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Imperial Metals Corp (2)
Symbol III
Shares Issued 128,490,174
Close 2019-08-14 C$ 2.77
Recent Sedar Documents

Imperial loses $9.67-million from continuing ops in Q2

2019-08-14 18:52 ET - News Release

Mr. Brian Kynoch reports

IMPERIAL REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS

Imperial Metals Corp. has released its financial results for the three and six months ended June 30, 2019, 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.

QUARTER HIGHLIGHTS

FINANCIAL

On March 10, 2019, the Company entered into an agreement to sell a 70% interest in the Red Chris mine to Newcrest. In accordance with IFRS, the Company has classified Red Chris mine as a discontinued operation effective January 1, 2019 and asset held for sale as at June 30, 2019, and the prior year comparative quarter consolidated statement of income (loss) has been restated accordingly.

Total revenue increased to $83.6 million in the June 2019 quarter compared to $80.1 million in the 2018 comparative quarter, an increase of $3.5 million or 4.4%.

Revenue from the Red Chris mine in the June 2019 quarter was $61.9 million compared to $57.3 million in the 2018 comparative quarter. This increase was attributable to a higher quantity of copper concentrate sold along with slightly higher gold prices partially offset by lower copper prices and a negative revenue revaluation.

Revenue from the Mount Polley mine in the June 2019 quarter was $21.7 million compared to $22.8 million in the 2018 comparative quarter. The decrease was attributable to lower sales volumes and metal prices.

In the June 2019 quarter there were 3.1 concentrate shipments from the Red Chris mine (2018-2.6 concentrate shipments) and 0.7 concentrate shipments from the Mount Polley mine (2018-0.7 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$2.77 in the June 2019 quarter compared to US$3.12 in the 2018 comparative quarter. The London Metals Exchange cash settlement gold price per troy ounce averaged US$1,310 in the June 2019 quarter compared to US$1,306 in the 2018 comparative quarter. The average CDN/US Dollar exchange rate was 1.338 in the June 2019 quarter, 3.6% higher than the exchange rate of 1.291 in the June 2018 quarter. In CDN Dollar terms the average copper price in the June 2019 quarter was CDN$3.71 per pound compared to CDN$4.03 per pound in the 2018 comparative quarter, and the average gold price in the June 2019 quarter was CDN$1,752 per ounce compared to CDN$1,686 per ounce in the 2018 comparative quarter.

Revenue in the June 2019 quarter decreased by $4.8 million due to a negative revenue revaluation as compared to a $6.9 million negative revenue revaluation in the 2018 comparative quarter. Revenue revaluations are the result of the metal prices 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 prices at the last balance sheet date and finalization of contained metal as a result of final assays.

Net loss from continuing operations for the June 2019 quarter was $9.7 million ($0.08 per share) compared to net loss of $22.4 million ($0.19 per share) in the 2018 comparative quarter. The decrease in net loss of $12.7 million was primarily due to the following factors:

  • Loss from mine operations went from a loss of $1.2 million in June 2018 to a loss of $2.2 million in June 2019, an increase in loss of $1.0 million.
  • Interest expense went from $18.3 million in June 2018 to $18.1 million in June 2019, a decrease in loss of $0.2 million.
  • Foreign exchange gains/losses went from a loss of $9.2 million in June 2018 to a gain of $9.1 million in June 2019, a decrease in loss of $18.3 million. The average CDN/US Dollar exchange rate in the June 2019 quarter was 1.338 compared to an average of 1.291 in the 2018 comparative quarter.
  • Tax recovery went from $10.7 million in June 2018 to $4.0 million in June 2019, an increase in loss of $6.7 million.

Cash flow from continuing operations was $0.2 million in the June 2019 quarter compared to $0.8 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 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 $0.6 million in the June 2019 quarter, down from $3.4 million in the 2018 comparative quarter. The reduction was due to placing Mount Polley on care and maintenance.

