill program to
test the East zone at depth has been designed to test the deposit
below the historic drilling.
For the quarter ending March 31, 2020,
Huckleberry incurred idle mine costs comprised of $1.2 million in
operating costs and $0.2 million in depreciation expense.
Operations Outlook
Plans are in progress to conduct exploration
drilling at Mount Polley and Huckleberry. The restart of operations
at the site, will be dependent on metal prices, however if the
planned exploration proves successful, metal prices required for
restart may be reduced.
Earlier, we described the current impact of
COVID-19 on our business. The Company’s plans for 2020 and beyond
could be adversely impacted by the effects of the coronavirus
global pandemic. In particular, the continued spread of the
coronavirus and travel and other operating restrictions established
to curb the spread of coronavirus, could materially and adversely
impact the Company’s current plans by causing a temporary closure
of the Red Chris mine, suspending planned exploration work, causing
an economic slowdown resulting in a decrease in the demand for
copper and gold, negatively impacting copper and gold prices,
impacting the Company’s ability to transport or market the
Company’s concentrate or causing disruptions in the Company’s
supply chains.
EARNINGS AND CASH FLOW
The Company completed the sale of 70% interest
in the Red Chris mine to Newcrest on August 15, 2019. As a result,
this operation was classified as a discontinued operation effective
January 1, 2019 to August 14, 2019.
Select Quarter Financial
Information
|
Three Months Ended March 31 |
expressed in thousands, except share and per share amounts |
|
|
2020 |
|
|
2019 |
|
Continuing Operations: |
|
|
|
Total revenues |
|
$ |
27,965 |
|
$ |
13,803 |
|
Net loss |
|
$ |
(6,210 |
) |
$ |
(2,337 |
) |
Net loss per share |
|
$ |
(0.05 |
) |
$ |
(0.02 |
) |
Diluted income (loss) per share |
|
$ |
(0.05 |
) |
$ |
(0.02 |
) |
Adjusted net loss (1) |
|
$ |
(5,926 |
) |
$ |
(11,389 |
) |
Adjusted net loss per share (1) |
|
$ |
(0.05 |
) |
$ |
(0.09 |
) |
Adjusted EBITDA(1) |
|
$ |
2,534 |
|
$ |
(3,566 |
) |
Cash flow (1)(2) |
|
$ |
2,477 |
|
$ |
25 |
|
Cash flow per share (1)(2) |
|
$ |
0.02 |
|
$ |
(0.00 |
) |
|
|
|
|
Discontinued Operations: |
|
|
|
Total revenues |
|
$ |
- |
|
$ |
62,878 |
|
Net income |
|
$ |
- |
|
$ |
69 |
|
Net income per share |
|
$ |
- |
|
$ |
0.00 |
|
Diluted income (loss) per share |
|
$ |
- |
|
$ |
0.00 |
|
Adjusted net loss (1) |
|
$ |
- |
|
$ |
(225 |
) |
Adjusted net loss per share (1) |
|
$ |
- |
|
$ |
(0.00 |
) |
Adjusted EBITDA(1) |
|
$ |
- |
|
$ |
10,553 |
|
Cash flow (1)(2) |
|
$ |
- |
|
$ |
10,260 |
|
Cash flow per share (1)(2) |
|
$ |
- |
|
$ |
0.08 |
|
|
|
|
|
Working capital (deficiency) |
|
$ |
42,311 |
|
$ |
(727,836 |
) |
Total assets |
|
$ |
1,061,851 |
|
$ |
1,588,745 |
|
Total debt (including current portion) |
|
$ |
3,762 |
|
$ |
874,329 |
|
(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. |
Select Items Affecting Net Income (Loss)
(presented on an after-tax basis)
|
Three Months Ended March 31 |
expressed in thousands |
|
2020 |
|
|
2019 |
|
Net loss from continuing
operations before undernoted items |
$ |
(5,529 |
) |
$ |
(9,254 |
) |
Interest expense |
|
(397 |
) |
|
(13,423 |
) |
Recovery of BC Mineral taxes including interest |
|
- |
|
|
11,288 |
|
Foreign exchange gain (loss) on debt |
|
(284 |
) |
|
9,052 |
|
Net Loss from continuing operations |
$ |
(6,210 |
) |
$ |
(2,337 |
) |
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.
Adjusted Net Loss and Adjusted Net Loss
per Share
Adjusted net loss from continuing operations in
the March 2020 quarter was $5.9 million ($0.05 per share) compared
to an adjusted net loss of $11.4 million ($0.09 per share) in the
2019 comparative quarter. Adjusted net income or loss shows the
financial results excluding the effect of items not settling in the
current period and non-recurring items. Adjusted net income or loss
is calculated by removing the gains or loss, resulting from
acquisition and disposal of property, mark to market revaluation of
derivative instruments not related to the current period, net of
tax, unrealized foreign exchange gains or losses on non-current
debt, net of tax.
Adjusted EBITDA
Adjusted EBITDA from continuing operations in
the March 2020 quarter was $2.5 million compared to a loss of $3.6
million in the 2019 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 from continuing operations in the
March 2020 quarter was $2.5 compared to $nil in the 2019
comparative quarter. Cash flow per share was $0.04 in the March
2020 quarter compared to $nil in the 2019 comparative quarter.
