Imperial Reports First Quarter 2018 Financial Results

by pmnationtalk on May 11, 2018525 Views

May 10, 2018

Vancouver | May 10, 2018 | Imperial Metals Corporation (the “Company”) (TSX:III) reports financial results for the three months ended March 31, 2018 and 2017, 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.

Select Quarter Financial Information

expressed in thousands, except share and per share amounts	Three Months Ended March 31
	2018	2017
Total revenues	$117,912	$115,749
Net loss	$16,166	$18,752
Net loss per share	$0.14	$0.20
Diluted loss per share	$0.14	$0.20
Adjusted net loss⁽¹⁾	$4,754	$22,296
Adjusted net loss per share (1)	$0.04	$0.24
Adjusted EBITDA⁽¹⁾	$36,392	$15,187
Working capital deficiency	$743,096	$214,646
Total assets	$1,662,528	$1,511,120
Total debt (including current portion)	$829,698	$846,067
Cash flow ⁽¹⁾⁽²⁾	$35,958	$15,065
Cash flow per share ⁽¹⁾⁽²⁾	$0.31	$0.16

(1)	Refer to Management’s Discussion & Analysis 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 period.

Revenues increased to $117.9 million in the March 2018 quarter compared to $115.7 million in the 2017 comparative quarter, an increase of $2.2 million or 1.9%.

Revenue from the Red Chris mine in the March 2018 quarter was $81.9 million compared to $54.6 million in the 2017 comparative quarter. This increase was attributable to a higher quantity of copper concentrate sold along with higher copper prices compared to the 2017 quarter.

Revenue from the Mount Polley mine in the March 2018 quarter was $36.0 million compared to $61.0 million in the 2017 comparative quarter. The decrease was attributable to a lower quantity of copper concentrate sold.

In the March 2018 quarter, there were 4.0 concentrate shipments from Red Chris mine (2017-3.0 concentrate shipments) and 1.0 concentrate shipment from Mount Polley mine (2017-1.7 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$3.16 in the March 2018 quarter compared to US$2.65 in the 2017 comparative quarter. The London Metals Exchange cash settlement gold price per troy ounce averaged US$1,329 in the March 2018 quarter compared to US$1,219 in the March 2017 quarter. The average CDN/US$ Dollar exchange rate was 1.265 in the March 2018 quarter, 4.38% lower than the exchange rate of 1.323 in the March 2017 quarter. In CDN dollar terms the average copper price in the March 2018 quarter was CDN$4.00 per pound compared to CDN$3.51 per pound in the 2017 comparative quarter and the average gold price in the March 2018 quarter was CDN$1,681 per ounce compared to CDN$1,613 per ounce in the 2017 comparative quarter.

Revenue in the March 2018 quarter decreased by $5.6 million negative revenue revaluation compared to a $5.1 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.

Net loss for the March 2018 quarter was $16.2 million ($0.14 per share) compared to net loss of $18.8 million ($0.20 per share) in the 2017 comparative quarter. The decrease in net loss of $2.6 million was primarily due to the following factors:

Income/loss from mine operations went from a loss of $5.7 million in March 2017 to income of $17.6 million in March 2018, a decrease in net loss of $23.3 million.
Interest expense went from $18.2 million in March 2017 to $19.0 million in March 2018, an increase in net loss of $0.8 million.
Foreign exchange gains/losses on current and non-current debt went from a gain of $3.4 million in March 2017 to a loss of $11.4 million in March 2018, an increase in net loss of $14.8 million.
The Company’s equity loss in Huckleberry went from loss of $1.6 million in March 2017 to $nil in March 2018, a decrease in net loss of $1.6 million.
Idle mine costs went from $nil in March 2017 to $1.4 million in March 2018, an increase in net loss of $1.4 million.
Tax position went from a recovery of $5.0 million in March 2017 to $nil in March 2018, an increase in net loss of $5.0 million.

