Mr. Brian Kynoch reports
IMPERIAL REPORTS FIRST QUARTER 2019 FINANCIAL RESULTS
Imperial Metals Corp. has released its financial results for the three ended March 31, 2019, as summarized in this release and discussed in detail in the management's discussion and analysis (MD&A). The company's financial results are prepared in accordance with international financial reporting standards (IFRS).
On March 10, 2019, the company entered into an agreement to sell a 70-per-cent interest in the Red Chris mine to Newcrest. In accordance with IFRS, the company has classified Red Chris mine as a discontinued operation effective Jan. 1, 2019, and as an asset held for sale as at March 31, 2019, and the prior-year comparative quarter consolidated statement of income has been restated accordingly. Unless otherwise stated, this release and the MD&A will report the total of continuing and discontinued operations as one total for ease of comparison with the prior comparative period.
Total revenue decreased to $76.7-million in the March, 2019, quarter, compared with $117.9-million in the 2018 comparative quarter, a decrease of $41.2-million or 34.9 per cent. Revenue from the Red Chris mine in the March, 2019, quarter was $62.9-million, compared with $81.9-million in the 2018 comparative quarter. This decrease was attributable to a lower quantity of copper concentrate sold, along with lower copper prices and slightly higher gold prices, partially offset by the positive revenue revaluation noted below. Revenue from the Mount Polley mine in the March, 2019, quarter was $13.8-million, compared with $36.0-million in the 2018 comparative quarter, due to lower production, which was partially offset by the positive revenue revaluation noted below.
In the March, 2019, quarter, there were 2.6 concentrate shipments from the Red Chris mine (2018 -- 4.0 concentrate shipments) and 0.3 concentrate shipment from the Mount Polley mine (2018 -- 1.0 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 $2.82 (U.S.) in the March, 2019, quarter, compared with $3.16 (U.S.) in the 2018 comparative quarter. The LME cash settlement gold price per troy ounce averaged $1,304 (U.S.) in the March, 2019, quarter, compared with $1,329 (U.S.) in the 2018 comparative quarter. The average Canadian-U.S.-dollar exchange rate was 1.329 in the March, 2019, quarter, 5 per cent higher than the exchange rate of 1.265 in the March, 2018, quarter. In Canadian-dollar terms, the average copper price in the March, 2019, quarter was $3.75 per pound, compared with $4 per pound in the 2018 comparative quarter, and the average gold price in the March, 2019, quarter was $1,734 per ounce, compared with $1,681 per ounce in the 2018 comparative quarter.
Revenue in the March, 2019, quarter increased by $2.5-million due to a positive revenue revaluation, as compared with a $5.6-million negative revenue revaluation in the 2018 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, 2019, quarter was $2.3-million (two cents per share), compared with net loss of $31.1-million (27 cents per share) in the 2018 comparative quarter. The decrease in net loss of $28.8-million was primarily due to the following factors:
- Loss from mine operations went from income of $200,000 in March, 2018, to a loss of $2.5-million in March, 2019, an increase in net loss of $2.3-million.
- Interest expense went from $17.8-million in March, 2018, to $18.4-million in March, 2019, an increase in net loss of $600,000.
- Foreign exchange gains/losses on current and non-current debt went from a loss of $11.3-million in March, 2018, to a gain of $9.1-million in March, 2019, a decrease in net loss of $20.4-million.
- Tax recovery went from $1.2-million in March, 2018, to $14.1-million in March, 2019, a decrease in net loss of $12.9-million.
The March, 2019, quarter net income included a foreign exchange gain from continuing operations related to changes in Canadian/U.S.-dollar exchange rate of $8.9-million, compared with a foreign exchange loss of $11.4-million in the 2018 comparative quarter. The $8.9-million foreign exchange gain comprises a $9.1-million gain on the senior notes and a $200,000 loss on operational items. The average Canadian/U.S.-dollar exchange rate in the March, 2019, quarter was 1.329, compared with an average of 1.265 in the 2018 comparative quarter.
Cash flow from continuing operations was nil in the March, 2019, quarter, compared with cash flow of $4.7-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 that 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 $700,000 in the March, 2019, quarter, down from $4.2-million in the 2018 comparative quarter. The majority of the March, 2019, expenditures were related to curtailment expenditures for the Mount Polley shutdown.
At March 31, 2019, the company has not hedged any copper, gold or Canadian/U.S.-dollar exchange. Quarterly revenues will fluctuate depending on copper and gold prices, the Canadian/U.S.-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
Red Chris first quarter metal production was 13.10 million pounds copper and 8,317 ounces gold. Mill throughput averaged 26,315 tonnes per calendar day during the first quarter, down from the 28,783 achieved in the same quarter last year. Metal recoveries were 73.84 per cent copper and 48.06 per cent gold, compared with 77.22 per cent copper and 47.37 per cent gold in the comparable 2018 quarter.
