Imperial Metals Corporation (TSX:III) reports financial results for the three and six months ended June 30, 2022, as summarized in this news 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 Dollar.
Total revenue increased to $36.4 million in the June 2022 quarter compared to $34.2 million in the 2021 comparative quarter, an increase of $2.2 million.
In the June 2022 quarter, the Red Chris mine (100% basis) had 4.5 concentrate shipments (2021-3.8 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$4.32 in the June 2022 quarter compared to US$4.40 in the 2021 comparative quarter. London Bullion Market Association, London gold price per troy ounce averaged US$1,873 in the June 2022 quarter compared to US$1,816 in the 2021 comparative quarter. The average US/CDN Dollar exchange rate was 1.277 in the June 2022 quarter, 4.0% higher than the exchange rate of 1.228 in the 2021 comparative quarter. In CDN Dollar terms the average copper price in the June 2022 quarter was CDN$5.52 per pound compared to CDN$5.40 per pound in the 2021 comparative quarter, and the average gold price in the June 2022 quarter was CDN$2,391 per ounce compared to CDN$2,230 per ounce in the 2021 comparative quarter.
A negative revenue revaluation in the June 2022 quarter was $7.3 million as compared to a $0.7 million negative revenue revaluation in the 2021 comparative quarter. Revenue revaluations are the result of the metal 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 metal price at the last balance sheet date and finalization of contained metal as a result of final assays.
Net loss for the June 2022 quarter was $29.3 million ($0.21 per share) compared to net loss of $5.1 million ($0.04 per share) in the 2021 comparative quarter. The increase in net loss of $24.2 million was primarily due to the following factors:
Capital expenditures including leases were $39.6 million in the June 2022 quarter, an increase from $23.8 million in the 2021 comparative quarter. The June 2022 expenditures included $11.8 million in exploration, $8.2 million for tailings dam construction and $19.6 million on stripping costs and other capital.
At June 30, 2022, the Company had not hedged any copper, gold or US/CDN Dollar exchange. Quarterly revenues will fluctuate depending on copper and gold prices, the US/CDN Dollar exchange rate, and the timing of concentrate sales, which is dependent on concentrate production and the availability and scheduling of transportation.
The current impact of the COVID-19 pandemic on our business is described under Significant Events and Liquidity in the Management’s Discussion & Analysis. The Company’s plans for 2022 and beyond could be adversely impacted by the effects of the COVID-19 pandemic. The continuing impact of COVID-19 to travel and other operating restrictions established to curb the spread of COVID-19, could materially and adversely impact the Company’s current plans by causing a temporary closure of the Red Chris mine, suspending planned exploration work, causing an economic slowdown resulting in a decrease in the demand for copper and gold, negatively impacting copper and gold prices, impacting the Company’s ability to transport or market the Company’s concentrate or causing disruptions in the Company’s supply chains.
Red Chris Mine
Metal production for the second quarter of 2022 was 22.0 million pounds copper and 19,540 ounces gold, compared to 17.6 million pounds copper and 15,450 ounces gold produced in the 2021 second quarter.
Imperial’s 30% portion of Red Chris mine second quarter production was 6.6 million pounds copper and 5,862 ounces gold.
|Three Months Ended June 30*||Six Months Ended June 30*|
|Ore milled –tonnes||2,576,109||2,493,319||4,601,566||4,656,078|
|Ore milled per calendar day –tonnes||28,309||27,399||25,423||27,399|
|Grade % – copper||0.486||0.402||0.450||0.416|
|Grade g/t – gold||0.394||0.348||0.375||0.381|
|Recovery % – copper||80.5||79.6||77.3||78.3|
|Recovery % – gold||60.6||55.4||57.0||54.8|
|Copper –000’s pounds||22,005||17,575||35,316||33,459|
* 100% Red Chris mine production
Metal production was higher by 25.2% for copper and 26.5% for gold compared to the second quarter of 2021 primarily due to higher recoveries (80.5% versus 79.6% for copper and 60.6% compared to 55.4% for gold) and increased copper and gold grades.
Exploration drilling at Red Chris is ongoing with up to eight drills in operation during the second quarter, focusing on expanding the East Ridge zone and gathering geotechnical information for infrastructure related to the development of a block cave. The exploration decline had advanced 1,717 metres as of July 20, 2022. Work on the Block Cave Feasibility Study is ongoing and is targeted to be released in the first half of 2023.
Imperial’s 30% share of exploration, development, and capital expenditures were $33.9 million in the June 2022 quarter compared to $23.3 million in the 2021 comparative quarter.
Mount Polley Mine
The Company began the work required to reopen the mine in the fourth quarter of 2021. Initial mill commissioning and operations began on June 25, 2022. Commissioning work continues into the third quarter, with six of the eight mills in the grinding circuit now in operation. During the second quarter, 62,775 tonnes were milled and 6.3 million tonnes were mined, achieving a day rate of 69,013 tonnes per day. By the end of the second quarter approximately 1.3 million tonnes had been stockpiled for future milling.
The restart of the facilities took approximately three months longer than planned due to difficulties in hiring operating personnel, certain supply chain challenges and unanticipated electrical and mechanical work that needed to be completed in order to get the plant operating. Also, the failure of a key electrical component two weeks after the restart of mill operations caused a 10-day delay in the ramp up of mill operations.
For the June 2022 quarter, Mount Polley incurred restart costs comprised of $29.6 million in operating costs and $0.6 million in depreciation expense.
Exploration, development, and capital expenditures in the June 2022 quarter were $5.2 million compared to $0.1 million in the 2021 comparative quarter.
