Imperial Metals Corporation (the “Company”)
(TSX:III) reports financial results for the three and nine months
ended September 30, 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 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 Red
Chris Joint Venture. Unless otherwise stated, this MD&A only
compares the comparative quarter results from continuing operations
and excludes discontinued operations.
During the third quarter of 2020 the provisional
fair values that were assigned to the sale of Red Chris were
finalized taking into consideration updated information obtained
during the measurement period. The year ended December 31, 2019 and
comparative quarters from September 30, 2019 onwards were restated
to take into consideration the finalized values.
Total revenue from continuing operations
increased to $38.2 million in the September 2020 quarter from $7.0
million in the 2019 comparative quarter, an increase of $31.2
million. The September 2019 amount only included revenue from the
Red Chris mine from August 15 to September 30. Revenues for the
first part of the 2019 quarter were classified in discontinued
operations and totalled $39.9 million. In the September 2020
quarter, the Company included its portion of the 30% interest in
the Red Chris mine.
In the September 2020 quarter, the Red Chris
mine (100% basis) had 4.3 concentrate shipments (2019-3.3
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$2.96 in the September 2020
quarter compared to US$2.64 in the 2019 comparative quarter. LBMA
cash settlement gold price per troy ounce averaged US$1,911 in the
September 2020 quarter compared to US$1,474 in the 2019 comparative
quarter. The average US/CDN Dollar exchange rate was 1.332 in the
September 2020 quarter, 0.8% higher than the exchange rate of 1.321
in the September 2019 quarter. In CDN Dollar terms the average
copper price in the September 2020 quarter was CDN$3.94 per pound
compared to CDN$3.49 per pound in the 2019 comparative quarter, and
the average gold price in the September 2020 quarter was CDN$2,545
per ounce compared to CDN$1,947 per ounce in the 2019 comparative
quarter.
Revenue in the September 2020 quarter increased
by $3.3 million due to a positive revenue revaluation as compared
to a $4.6 million negative revenue revaluation in the 2019
comparative quarter from continued and discontinued operations.
Revenue revaluations are the result of the metal 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
metal price at the last balance sheet date and finalization of
contained metal as a result of final weights and assays.
Net income from continuing operations for the
September 2020 quarter was $7.1 million ($0.05 per share) compared
to net loss of $17.9 million ($0.14 per share) in the 2019
comparative quarter. The increase in net income of $25.0 million
was primarily due to the following factors:
-
Mine operations went from a loss of $2.2 million in September 2019
to income of $12.8 million in September 2020, an increase in net
income of $15.0 million.
-
Interest expense went from $9.4 million in September 2019 to $0.3
million in September 2020, an increase in net income of $9.1
million.
-
Foreign exchange went from a loss of $7.7 million in September 2019
to a loss of $1.1 million in September 2020, an increase in net
income of $6.6 million.
-
Tax recovery went from $9.5 million in September 2019 to $1.2
million in September 2020, a decrease in net income of $8.3
million.
Cash flow was $17.7 million in the September
2020 quarter compared to negative $1.8 million 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 from continuing operations
were $26.4 million in the September 2020 quarter, up from $16.4
million in the 2019 comparative quarter.
At September 30, 2020, the Company had not
hedged any copper, gold or US/CDN Dollar exchange. Quarterly
revenues will fluctuate depending on copper and gold prices, the
US/CDN Dollar exchange rate, and the timing of concentrate sales,
which is dependent on concentrate production and the availability
and scheduling of transportation.
OPERATIONS
The Company’s plans for 2020 and beyond could be
adversely impacted by the effects of the coronavirus (2019-nCoV)
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.
Red Chris Mine
Red Chris metal production for the 2020 third
quarter was 22.2 million pounds copper and 18,052 ounces gold, as
compared to 26.5 million pounds copper and 22,057 ounces gold
produced in the 2020 second quarter. Imperial’s 30% portion of Red
Chris third quarter production was 6.66 million pounds copper and
5,415 ounces gold. Newcrest Red Chris Mining Limited is operator of
the Red Chris Joint Venture (Newcrest 70%; Imperial 30%).