The March 2018 quarter net loss included foreign exchange loss related to changes in CDN/US Dollar exchange rate of $11.8 million compared to foreign exchange gain of $3.1 million in the 2017 comparative quarter. The $11.8 million foreign exchange loss is comprised of an $11.3 million loss on the senior notes, a $0.1 million loss on long term equipment loans, and a $0.4 million loss on operational items. The average CDN/US Dollar exchange rate in the March 2018 quarter was 1.265 compared to an average of 1.323 in the 2017 comparative quarter.

Cash flow was $36.0 million in the March 2018 quarter compared to cash flow of $15.1 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 $9.1 million in the March 2018 quarter, down from $24.0 million in the 2017 comparative quarter. The March 2018 expenditures included $1.8 million for tailings dam construction, $5.0 million on mobile equipment and $2.3 million for other capital items. The 2017 quarter included $7.2 million of mobile equipment purchases as well as higher costs for tailings dam construction and other capital items.

NON-IFRS FINANCIAL MEASURES

The Company reports four non-IFRS financial measures: Adjusted net income, adjusted EBITDA, cash flow and cash cost per pound of copper produced which are described in detail below. The Company believes these measures are useful to investors because they are included in the measures that are used by management in assessing the financial performance of the Company.

Adjusted net income, adjusted EBITDA, and cash flow are not generally accepted earnings measures and should not be considered as an alternative to net income (loss) and cash flows as determined in accordance with IFRS. As there is no standardized method of calculating these measures, these measures may not be directly comparable to similarly titled measures used by other companies. Reconciliations are provided below.

Adjusted Net Loss and Adjusted Net Loss Per Share

Adjusted net loss in the March 2018 quarter was $4.8 million ($0.04 per share) compared to an adjusted net loss of $22.3 million ($0.24 per share) in the 2017 comparative quarter. Adjusted net loss reflects the financial results excluding the effect of items not settling in the current period and non-recurring items. Adjusted net loss is calculated by removing the gains or losses, resulting from mark to market revaluation of derivative instruments, net of tax, unrealized foreign exchange gains or losses on non-current debt, net of tax and other adjustments.

Adjusted EBITDA

Adjusted EBITDA in the March 2018 quarter was $36.4 million compared to $15.2 million in the 2017 comparative quarter. We define Adjusted EBITDA as net income (loss) before interest expense, taxes, depletion and depreciation, and as adjusted for certain other items.

Cash Flow and Cash Flow Per Share

Cash flow in the March 2018 quarter was $36.0 million compared to $15.1 million in the 2017 comparative quarter. Cash flow per share was $0.31 in the March 2018 quarter compared to $0.16 in the 2017 comparative quarter.

Cash flow and cash flow per share are measures used by the Company to evaluate its performance however they are not terms recognized under IFRS. 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 and cash flow per share is the same measure divided by the weighted average number of common shares outstanding during the year.

Cash Cost Per Pound of Copper Produced

The cash cost per pound of copper produced is a non-IFRS financial measure that does not have a standardized meaning under IFRS, and as a result may not be comparable to similar measures presented by other companies. Management uses this non-IFRS financial measure to monitor operating costs and profitability. The Company is primarily a copper producer and therefore calculates this non-IFRS financial measure individually for its three copper mines, Red Chris, Mount Polley and Huckleberry, and on a composite basis for these mines.

The cash cost per pound of copper produced is derived from the sum of cash production costs, transportation and offsite costs, treatment and refining costs, royalties, net of by-product and other revenues, divided by the number of pounds of copper produced during the period.

Variations from period to period in the cash cost per pound of copper produced are the result of many factors including: grade, metal recoveries, amount of stripping charged to operations, mine and mill operating conditions, labour and other cost inputs, transportation and warehousing costs, treatment and refining costs, the amount of by-product and other revenues, the US$ to CDN$ exchange rate and the amount of copper produced. Idle mine costs during the periods when the Huckleberry mine was not in operation have been excluded from the cash cost per pound of copper produced.

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