The reduced throughput and recovery in the quarter were the result of challenges with water reclaim quantity and quality. A large portion of the available water in the tailings impoundment area became unavailable due to freezing, owing to extreme cold temperatures. Operations were sustained by using the available free water to continue operations at a reduced rate. The period of reduced operations extended from about Feb. 9 to March 28, with warming temperatures and adjusted tailings deposition management providing sufficient water for operations to return to normal throughput rates.
Exploration, development and capital expenditures were $9.3-million in the March, 2019, quarter, compared with $4.9-million in the comparative 2018 quarter.
- The Red Chris mine was classified as a discontinued operation effective Jan. 1, 2019, and the comparative period has been restated accordingly.
Mount Polley mine
Mount Polley first quarter metal production was 2.31 million pounds copper and 6,147 ounces gold. Mill throughput averaged 13,653 tonnes per calendar day during the first quarter. Metal recoveries were 38.37 per cent copper and 57.47 per cent gold, compared with 75.67 per cent copper and 73.75 per cent gold in the comparable 2018 quarter. Copper oxide percentages in the 2019 first quarter averaged 40.9 per cent, up substantially from the average of 13.4 per cent in the comparable 2018 quarter. Copper oxide content negatively impacted metal recoveries as copper oxide minerals do not respond well to flotation recovery methods.
Extremely cold winter temperatures also affected the Mount Polley mill throughput during the first quarter. Freezing ore in chutes and stockpiles limited the milling rates from the latter part of January into late February. During February, 2019, only 9,764 dry metric tonnes were treated per calendar day milled, compared with 17,531 dry metric tonnes treated during February, 2018. Warmer temperatures in March improved mill throughput, which averaged over 16,000 tonnes per day in March and about 18,000 tonnes per day for the first 20 days of April. Milling of low-grade stockpiles is targeted to continue to the end of May, 2019, at which time the mine will be placed on care and maintenance until there is a sustained improvement in the price of copper.
Exploration, development and capital expenditures were $700,000 in the March, 2019, quarter, compared with $4.2-million in the comparative 2018 quarter.
Huckleberry continues to be on care and maintenance. For the quarter ending March 31, 2019, Huckleberry incurred idle mine costs comprising $1.2-million in operating costs and $200,000 in depreciation expense.
Earnings and cash flow
During the first quarter of 2019, the company entered into an agreement for the sale of a 70-per-cent interest in the Red Chris mine, and it expects to complete the sale by the third quarter of 2019. As a result, this operation has been classified as a discontinued operation effective Jan. 1, 2019, and the comparative periods have been restated.
SELECT QUARTER FINANCIAL INFORMATION
(in thousands, except per-share amounts)
Three months ended March 31,
Total revenues $ 13,803 $ 36,027
Net (loss) (2,337) (31,078)
Net (loss) per share (0.02) (0.27)
Diluted (loss) per share (0.02) (0.27)
Adjusted net (loss) (1) (11,389) (19,666)
Adjusted net (loss) per share (1) (0.09) (0.16)
Adjusted EBITDA (1) (3,566) 4,798
Cash flow (1)(2) 25 4,677
Cash flow per share (1)(2) (0.00) 0.04
Total revenues 62,878 81,885
Net income 69 15,244
Net income per share 0.00 0.13
Diluted income (loss) per share 0.00 0.13
Adjusted net income (loss) (1) (225) 15,344
Adjusted net income (loss) per share (1) (0.00) 0.13
Adjusted EBITDA (1) 10,553 31,594
Cash flow (1)(2) 10,260 31,594
Cash flow per share (1)(2) 0.08 0.27
Working capital deficiency (3) 727,836 789,470
Total assets 1,588,745 1,573,903
Total debt (including current portion) 874,329 829,698
(1) Non-IFRS financial measures.
(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.
(3) Excludes assets and liabilities held for sale.
Earnings announcement conference call
On May 15, 2019, at 10 a.m. PT (11 a.m. ET), management will discuss the company's first quarter 2019 financial results. To participate in the conference call, dial toll-free 833-231-8250 (North America). A recording of the conference call will be available for playback until May 25, 2019, by calling 855-859-2056 and using playback code 3596176.
About Imperial Metals Corp.
Imperial, through its subsidiaries, owns the Red Chris, Mount Polley and Huckleberry copper mines in British Columbia. Imperial also holds a 50-per-cent interest in the Ruddock Creek lead/zinc property. Imperial recently announced an agreement with Newcrest to sell a 70-per-cent interest in Red Chris to Newcrest for $806.5-million (U.S.), while retaining a 30-per-cent interest in the mine. The company and Newcrest will form a joint venture for the operation of the Red Chris mine going forward, with Newcrest acting as the operator.
We seek Safe Harbor.
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