Metal production was lower than the prior
quarter reflecting a higher proportion of lower grade stockpile
material being fed to the mill due to unseasonal rainfall. This
impacted the availability of higher grade mill feed from the pits,
and resulted in lower recoveries. Lower grades and recoveries were
partially offset by a 13% increase in mill throughput.
|
|
Three Months Ended September 30* |
|
Nine Months Ended September 30* |
|
|
2020 |
2019 |
|
2020 |
2019 |
|
Ore milled – tonnes |
2,777,245 |
2,812,236 |
|
7,196,524 |
7,874,663 |
| Ore milled per calendar
day – tonnes |
30,187 |
30,568 |
|
26,265 |
28,845 |
| Grade % – copper |
0.460 |
0.421 |
|
0.553 |
0.385 |
| Grade g/t – gold |
0.398 |
0.226 |
|
0.462 |
0.219 |
| Recovery % – copper |
78.8 |
74.8 |
|
81.0 |
75.0 |
| Recovery % – gold |
50.8 |
41.2 |
|
53.9 |
43.8 |
| Copper – 000’s pounds |
22,203 |
19,505 |
|
71,112 |
50,206 |
| Gold – ounces |
18,052 |
8,419 |
|
57,536 |
24,316 |
| Silver
– ounces |
45,914 |
35,318 |
|
141,044 |
88,371 |
* 100% Red Chris mine production
The Company’s share of exploration, development
and capital expenditures were $26.3 million in the September 2020
quarter compared to $13.2 million in the 2019 comparative
quarter.
Mount Polley Mine
Mount Polley mine remains on care and
maintenance status pending improvement of the economics of mining.
Site personnel are maintaining access, fire watch, managing the
collection, treatment and discharge of site contact water, and
actively monitoring the tailings storage facility.
For the September 2020 quarter, Mount Polley
incurred idle mine costs comprised of $2.7 million in operating
costs and $1.1 million in depreciation expense.
Huckleberry Mine
Huckleberry mine operations were shut down in
August 2016, and the mine remains 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.
For the September 2020 quarter, Huckleberry
incurred idle mine costs comprised of $1.0 million in operating
costs and $0.2 million in depreciation expense.
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 September 30 |
|
Nine Months Ended September 30 |
|
|
expressed in thousands, except share and per share amounts |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
Continuing operations: |
|
|
|
|
|
Total revenues |
$ |
38,161 |
|
$ |
6,991 |
|
$ |
111,182 |
|
$ |
42,467 |
|
|
Net income (loss) |
$ |
7,063 |
|
$ |
(17,901 |
) |
$ |
24 |
|
$ |
(29,915 |
) |
|
Net income (loss) per share |
$ |
0.05 |
|
$ |
(0.14 |
) |
$ |
0.00 |
|
$ |
(0.24 |
) |
|
Diluted income (loss) per share |
$ |
0.05 |
|
$ |
(0.14 |
) |
$ |
0.00 |
|
$ |
(0.24 |
) |
|
Adjusted net income (loss) (1) |
$ |
7,015 |
|
$ |
(8,895 |
) |
$ |
132 |
|
$ |
(38,936 |
) |
|
Adjusted net income (loss) per share (1) |
$ |
0.05 |
|
$ |
(0.07 |
) |
$ |
0.00 |
|
$ |
(0.31 |
) |
|
Adjusted EBITDA |
$ |
17,243 |
|
$ |
(1,227 |
) |
$ |
36,001 |
|
$ |
(1,444 |
) |
|
Cash flow (1)(2) |
$ |
17,655 |
|
$ |
(1,823 |
) |
$ |
36,549 |
|
$ |
(1,331 |
) |
|
Cash flow per share (1)(2) |
$ |
0.14 |
|
$ |
(0.01 |
) |
$ |
0.28 |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
Total revenues |
$ |
- |
|
$ |
39,872 |
|
$ |
- |
|
$ |
164,695 |
|
|
Net income |
$ |
- |
|
$ |
360,906 |
|
$ |
- |
|
$ |
363,202 |
|
|
Net income share |
$ |
- |
|
$ |
2.81 |
|
$ |
- |
|
$ |
2.86 |
|
|
Diluted income per share |
$ |
- |
|
$ |
2.81 |
|
$ |
- |
|
$ |
2.86 |
|
|
Adjusted net income (1) |
$ |
- |
|
$ |
42,501 |
|
$ |
- |
|
$ |
44,244 |
|
|
Adjusted net income per share (1) |
$ |
- |
|
$ |
0.34 |
|
$ |
- |
|
$ |
0.35 |
|
|
Adjusted EBITDA (1) |
$ |
- |
|
$ |
127,761 |
|
$ |
- |
|
$ |
141,820 |
|
|
Cash flow (1)(2) |
$ |
- |
|
$ |
10,179 |
|
$ |
- |
|
$ |
23,699 |
|
|
Cash flow per share (1)(2) |
$ |
- |
|
$ |
0.08 |
|
$ |
- |
|
$ |
0.19 |
|
|
|
|
|
|
|
|
Working capital |
$ |
27,082 |
|
$ |
72,894 |
|
$ |
27,082 |
|
$ |
72,894 |
|
|
Total assets |
$ |
1,092,134 |
|
$ |
1,115,426 |
|
$ |
1,092,134 |
|
$ |
1,115,426 |
|
| Total
debt (including current portion) |
$ |
2,847 |
|
$ |
4,214 |
|
$ |
2,847 |
|
$ |
4,214 |
|
|
(1) Refer to 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 September 30 |
|
Nine Months Ended September 30 |
|
|
expressed in thousands |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
| Net
income (loss) before undernoted items undernoted items |
$ |
7,349 |
|
$ |
(1,513 |
) |
$ |
719 |
