Vancouver | March 29, 2019 | Imperial Metals Corporation (the “Company”) (TSX:III) reports financial results for its fiscal year ended December 31, 2018.
Select Annual Financial Information
Years Ended December 31
expressed in thousands, except share and per share amounts
2018 2017 2016
Total revenues $360,173 $453,113 $428,218
Net income (loss) $(125,595) $77,113 $(54,080)
Net income (loss) per share $(1.06) $0.82 $(0.66)
Diluted income (loss) per share $(1.06) $0.82 $(0.66)
Adjusted net loss (1) $(84,763) $(62,626) $(56,784)
Adjusted net loss per share (1) $(0.71) $(0.66) $(0.69)
Adjusted EBITDA(1) $33,268 $88,457 $106,624
Working capital deficiency $789,470 $238,269 $89,108
Total assets $1,573,903 $1,723,768 $1,527,778
Total debt (including current portion) $871,268 $852,378 $835,365
Cash flow (1)(2) $143,449 $88,381 $107,591
Cash flow per share (1)(2) $1.21 $0.94 $1.32
(1) Refer to Non-IFRS Financial Measures in the Management’s Discussion & Analysis.
(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.
select Items Affecting Net Income (Loss) (presented on an after-tax basis)
Years Ended December 31
expressed in thousands 2018 2017
Net income (loss) before undernoted items $(26,923) $(6,182)
Interest expense (57,249) (55,887)
Foreign exchange gain (loss) on non-current debt (36,949) 29,280
Impairment of mineral properties (79,719) -
Gain on bargain purchase of Huckleberry and revaluation
of equity investment in Huckleberry - 109,818
Settlement and insurance recoveries 74,949 -
Gain on sale of Sterling 296 641
Share of loss in Huckleberry - (557)
Net Income (Loss) $(125,595) $77,113
Revenues decreased to $360.2 million in 2018 compared to $453.1 million in 2017, a decrease of $92.9 million or 20.5%.
Revenue from the Red Chris mine in 2018 was $255.7 million compared to $289.1 million in 2017. Revenue from the Mount Polley mine in 2018 was $104.4 million compared to $163.5 million in 2017. There were 12.0 concentrate shipments in 2018 from the Red Chris mine (2017-15.0 concentrate shipments) and 3.0 concentrate shipments from the Mount Polley mine in 2018 (2017-4.7 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 metal prices will settle at a future date.
Net loss for 2018 was $125.6 million ($1.06 per share) compared to net income of $77.1 million ($0.82 per share) in 2017. The majority of decrease in net income of $202.7 million was primarily due to the following factors:
•Loss from mine operations went from income of $19.5 million in 2017 to a loss of $33.0 million in 2018, an increase in net loss of $52.5 million.
•Interest expense increased from $75.5 million in 2017 to $78.4 million in 2018, an increase to net loss of $2.9 million.
•Foreign exchange gain on current and non-current debt went from a gain of $30.2 million in 2017 to a loss of $36.9 million in 2018, an increase in net loss of $67.1 million.
•Impairment on mineral properties went from $nil in 2017 to $109.2 million in 2018, an increase in net loss of $109.2 million.
•A gain on bargain purchase of Huckleberry and revaluation of equity investment in Huckleberry of $109.8 million in 2017 compared to $nil in 2018, an increase in net loss of $109.8 million.
•Rehabilitation costs of $0.2 million in 2018 compared to $5.8 million in 2017, a decrease in net loss of $5.6 million.
•Other income totalled $108.1 million in 2018 largely due to the settlement of $106.2 million, net of costs pertaining to the August 4, 2014 tailings dam breach at the Mount Polley Mine (“Mount Polley Breach”) compared to an expense of $0.3 million in 2017, a decrease in net loss of $107.8 million.
•An income and mining tax recovery of $38.1 million in 2018 compared to a recovery of $10.6 million in 2017, a decrease in net loss of $27.5 million.
The 2018 net loss included foreign exchange loss related to changes in CDN$/US$ exchange rate of $38.4 million compared to foreign exchange gain of $30.4 million in 2017. The $38.4 million foreign exchange loss in 2018 is comprised of a $36.4 million loss on the Senior Notes, a $0.6 million loss on short term loans, and a $1.4 million loss on operational items. The average CDN$/US$ exchange rate in the 2018 was 1.296 compared to an average of 1.298 in 2017.
Cash flow was $143.4 million in 2018 compared to cash flow of $88.4 million in 2017. 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 $77.0 million in 2018, down from $92.9 million in 2017. The 2018 expenditures included $34.8 million for tailings dam construction, $35.7 million on equipment and components and $6.5 million for other capital items.
At December 31, 2018 the Company had $18.6 million in cash (December 31, 2017-$51.9 million). The Company has classified $603.6 million of its non-current debt as current at December 31, 2018 (December 31, 2017-$213.9 million).
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.
Adjusted Net Loss and Adjusted Net Loss per Share
Adjusted net loss in 2018 was $84.8 million ($0.71 per share) compared to an adjusted net loss of $62.6.million ($0.66 per share) in 2017. Adjusted net income or loss shows the financial results excluding the effect of items not settling in the current period and non-recurring items. Adjusted net income or loss is calculated 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.
Adjusted EBITDA in 2018 was $33.3 million compared to $88.5 million in 2017. 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 2018 was $143.5 million compared to $88.4 million in 2017. Cash flow per share was $1.21 in 2018 compared to $0.94 in 2017.
Cash flow and cash flow per share are measures used by the Company to evaluate its performance however they are not terms recognized under IFRS. Cash flow is defined as cash flow from operations before the net change in non-cash working capital balances, income and mining taxes, and interest paid and cash flow per share is the same measure divided by the weighted average number of common shares outstanding during the year.
Cash Cost Per Pound of Copper Produced
The Company is primarily a copper producer and therefore calculates this non-IFRS financial measure individually for its three copper mines, Red Chris, Mount Polley and Huckleberry, and on a composite basis for these mines.
Variations from period to period in the cash cost per pound of copper produced are the result of many factors including: grade, metal recoveries, amount of stripping charged to operations, mine and mill operating conditions, labour and other cost inputs, transportation and warehousing costs, treatment and refining costs, the amount of by-product and other revenues, the US$ 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.
Calculation of Cash Cost Per Pound of Copper Produced
expressed in thousands, except cash cost per pound of copper produced
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