At June 30, 2019, 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 second quarter metal production was 17.60 million pounds copper and 7,580 ounces gold. Copper production was up from the first quarter by 26%, while gold production was down by 10%. Gold production was down on lower grade as virtually all mill feed came from the Main zone, with less feed coming from the mid pit area where gold grades are higher. Metal recoveries were 76.20% copper and 42.56% gold, compared to 73.84% copper and 48.06% gold achieved in the first quarter.

(1) The Red Chris Mine was classified as a discontinued operation effective January 1, 2019 and the comparative period has been restated accordingly.

                                    Three Months Ended June 30 Six Months Ended June 30
                                             2019         2018         2019        2018

Ore milled - tonnes                     2,694,090    2,529,951    5,062,427   5,120,442
Ore milled per calendar day - tonnes       29,605       27,802       27,969      28,290
Grade %  - copper                           0.389        0.283        0.366       0.366
Grade g/t  - gold                           0.206        0.241        0.216       0.276
Recovery %  - copper                        76.20        72.96        75.18       75.59
Recovery %  - gold                          42.56        43.94        45.27       45.89
Copper - 000's pounds                      17,599       11,510       30,700      31,235
Gold - ounces                               7,580        8,614       15,897      20,829
Silver - ounces                            30,427       19,388       53,054      54,270

The Company is working to obtain the necessary approvals and consents for the previously announced sale of a 70% interest in the Red Chris project to Newcrest Mining Limited.

Several factors that contributed to a strong production improvement in the quarter include:

  • Improved primary haul truck fleet availability that enabled pit production targets to be met and targeted copper and gold grades were delivered.
  • Unscheduled downtime was reduced substantially and a 91.6% plant availability was achieved versus the 89.6% budgeted.
  • During the quarter, tonnes per operating hour (TPOH) averaged 1,348, a 12.6% increase from the prior quarter's average of 1,197 TPOH.
  • With the better availability and processing rate, 2.694 million tonnes were treated compared to 2.368 million tonnes in the previous quarter, a 14% increase.
  • Copper recovery improved and averaged 76.2% versus the previous quarter's average of 73.8%.

During the third quarter Red Chris management plans to focus on:

  • Maximizing throughput through optimization of the pebble crusher and other debottlenecking initiatives to increase throughput rates. These efforts are achieving the desired result; for the first 20 days in July the plant treated an average of 1,454 TPOH, and on July 19, 2019 set a new record for daily throughput of 38,823 tonnes.
  • Completion of the tailings dam construction using both Red Chris equipment and personnel, and TNDC (a Tahltan construction company).
  • Confirm that installation of additional column cell residence time would improve plant recoveries by completing a program of test work using a recently installed pilot sized cleaning cell in the circuit.

Subsequent to the quarter end, USW-Local 1937 was certified as bargaining agent for certain employees at the Red Chris mine. This certification follows the reconsideration of a previous decision by the Labour Relations Board. The company has filed a petition seeking judicial review of the Labour Relations Board's reconsideration decision.

Exploration, development and capital expenditures were $11.7 million in the June 2019 quarter compared to $12.1 million in the comparative 2018 quarter.

Mount Polley Mine

Mount Polley metal production for the two months prior to the suspension of operations in late May 2019 was 1.52 million pounds copper and 4,472 ounces gold. Mill throughput from the low grade stockpiles averaged 16,432 tonnes per calendar day for April and May, and metal recoveries were 28.92% copper and 46.60% gold as low grade, oxidized stockpiles were treated.

                                    Three Months Ended June 30 Six Months Ended June 30
                                            2019*         2018        2019*        2018

Ore milled - tonnes                     1,002,352    1,582,944    2,231,119   3,195,430
Ore milled per calendar day - tonnes       16,432       17,395       14,776      17,654
Grade %  - copper                           0.238        0.180        0.229       0.190
Grade g/t  - gold                           0.298        0.261        0.283       0.291
Recovery %  - copper                        28.92        60.80        33.96       68.69
Recovery %  - gold                          46.60        68.64        52.33       71.48
Copper - 000's pounds                       1,520        3,819        3,825       9,191
Gold - ounces                               4,472        9,110       10,619      21,390
Silver - ounces                             4,609        7,531       11,119      16,497

*production stated for period January 1-May 26, 2019

A care and maintenance team is in place to look after the site and complete the final work on rehabilitation of Hazeltine Creek during the suspension of operations. For the quarter ended June 30, 2019, Mount Polley incurred idle mine costs comprised of $0.8 million in operating costs and $0.5 million in depreciation expense.