|
$ |
(16,234 |
) |
| Interest
expense |
|
(238 |
) |
|
(7,383 |
) |
|
(803 |
) |
|
(33,990 |
) |
| Recovery
of BC Mineral taxes including interest |
|
- |
|
|
- |
|
|
- |
|
|
11,288 |
|
| Foreign
exchange gain (loss) on debt |
|
(48 |
) |
|
(7,716 |
) |
|
108 |
|
|
10,310 |
|
| Loss on
early repayment of debt |
|
- |
|
|
(1,289 |
) |
|
- |
|
|
(1,289 |
) |
| Net
income (loss) from continuing operations |
$ |
7,063 |
|
$ |
(17,901 |
) |
$ |
24 |
|
$ |
(29,915 |
) |
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. 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
Income
(Loss) and Adjusted Net
Income
(Loss)
Per Share
Adjusted net income from continuing operations
in the September 2020 quarter was $7.0 million ($0.05 per share)
compared to an adjusted net loss of $8.9 million ($0.07 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 September 2020 quarter was $17.2 million compared to a negative
$1.2 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
September 2020 quarter was $17.7 million compared to a negative
$1.8 million in the 2019 comparative quarter. Cash flow per share
was $0.14 in the September 2020 quarter compared to $(0.01) in the
2019 comparative quarter.
Cash flow and cash flow per share are measures
used by the Company to evaluate its performance however they are
not terms recognized under IFRS. Cash flow is defined as cash flow
from operations before the net change in non-cash working capital
balances, income and mining taxes, and interest paid and cash flow
per share is the same measure divided by the weighted average
number of common shares outstanding during the year.
Cash Cost Per Pound of Copper
Produced
The Company is primarily a copper producer and
therefore calculates this non-IFRS financial measure individually
for its three copper mines, Red Chris (30% share), Mount Polley and
Huckleberry, and on a composite basis for these mines Variations
from period to period in the cash cost per pound of copper produced
are the result of many factors including: grade, metal recoveries,
amount of stripping charged to operations, mine and mill operating
conditions, labour and other cost inputs, transportation and
warehousing costs, treatment and refining costs, the amount of
by-product and other revenues, the US$ 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 September 30, 2020 |
|
|
Red Chris |
**Mount Polley |
Composite |
|
Cash cost of copper produced in US$ |
$ |
9,471 |
|
$ |
- |
|
$ |
9,471 |
| Copper produced – pounds |
|
6,661 |
|
|
- |
|
|
6,661 |
| Cash cost per lb copper
produced in US$ |
$ |
1.42 |
|
$ |
- |
|
$ |
1.42 |
|
|
|
|
Three Months Ended September 30, 2019 |
| |
*Red Chris |
**Mount Polley |
Composite |
| Cash cost of copper produced
in US$ |
$ |
30,875 |
|
$ |
- |
|
$ |
30,875 |
| Copper produced – pounds |
|
13,132 |
|
|
- |
|
|
13,132 |
| Cash cost per lb copper
produced in US$ |
$ |
2.35 |
|
$ |
- |
|
$ |
2.35 |
| |
|
|
|
|
|
Nine Months Ended September 30, 2020 |
|
|
Red Chris |
**Mount Polley |
Composite |
| Cash cost of copper produced
in US$ |
$ |
27,417 |
|
$ |
- |
|
$ |
27,417 |
| Copper produced – pounds |
|
21,333 |
|
|
- |
|
|
21,333 |
| Cash cost per lb copper
produced in US$ |
$ |
1.29 |
|
$ |
- |
|
$ |
1.29 |
|
|
|
|
Nine Months Ended September 30, 2019 |
| |
*Red Chris |
**Mount Polley |
Composite |
| Cash cost of copper produced
in US$ |
$ |
110,947 |
|
$ |
12,476 |
|
$ |
123,423 |
| Copper produced – pounds |
|
43,832 |
|
|
3,825 |
|
|
47,657 |
| Cash cost per lb copper
produced in US$ |
$ |
2.53 |
|
$ |
3.26 |
|
$ |
2.59 |
|
* |
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 Red Chris Joint Venture. |
| ** |
The Mount Polley mine was placed
on care and maintenance on May 26, 2019. |
For detailed information, refer to Imperial’s
2020 Third Quarter Report available on imperialmetals.com and
sedar.com
About Imperial
Imperial is a Vancouver based 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 |
604.669.8959Darb Dhillon | Chief Financial Officer
| 604.669.8959Sabine 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 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,
future prices of copper and gold and future foreign currency
exchange rates and their impact.
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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