Imperial Reports 2015 First Quarter Financial Results
Vancouver – May 15, 2015 | Imperial Metals Corporation (the “Company”) (III-TSX) reports comparative financial results for the first quarter period ended March 31, 2015. Revenues were $1.5 million in the March 2015 quarter compared to $51.3 million in the 2014 comparative quarter. Variations in revenue are impacted by the timing and quantity of concentrate shipments, metal prices and exchange rate, and period end revaluations of revenue attributed to concentrate shipments where the copper price will settle at a future date. The revenue in the current quarter represents primarily gold sales from the Sterling gold mine. The decrease in revenue in the March 2015 quarter from the 2014 comparative quarter is due to the absence of concentrate sales from the Mount Polley mine due to suspension of operations on August 4, 2014 as a result of the tailings dam breach. There were two concentrate shipments in the March 2014 comparative quarter from the Mount Polley mine.
The London Metals Exchange cash settlement copper price per pound averaged US$2.64 in the March 2015 quarter compared to US$3.19 in the March 2014 quarter. The London Metals Exchange cash settlement gold price per troy ounce averaged US$1,219 in the March 2015 quarter compared to US$1,294 in the March 2014 quarter. The CDN Dollar weakened by 11.1% compared to the US Dollar in the March 2015 quarter over the March 2014 quarter. In CDN Dollar terms the average copper price in the March 2015 quarter was CDN$3.28 per pound compared to CDN$3.52 per pound in the March 2014 quarter and the average gold price in the March 2015 quarter was CDN$1,513 per ounce compared to CDN$1,428 per ounce in the March 2014 quarter.
Revenue in the March 2015 quarter was decreased by a $0.1 million negative revenue revaluation compared to a negative revenue revaluation of $1.1 million in the March 2014 quarter. Negative revenue revaluations are the result of the metal prices on the settlement date and/or the current period balance sheet date being lower than when the revenue was initially recorded or the metal price at the last balance sheet date.
In the March 2015 quarter the Company recorded a $1.7 million loss from mine operations compared to income of $15.9 million in the March 2014 quarter. The reduction was a result of the suspension of the Mount Polley mine operations in August 2014. The net loss for the March 2015 quarter was $33.4 million ($0.45 per share) compared to net income of $5.9 million ($0.08 per share) in the comparative 2014 quarter. The variation in net income in the March 2015 quarter compared to the March 2014 quarter is attributable to the loss of production from suspension of Mount Polley mine operations, related idle mine costs, foreign exchange losses and gains and losses on derivative instruments.
The March 2015 quarter net loss included foreign exchange losses related to changes in CDN/US Dollar exchange rates of $39.1 million compared to foreign exchange losses of $0.5 million in the comparative 2014 quarter. The $39.1 million foreign exchange loss is comprised of a $34.4 million loss on the senior notes, a $3.9 million loss on long term equipment loans, and a loss of $0.8 million on operational items. The average CDN/US Dollar exchange rate in the March 2015 quarter was 1.241 compared to an average of 1.103 in the March 2014 quarter.
In the March 2015 quarter the Company recorded net gains on derivative instruments of $13.7 million compared to net losses of $2.1 million in the March 2014 quarter. In the March 2015 quarter the Company recorded a gain, primarily unrealized, of $12.7 million on the foreign currency swap due to an increase in the CDN/US Dollar exchange rate compared to the exchange rate at December 31, 2014. The decrease in the gold price compared to the price in the derivative instrument contracts entered into during the current quarter or the gold price at December 31, 2014 for derivative instrument contracts entered into before January 1, 2015 resulted in a gain of $1.0 million, primarily unrealized, for gold derivative instruments in the March 2015 quarter compared to a $0.7 million unrealized gain related to copper and gold derivative instruments in the March 2014 quarter.
The Company recorded a $0.6 million equity loss as its share of Huckleberry’s net loss during the March 2015 quarter compared to a $1.3 million equity loss in the March 2014 quarter. Although Huckleberry had two shipments in the March 2014 quarter compared to only one shipment in the March 2015 quarter, the higher loss in the March 2014 quarter was the result of the bull gear failure that occurred in the 2014 quarter.
The Company incurred a pre-tax loss of $36.6 million in the March 2015 quarter which resulted in a $3.2 million recovery of income and mining taxes compared to a $4.2 million expense in the March 2014 quarter when the Company had pre-tax income of $10.1 million.
Cash flow was negative $6.1 million in the March 2015 quarter compared to positive cash flow of $20.3 million in the March 2014 quarter. Cash flow is a measure used by the Company to evaluate its performance, however, it is not a term recognized under IFRS in Canada. 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. 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, inclusive of capitalized interest, were $44.7 million in the March 2015 quarter, down from $96.8 million in the March 2014 quarter. The expenditures in the March 2015 quarter were financed by cash flow from long term debt. At March 31, 2015 the Company had $6.5 million in cash (December 31, 2014-$19.9 million). The Company had $7.3 million of short term debt at March 31, 2015 (December 31, 2014-$nil).
Liquidity and Financing
The Company’s Interim Financial Statements have been prepared on a going concern basis which assumes the Company will continue operating in the foreseeable future and will be able to service its debt obligations, realize its assets and discharge its liabilities in the normal course as they come due.
At March 31, 2015, the Company had cash of $6.5 million and a working capital deficiency of $35.6 million. Following completion of the construction of the Red Chris mine, commissioning of the mill commenced and the first concentrate was produced in February 2015. However, due to production slowdowns related to temporarily reduced water supply, it will take additional time for the mine to consistently achieve design levels of throughput and production. As a result, the Company will not be able to meet the June 1, 2015 date for completion under the Senior Credit Facility. The Company is in discussions with its lenders to extend the date for it to achieve completion. However, without a waiver or extension from its lenders the Company will be in default under the Senior Credit Facility effective June 1, 2015.
The Company is reviewing alternatives for additional sources of financing to provide funding until the Red Chris mine is generating sufficient cash flow. However, there can be no assurance that financing will be available on terms acceptable to the Company or at all. The projected cash flow from the Red Chris mine when operating at design capacity together with anticipated insurance proceeds as well as the available credit facilities and additional sources of financing should be sufficient to fund the remaining estimated remediation cost of the tailings dam breach at the Mount Polley mine and the estimated costs associated with the Red Chris mine. However, there are inherent risks associated with the startup of the Red Chris mine and production from the mine after startup as well as uncertainties related to the scope, timing and cost of the rehabilitation and restoration at the Mount Polley mine. A default under the Senior Credit Facility without securing additional adequate financing would have a material adverse impact on the Company’s financial condition and results of operations and its ability to operate as a going concern. Management is working diligently to secure additional financing on terms acceptable to the Company.
Selected Annual Financial Information
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