Huckleberry operations ceased in August 2016 and the mine remains on care and maintenance status. The Company anticipates working towards the restart of Huckleberry following the start of operations at Mount Polley.
Site personnel continue to focus on maintaining site access, water management (treatment and release of mine contact water into Tahtsa Reach), maintenance of site infrastructure and equipment, mine permit compliance, environmental compliance monitoring and monitoring tailings management facilities.
Geotechnical programs conducted in 2021 have indicated that some work is required to upgrade the existing facility and provided information required to update the tailings facility design for future operations. A program of geotechnical and de-pressurization drilling is underway to collect the data so that these two tasks can be completed.
For the June 2022 quarter, Huckleberry incurred idle mine costs comprised of $1.5 million in operating costs and $0.2 million in depreciation expense.
EARNINGS AND CASH FLOW
Select Quarter Financial Information
|expressed in thousands of dollars,
except share and per share amounts
|Three Months Ended June 30||Six Months Ended June 30|
|Net loss per share||$||(0.21||)||$||(0.04||)||$||(0.26||)||$||(0.06||)|
|Diluted loss per share||$||(0.21||)||$||(0.04||)||$||(0.26||)||$||(0.06||)|
|Adjusted net loss(1)||$||(29,706||)||$||(5,111||)||$||(48,460||)||$||(7,676||)|
|Adjusted net loss per share(1)||$||(0.21||)||$||(0.04||)||$||(0.34||)||$||(0.06||)|
|Cash earnings per share(1)(2)||$||(0.16||)||$||0.06||$||(0.26||)||$||0.08|
|Working capital (deficiency)
|Total debt (including current portion)||$||99,092||$||5,252||$||99,092||$||5,252|
|(1)||Refer to Non-IFRS Financial Measures for further details.|
|(2)||Cash earnings 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 earnings per share is defined as cash earnings divided by the weighted average number of common shares outstanding during the year.|
NON-IFRS FINANCIAL MEASURES
The Company reports four non-IFRS financial measures: adjusted net loss, adjusted EBITDA, cash earnings 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 loss, adjusted EBITDA, cash earnings and cash cost per pound of copper are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers.
Adjusted Net Loss and Adjusted Net Loss Per Share
Adjusted net loss is derived from operating net loss by removing the gains or loss, resulting from acquisition and disposal of property, mark to market revaluation of derivative instruments not related to the current period, net of tax, unrealized foreign exchange gains or losses on non-current debt, net of tax and other non-recurring items. Adjusted net loss in the June 2022 quarter was $29.7 million ($0.21 per share) compared to an adjusted net loss of $5.1 million ($0.04 per share) in the 2021 comparative quarter. We believe that the presentation of adjusted net loss helps investors better understand the results of our normal operating activities and the ongoing cash generating potential of our business.
Adjusted EBITDA in the June 2022 quarter was negative $23.0 million compared to positive $8.3 million in the 2021 comparative quarter. We define adjusted EBITDA as net loss before interest expense, taxes, depletion, and depreciation, and as adjusted for certain other items.
We believe that the presentation of adjusted EBITDA is appropriate to provide additional information to investors about certain non-cash items and is useful to investors as an important indicator of our operations and the performance of our core business.
Cash Earnings and Cash Earnings Per Share
Cash earnings in the June 2022 quarter was negative $23.1 million compared to positive $8.1 million in the 2021 comparative quarter. Cash earnings per share was negative $0.16 in the June 2022 quarter compared to positive $0.06 in the 2021 comparative quarter.
Cash earnings and cash earnings per share are measures used by the Company to evaluate its performance however they are not terms recognized under IFRS. We believe that the presentation of cash earnings and cash earnings per share is appropriate to provide additional information to investors about how well the Company can earn cash to pay its debts and manage its operating expenses and investment. Cash earnings is defined as cash flow from operations before the net change in non-cash working capital balances, income and mining taxes paid, and interest paid. Cash earnings per share is the same measure divided by the weighted average number of common shares outstanding during the year.
Cash Cost Per Pound of Copper Produced
Company is primarily a copper producer and therefore calculates this non-IFRS financial measure individually for its three copper mines, Red Chris (30% share), Mount Polley and Huckleberry, and on a composite basis for these mines.
Variations from period to period in the cash cost per pound of copper produced are the result of many factors including: grade, metal recoveries, amount of stripping charged to operations, mine and mill operating conditions, labour and other cost inputs, transportation and warehousing costs, treatment and refining costs, the amount of by-product and other revenues, the US$ to CDN$ exchange rate and the amount of copper produced.
Idle mine and mine restart costs during the periods when the Huckleberry and Mount Polley mines are not in operation have been excluded from the cash cost per pound of copper produced.
Calculation of Cash Cost Per Pound of Copper Produced
|expressed in thousands of dollars,
except cash cost per pound of copper produced
|Three Months Ended June 30||Six Months Ended June 30|
|Cash cost of copper produced in US$||$||9,609||$||11,995||$||20,750||$||25,346|
|Copper produced – pounds||6,602||5,272||10,595||10,037|
|Cash cost per lb copper produced in US$||$||1.46||$||2.28||$||1.96||$||2.53|
For detailed information, refer to Imperial’s 2022 Second Quarter Report available on imperialmetals.com and sedar.com
Imperial is a Vancouver based exploration, mine development and operating company with holdings that include the Mount Polley mine (100%), the Huckleberry mine (100%), the Red Chris mine (30%). Imperial also holds a portfolio of 23 greenfield exploration properties in British Columbia.
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