Vancouver | August 13, 2018 | Imperial Metals Corporation (the “Company”) (TSX:III) reports financial results for the three and six months ended June 30, 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 June 30 Six Months Ended June 30 2018 2017 (Note 3) 2018 2017 (Note 3)
Total revenues $80,066 $106,741 $197,978 $222,490
Net income (loss) $(36,555) $99,544 $(52,721) $80,792
Net income (loss) per share $(0.31) $1.06 $(0.45) $0.86
Diluted income (loss) per share $(0.31) $1.06 $(0.45) $0.86
Adjusted net loss (1) $(27,823) $(21,780) $(32,577) $(44,076)
Adjusted net loss per share (1) $(0.24) $(0.23) $(0.28) $(0.47)
Adjusted EBITDA(1) $(2,180) $12,851 $34,212 $28,039
Working capital deficiency $(791,538) $(910,645) $(791,538) $(910,645)
Total assets $1,661,947 $1,661,258 $1,661,947 $1,661,258
Total debt (including current portion) $856,802 $849,917 $856,802 $849,917
Cash flow (1)(2) $(2,593) $12,341 $33,365 $27,406
Cash flow per share (1)(2) $(0.02) $0.13 $0.28 $0.29

(1) Refer to table under 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 year.
(3) In the December 2018 quarter the Company finalized the accounting for the April 2017 acquisition of the remaining 50% of Huckleberry Mines Ltd. that it did not own. IFRS 3 requires that any amounts resulting from the finalization of the accounting for the acquisition to be retroactively updated to the period in which the acquisition took place. The Company has therefore revised the items impacted by the finalization of the gain on bargain purchase of Huckleberry and the gain on revaluation of the 50% interest in Huckleberry in the comparative June 2017, September 2017 and December 2017 periods. All amounts related to this revision have been reflected in the Interim Financial Statements and Management’s Discussion and Analysis. For further information on Huckleberry and the accounting for the gains, refer to Note 5 of the audited consolidated financial statements for the year ended December 31, 2017 and Note 5 of the Interim Financial Statements for the three and six months ending June 30, 2018.

Revenues decreased to $80.1 million in the June 2018 quarter compared to $106.7 million in the 2017 comparative quarter, a decrease of $26.6 million or 24.9%.
Revenue from the Red Chris mine in the June 2018 quarter was $57.3 million compared to $62.3 million in the 2017 comparative quarter. This decrease was attributable to a lower quantity of copper concentrate sold partially offset by higher copper prices.

Revenue from the Mount Polley mine in the June 2018 quarter was $22.8 million compared to $44.1 million in the 2017 comparative quarter. The strike by unionized employees that commenced in May 2018 resulted in lower production and restricted the ability of the Company to record revenue during the June 2018 quarter.

In the June 2018 quarter, there were 2.6 concentrate shipments from Red Chris mine (2017-3.5 concentrate shipments) and 0.7 concentrate shipments from Mount Polley mine (2017-1.3 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$3.12 in the June 2018 quarter compared to US$2.57 in the 2017 comparative quarter. The London Metals Exchange cash settlement gold price per troy ounce averaged US$1,306 in the June 2018 quarter compared to US$1,257 in the June 2017 quarter. The average CDN/US$ Dollar exchange rate was 1.291 in the June 2018 quarter, 4% lower than the exchange rate of 1.345 in the June 2017 quarter. In CDN dollar terms the average copper price in the June 2018 quarter was CDN$4.03 per pound compared to CDN$3.46 per pound in the 2017 comparative quarter and the average gold price in the June 2018 quarter was CDN$1,686 per ounce compared to CDN$1,691 per ounce in the 2017 comparative quarter.

Revenue in the June 2018 quarter decreased by $6.9 million due to a negative revenue revaluation as compared to a $0.5 million negative 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 June 2018 quarter was $36.6 million ($0.31 per share) compared to net income of $99.5 million ($1.06 per share) in the 2017 comparative quarter. The decrease in net income of $136.1 million was primarily due to the following factors:
•Income/loss from mine operations went from a loss of $5.9 million in June 2017 to a loss of $15.4 million in June 2018, a decrease in net income of $9.5 million.
•Interest expense went from $18.3 million in June 2017 to $19.3 million in June 2018, a decrease in net income of $1.0 million.
•Foreign exchange gains/losses on current and non-current debt went from a gain of $12.4 million in June 2017 to a loss of $9.2 million in June 2018, a decrease in net income of $21.6 million.
•Gain of $109.8 million in the June 2017 quarter was recognized relating to the purchase of the additional 50% share in Huckleberry and revaluation of equity investment. No such gain recognized in June 2018.
•The Company’s equity income in Huckleberry went from $1.0 million in June 2017 to $nil in June 2018, a decrease in net income of $1.0 million.
•Idle mine costs went from $1.4 million in June 2017 to $1.6 million in June 2018, a decrease in net income of $0.2 million.
•Tax position went from a recovery of $3.5 million in June 2017 to $12.2 million in June 2018, an increase in net income of $8.7 million.

The June 2018 quarter net loss included foreign exchange loss related to changes in CDN/US Dollar exchange rate of $9.6 million compared to foreign exchange gain of $12.4 million in the 2017 comparative quarter. The $9.6 million foreign exchange loss is comprised of an $8.9 million loss on the senior notes, a $0.2 million loss on long term equipment loans, and a $0.5 million loss on operational items. The average CDN/US Dollar exchange rate in the June 2018 quarter was 1.291 compared to an average of 1.345 in the 2017 comparative quarter.

Cash flow was negative $2.6 million in the June 2018 quarter compared to positive cash flow of $12.3 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 $15.8 million in the June 2018 quarter, down from $28.8 million in the 2017 comparative quarter. The June 2018 expenditures included $8.5 million for tailings dam construction, $5.4 million on mobile equipment and $1.9 million for other capital items.

At June 30, 2018, 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.

Liquidity & Capital Resources and Financing

At June 30, 2018, the Company had cash of $15.5 million, available capacity of $15.6 million for future draws under the Senior Credit Facility, $10.0 million undrawn on the 2017 LOC loan facility and a working capital deficiency of $791.5 million, which includes $730.1 million of current debt.

Cash balances on hand, the projected cash flow from the Red Chris and Mount Polley mines, as well as the available credit facilities are expected to be sufficient to fund the working capital deficiency and the Company’s obligations as they come due assuming the Company is able to successfully extend or refinance the Senior Credit Facility and the Second Lien Credit Facility prior to their maturity in the fourth quarter of 2018 and the Senior Unsecured Notes which mature in the first quarter of 2019. In addition, there are inherent risks related to the operation of the Company’s mines which could require additional sources of financing. There can be no assurance that the Company will be able to successfully extend or renegotiate this debt, and that adequate additional financing will be available on terms acceptable to the Company or at all, which creates a material uncertainty that could have an adverse impact on the Company’s financial condition and results of operations and may cast significant doubt on the Company’s ability to continue as a going concern.

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 the June 2018 quarter was $27.8 million ($0.24 per share) compared to an adjusted net loss of $21.8 million ($0.23 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 June 2018 quarter was a loss of $2.2 million compared to income of $12.9 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 June 2018 quarter was negative $2.6 million compared to positive $12.3 million in the 2017 comparative quarter. Cash flow per share was $(0.02) in the June 2018 quarter compared to $0.13 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.

see & read more on
https://www.imperialmetals.com/for-our-shareholders/press-releases/imperial-reports-second-quarter-2018-financial-results