Exploration, development and capital expenditures were $0.7 million in the June 2019 quarter compared to $3.4 million in the comparative 2018 quarter.

Huckleberry Mine

Huckleberry continues to be on care and maintenance. For the quarter ending June 30, 2019, Huckleberry incurred idle mine costs comprised of $1.2 million in operating costs and $0.2 million 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% interest in the Red Chris mine. The sale is expected to be completed in the third quarter of 2019. As a result, this operation has been classified as a discontinued operation effective January 1, 2019 and the comparative periods have been restated.

                     Select Quarter Financial Information
           Expressed in thousands, except share and per share amounts

                               Three Months Ended June 30 Six Months Ended June 30
                                         2019        2018        2019        2018                     
Continuing operations:
Total revenues                        $21,673     $22,791     $35,476     $58,818
Net loss                             $(9,677)   $(22,390)   $(12,014)   $(53,468)
Net loss per share                    $(0.08)     $(0.19)     $(0.10)     $(0.46)
Diluted loss per share                $(0.08)     $(0.19)     $(0.10)     $(0.46)
Adjusted net loss (1)               $(18,651)   $(13,658)   $(30,040)   $(33,324)
Adjusted net loss per share (1)       $(0.15)     $(0.12)     $(0.23)     $(0.28)
Adjusted EBITDA(1)                      $(16)      $1,287    $(3,573)      $6,367
Cash flow (1)(2)                         $207        $843        $232      $5,520
Cash flow per share (1)(2)              $0.00       $0.01       $0.00       $0.04

Discontinued operations:
Total revenues                        $61,945     $57,275    $124,823    $139,160
Net income (loss)                      $2,227   $(14,165)      $2,296        $747
Net income (loss per) share             $0.02     $(0.12)       $0.02       $0.01
Diluted income (loss) per share         $0.02     $(0.12)       $0.02       $0.01
Adjusted net income (loss) (1)         $1,968   $(14,165)      $1,743        $747
Adjusted net income (loss)
per share (1)                           $0.02     $(0.12)       $0.02       $0.00
Adjusted EBITDA(1)                     $3,506    $(3,417)     $14,059     $27,845
Cash flow (1)(2)                       $3,260    $(3,436)     $13,520     $27,845
Cash flow per share (1)(2)              $0.03     $(0.03)       $0.11       $0.24

Working capital deficiency (3)       $744,682    $791,538    $744,682    $791,538
Total assets                       $1,591,256  $1,661,947  $1,591,256  $1,661,947
Total debt (including
current portion)                     $887,932    $856,802    $887,932    $856,802

(1) Refer to table under heading Non-IFRS Financial Measures in MD&A 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.

(3) Excludes assets and liabilities held for sale.

          Select Items Affecting Net Loss (presented on an after-tax basis)

 expressed in thousands                    Three Months Ended June 30Six Months Ended June 30
                                                     2019        2018        2019        2018
Net income (loss) before undernoted
items from continuing operations                  $(7,330)     $4,582    $(14,722)     $2,592
Interest expense                                  (13,184)    (18,281)    (26,607)    (36,094)
Recovery of BC Mineral taxes including interest     1,863           -      11,288           -
Gain on sale of Sterling                                -         175           -         175
Foreign exchange gain (loss) on debt                8,974      (8,866)     18,026     (20,141)
Net loss from continuing operations               $(9,677)   $(22,390)   $(12,014)   $(53,468)

About Imperial

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 March 2019, Imperial announced an agreement with Newcrest Mining Limited to sell a 70% interest in Red Chris to Newcrest, for US$806.5 million, while retaining a 30% 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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