Cash flow and cash flow per share are measures
used by the Company to evaluate its performance however they are
not terms recognized under IFRS. Cash flow is defined as cash flow
from operations before the net change in non-cash working capital
balances, income and mining taxes, and interest paid and cash flow
per share is the same measure divided by the weighted average
number of common shares outstanding during the year.
Cash Cost Per Pound of Copper
Produced
The Company is primarily a copper producer and
therefore calculates this non-IFRS financial measure individually
for its three copper mines, Red Chris (30% share), Mount Polley and
Huckleberry, and on a composite basis for these mines.
Variations from period to period in the cash
cost per pound of copper produced are the result of many factors
including: grade, metal recoveries, amount of stripping
charged to operations, mine and mill operating conditions, labour
and other cost inputs, transportation and warehousing costs,
treatment and refining costs, the amount of by-product and other
revenues, the US$ 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.
Calculation of Cash Cost Per Pound of Copper
Produced expressed in thousands, except cash cost per pound of
copper produced |
|
|
Three Months Ended March 31, 2020 |
|
Red |
**Mount |
|
Chris |
Polley |
Composite |
Cash cost of copper produced in US$ |
$ |
9,954 |
$ |
- |
$ |
9,954 |
Copper produced – pounds |
|
6,735 |
|
- |
|
6,735 |
Cash cost per lb copper produced in US$ |
$ |
1.48 |
$ |
- |
$ |
1.48 |
|
|
|
Three Months Ended March 31, 2019 |
|
*Red |
**Mount |
|
Chris |
Polley |
Composite |
Cash cost of copper produced in US$ |
$ |
35,429 |
$ |
7,069 |
$ |
42,497 |
Copper produced – pounds |
|
13,100 |
|
2,305 |
|
15,405 |
Cash cost per lb copper produced in US$ |
$ |
2.70 |
$ |
3.07 |
$ |
2.76 |
|
|
|
|
* The Red Chris Mine was classified as a discontinued operation
effective January 1, 2019 to August 14, 2019. Effective August 15,
2019, the results from Red Chris are presented in continuing
operations on a proportional basis relative to Imperial’s 30%
beneficial interest in the joint venture.
** The Mount Polley mine was placed on care and
maintenance on May 26, 2019.
SUBSEQUENT EVENT
On April 27, 2020 the Company announced a Normal
Course Issuer Bid to provide for purchases of its common shares to
satisfy its obligations under the Non-Management Directors’ Plan
and the Share Purchase Plan. Incorrect information with respect to
the number of shares repurchased by the Company in the previous 12
months and the related average price thereof was reported in that
News Release. The Company has corrected the information and advises
that in the previous 12 months it had repurchased 167,963 of its
outstanding common shares at an average price per share of
$2.00.
For detailed information, refer to Imperial’s
2020 First 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 also holds a 45.3% interest in the
Ruddock Creek lead/zinc property.
Company Contacts
Brian Kynoch | President |
604.669.8959Andre Deepwell | Chief Financial
Officer | 604.488.2666Sabine Goetz
| Shareholder Communications |
604.488.2657 | investor@imperialmetals.com
Cautionary Note Regarding
Forward-Looking Statements
Certain information contained in this news
release are not statements of historical fact and are
“forward-looking” statements. Forward-looking statements relate to
future events or future performance and reflect Company
management’s expectations or beliefs regarding future events and
include, but are not limited to, statements regarding expectations
regarding the care, maintenance and rehabilitation activities at
Mount Polley and Huckleberry, expectations and timing regarding
current and future exploration and drilling programs, expectations
regarding exploration results and metal prices required to restart
the Mount Polley and Huckleberry mines, expectations regarding
preventative measures implemented by Newcrest in response to the
COVID-19 pandemic and expectations about the future impacts of the
COVID-19 pandemic on the Company and the Company’s ability to
continue operations in lieu of the pandemic.
In certain cases, forward-looking statements can
be identified by the use of words such as "plans", "expects" or
"does not expect", "is expected", "outlook", "budget", "scheduled",
"estimates", "forecasts", "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", "would", "might" or "will be taken", "occur" or "be
achieved" or the negative of these terms or comparable terminology.
By their very nature forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements.
In making the forward-looking statements in this
release, the Company has applied certain factors and assumptions
that are based on information currently available to the Company as
well as the Company’s current beliefs and assumptions. These
factors and assumptions and beliefs and assumptions include, the
risk factors detailed from time to time in the Company’s interim
and annual financial statements and management’s discussion and
analysis of those statements, all of which are filed and available
for review on SEDAR at www.sedar.com. Although the Company has
attempted to identify important factors that could cause actual
actions, events or results to differ materially from those
described in forward-looking statements, there may be other factors
that cause actions, events or results not to be as anticipated,
estimated or intended, many of which are beyond the Company’s
ability to control or predict. There can be no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements and all
forward-looking statements in this news release are qualified by
these cautionary statements.
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