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Imperial Metals Corp (2)
Symbol C : III
Shares Issued 120,782,585
Close 2018-11-08 C$ 1.22
Recent Sedar Documents

Imperial loses $28.6-million in Q3 2018

2018-11-08 20:59 ET - News Release

Mr. Brian Kynoch reports

IMPERIAL REPORTS THIRD QUARTER 2018 FINANCIAL RESULTS

Imperial Metals Corp. has released its financial results for the three and nine months ended Sept. 30, 2018, and 2017, as summarized in this release and discussed in detail in the management's discussion and 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 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 quarter 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 was $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 quarter 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 pound 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 sheet date and finalization of contained metal as a result of final assays. Net loss for the September 2018 quarter was $28.6 million ($0.24 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 million 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 quarter, 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 loan 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 Chris and Mount Polley mines, as well as the available credit facilities are expected to be sufficient 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. In addition, there are inherent risks related to the operation of the Company's mines which could require 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 could 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.

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 ounces gold produced in the second quarter of 2018. Mill throughput averaged 30,544 tonnes per calendar day during the third 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.

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 30Nine Months Ended September 30 2018 2017 2018 2017 Ore milled - tonnes 1,393,368 1,444,625 4,588,798 4,916,789 Ore milled per calendar day - tonnes15,145 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 {A –} 000's pounds 2,599 3,981 11,790 15,048 Gold {A –} ounces 7,748 9,989 29,138 37,758 Silver {A –} ounces 7,684 7,324 24,181 28,738

The unionized employees at Mount Polley returned to work in August following the strike that began on May 23, 2018. Following the return to work, mining in the Cariboo pit was restarted 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.

Refer to Imperial's 2018 Third Quarter Report on imperialmetals.com and sedar.com for detailed information.

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{A –}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.

We seek Safe Harbor.

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