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March 20, 2008
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Imperial Reports 2007 Financial Results
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VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 20, 2008) - Imperial Metals Corporation (TSX:III) reports net income of $22.7 million, revenues of $265.0 million, operating income of $57.2 million and cash flow of $61.9 million for the fiscal year ended December 31, 2007.
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For the Years Ended 2007 2006
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(expressed in thousands of dollars,
except share amounts)
Total Revenues $ 264,987 $ 211,447
Operating Income $ 57,200 $ 96,600
Net Income $ 22,729 $ 82,007
Net Income per share $ 0.71 $ 2.75
Diluted Income per share $ 0.70 $ 2.63
Adjusted Net Income (2) $ 31,885 $ 72,793
Adjusted Net Income per share (2) $ 1.00 $ 2.44
Cash Flow (1) $ 61,876 $ 70,363
Cash Flow per share (1) $ 1.94 $ 2.36
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(1) Cash flow and cash flow per share are measures used by the Company to
evaluate its performance however, they are not terms recognized under
generally accepted accounting principles. Cash flow is defined as cash
flow from operations before the net change in working capital balances
and cash flow per share is the same measure divided by the weighted
average number of common shares outstanding during the period.
(2) Adjusted net income is calculated by removing the gains or losses, net
of related income taxes, resulting from mark to market revaluation of
copper hedging not related to the current period and removing the
unrealized share based compensation expense, net of taxes, as further
detailed in the Management's Discussion and Analysis for the year
ended December 31, 2007.
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.The year over year decrease in net income is the result of lower contributions from Mount Polley and Huckleberry, higher income tax provisions and increased share based compensation expense following a change in the payment alternative pursuant to the option plans which affect the accounting for this item.
The year over year increase in revenues reflects the inclusion of Huckleberry offset by lower revenue from Mount Polley. Although the copper price per pound averaged higher in US Dollars in 2007 compared to 2006 this increase was offset by the decline in the average US Dollar/CDN Dollar exchange rate over the same period. In CDN Dollar terms the average copper price in 2007 was within 1% of the 2006 average copper price.
Revenue in the fourth quarter of 2007 was reduced by $12.0 million, as accounts receivable for concentrate shipments settling in 2008 were revaluated. The revaluation was due to the copper price at December 31, 2007 being significantly lower than the copper price when the revenue was initially recorded. A significant portion of these shipments settled in January and February 2008 at prices higher than those at December 31, and these adjustments will be reflected as additional revenue in the first quarter of 2008.
The year over year decrease in cash flow was the result of lower cash flow from Mount Polley partially offset by the inclusion of the 50% of cash flow from Huckleberry. Capital expenditures were $47.7 million, up significantly from $23.7 million in 2006 on increased capital and exploration spending and the inclusion of capital expenditures at Huckleberry in 2007. In addition the Company spent $58.7 million in 2007 to complete the acquisition of bcMetals Corporation.
Expenditures and the acquisition of bcMetals were financed by cash flow from the Mount Polley and Huckleberry mines, proceeds from the exercise of warrants and options and short term debt. At December 31, 2007 the Company had $30.3 million in cash and cash equivalents and short term investments.
Derivative Instruments
During 2007 a total of $19.7 million in losses were recorded on derivative instruments for copper, compared to losses of $26.6 million in 2006. Of the $19.7 million in derivative losses, $14.1 million were related to derivative instruments hedging copper produced at Huckleberry. These losses result from the mark to market valuation of the derivative instruments based on changes in the price of copper. The Company does not use hedge accounting therefore accounting rules require that derivative instruments be recorded at fair value on each balance sheet date, with the adjustment resulting from the revaluation being charged to the statement of income as a gain or loss. The Company has not hedged gold, silver or the CDN/US Dollar exchange rate. (ref: 2007 Annual Report Note 14)
A variety of instruments are utilized for hedging including the purchase of puts, forward sales and the use of min/max zero cost collars. Imperial's income or loss from derivative instruments may be very volatile from period to period as a result of changes in the copper price compared to copper price at the time when these contracts were entered into, and the type and length of time to maturity of the contracts.
Including hedges entered into through March 13, 2008, hedges for Mount Polley cover about 66% of 2008 copper settlements via min/max zero cost collars, with a weighted average minimum of US$2.92/lb, and a maximum of US$3.60/lb. Hedges for Huckleberry include puts extending out to the first quarter of 2010 covering about 90% of copper settlements in the period, and forward sales to the first quarter of 2009 covering about 50% of copper settlements in the period.
