Imperial Reports Third Quarter 2019 Financial Results
Vancouver | November 14, 2019 | Imperial Metals Corporation (the “Company”) (TSX:III) reports financial results for the three and nine months ended September 30, 2019, 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.
On March 10, 2019, the Company entered into an agreement to sell a 70% interest in the Red Chris mine to Newcrest. The Company completed the sale to Newcrest on August 15, 2019 for a final purchase price of US$804.4 million subject to debt and working capital adjustments.
In accordance with IFRS, the Company has classified Red Chris mine as a discontinued operation effective January 1, 2019 up to closing of the transaction with Newcrest on August 14, 2019, and the prior year comparative quarter consolidated statement of income (loss) has been restated accordingly. Effective August 15, 2019 onwards, the results from the Red Chris Mine are presented on a proportional basis relative to Imperial’s 30% ownership in the joint venture. Unless otherwise stated this MD&A will report the total of continuing and discontinued operations as one total for ease of comparison with the prior comparative period.
The majority of the proceeds received were used to repay most of the outstanding debt and eliminating interest expense on the debt on August 15, 2019.
Total revenue decreased to $46.9 million in the September 2019 quarter compared to $70.5 million in the 2018 comparative quarter, a decrease of $23.6 million or 33.0%.
Revenue from the Red Chris mine in the September 2019 quarter was $46.5 million compared to $52.7 million in the 2018 comparative quarter. This decrease was attributable to the Company’s ownership decreasing to 30% from 100% on August 15, 2019 compared to picking up 100% share throughout the entire prior year comparative quarter.
Revenue from the Mount Polley mine in the September 2019 quarter was ($0.3) million compared to $17.8 million in the 2018 comparative quarter. The decrease was attributable to the mine being on care and maintenance during the 2019 quarter.
In the September 2019 quarter there were 3.3 concentrate shipments from the Red Chris mine (2018-2.7 concentrate shipments). There were no concentrate shipments from the Mount Polley mine (2018-0.5 concentrate shipment) due to the closure of the mine in May 2019. 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$2.64 in the September 2019 quarter compared to US$2.77 in the 2018 comparative quarter. The London Metals Exchange cash settlement gold price per troy ounce averaged US$1,474 in the September 2019 quarter compared to US$1,213 in the 2018 comparative quarter. The average CDN/US Dollar exchange rate was 1.321 in the September 2019 quarter, 1.0% higher than the exchange rate of 1.307 in the September 2018 quarter. In CDN Dollar terms the average copper price in the September 2019 quarter was CDN$3.49 per pound compared to CDN$3.62 per pound in the 2018 comparative quarter, and the average gold price in the September 2019 quarter was CDN$1,947 per ounce compared to CDN$1,585 per ounce in the 2018 comparative quarter.
Revenue in the September 2019 quarter decreased by $4.6 million due to a negative revenue revaluation as compared to a $5.1 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 September 2019 quarter was $16.0 million ($0.12 per share) compared to net loss of $12.7 million ($0.11 per share) in the 2018 comparative quarter. The increase in net loss of $3.3 million was primarily due to the following factors:
Loss from mine operations went from $13.4 million in September 2018 to income of $0.4 million in September 2019, a decrease in net loss of $13.8 million.
Interest expense went from $18.7 million in September 2018 to $9.4 million in September 2019, a decrease in net loss of $9.3 million. Lower interest expense was due to the majority of the debt being repaid on August 15, 2019.
Foreign exchange gains/losses went from a gain of $6.9 million in September 2018 to a loss of $10.1 million in September 2019, an increase in net loss of $17.0 million. The average CDN/US Dollar exchange rate in the September 2019 quarter was 1.321 compared to an average of 1.307 in the 2018 comparative quarter.
Tax recovery went from $13.5 million in September 2018 to $8.8 in the September 2019, an increase in net loss of $4.7 million.
Cash flow from continuing operations was negative $1.8 million in the September 2019 quarter compared to negative $8.2 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 $8.2 million in the September 2019 quarter, up from $5.2 million in the 2018 comparative quarter. The increase was due to the inclusion of Red Chris expenditures from August 15, 2019 onwards representing Imperial’s 30% proportionate share compared to the prior year quarter where these expenditures were classified as discontinued operations.
At September 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.
Red Chris Mine
On August 15, 2019, Imperial completed the sale of a 70% interest in the Red Chris mine to Newcrest Mining Limited. Imperial’s portion of the third quarter production was 13.1 million pounds copper and 5,634 ounces gold representing 100% of production for the period July 1 through August 14, 2019, and 30% of production for the period August 15 through September 30, 2019.
Read More: https://www.imperialmetals.com/assets/docs/2019-11-14_NR_III_098jklnA465rec.pdf