Mount Polley Mine
Production during 2007 was less than budgeted due to decreased delivery to the mill of Wight pit ore. To increase waste stripping and enable more Wight pit ore to be released to the mill, a contractor was mobilized to move additional waste, and subsequently to unload a portion of the Wight pit highwall. This work was completed in February 2008.
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Mine Production
for the Years Ended December 31, December 31, (i)December 31,
2007 2006 2005
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Ore milled (tonnes) 6,444,112 6,235,221 4,814,083
Ore milled per calendar
day (tonnes) 17,655 17,083 16,209
Grade % - Copper 0.461 0.474 0.391
Grade g/t - Gold 0.242 0.265 0.295
Recovery % - Copper 78.66 85.31 73.1
Recovery % - Gold 69.34 71.89 67.1
Copper produced (lbs) 51,506,144 55,548,194 30,328,771
Gold produced (oz) 34,833 38,164 30,635
Silver produced (oz) 370,731 422,568 234,355
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(i) from March 8 restart of operationsStripping of the Springer pit is well advanced with 6.1 million tonnes removed in 2007, and the pit has begun to supply some feed to the mill. The Springer pit will be the major source of mill feed after 2008, as the Wight and Bell pits will be completed in 2008.
In February 2008 Mount Polley's unionized workforce ratified an extension to the collective agreement to December 31, 2012.
Imperial's wholly owned Mount Polley open pit copper/gold mine is located 56 kilometres northeast of Williams Lake, British Columbia.
Huckleberry Mine
Effective on January 1, 2007, Imperial regained joint control of Huckleberry. The Company now accounts for Huckleberry on the proportionate consolidation basis. The financial results of Huckleberry continue to have a significant impact on Imperial's results. Huckleberry contributed $11.1 million in net income to Imperial in 2007 compared to $33.7 million in equity income to Imperial in 2006. Huckleberry's net income declined in 2007 from 2006 due to lower sales volumes and increased losses from derivative instruments. A ship scheduled for arrival in December was delayed and did not arrive and load until early 2008. This deferred the revenue on this ship from 2007 to 2008.
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Mine Production(i)
for the Years Ended December 31, December 31, December 31,
2007 2006 2005
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Ore milled (tonnes) 6,477,600 6,646,200 6,951,000
Ore milled per calendar
day (tonnes) 17,747 18,209 19,044
Grade (%) - Copper 0.442 0.556 0.552
Grade (%) - Molybdenum 0.013 0.015 0.014
Recovery (%) - Copper 87.4 86.9 87.40
Recovery (%) - Molybdenum 16.3 14.3 24.80
Copper produced (lbs) 55,145,000 70,838,000 73,897,000
Gold produced (oz) 5,847 9,255 10,401
Silver produced (oz) 212,735 246,353 265,741
Molybdenum produced (lbs) 304,224 306,250 539,949
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(i) 50% allocable to ImperialThe pit wall failure in the East Pit at Huckleberry in mid 2007 did not affect mill throughput but resulted in the milling of lower grade Main Zone Extension and stock pile ore which reduced profit margins. For the remainder of the mine life, production will be from the Main Zone Extension pit, and annual copper production will be reduced to approximately 40 million pounds as the grade in this pit is about 0.35% copper.
Imperial holds 50% interest in Huckleberry Mines Ltd., the owner and operator of the Huckleberry open pit copper/molybdenum mine located 123 kilometres southwest of Houston, British Columbia.
Exploration Update
Mount Polley exploration expenditures were $4.8 million in 2007 compared to $3.0 million in 2006. Ongoing exploration at Mount Polley focused on identification of additional mineralized zones and expansion of identified zones. The 2007 drill program included 121 Diamond drill holes totaling 39,503 metres within eight zones on the property. Highlights included expansion and delineation of mineralization at the Pond zone, C2 zone and particularly at the Springer zone. Springer will provide most of the mill feed in the coming years at Mount Polley and drilling there has intersected significant intercepts to the north and northwest. (ref: news release dated Mar 20/08)
Exploration in 2008 will continue to focus on locating higher grade ore to replace the high grade ore that the Wight pit has been providing to the mill.
At Huckleberry, exploration targets during the 2007 to early 2008 field season were drill tested on projects generated in the course of regional exploration. A total of 22 Diamond drill holes and 16 reverse circulation rotary drill holes were used to test targets adjacent to Main Zone Expansion and East zone pits. Off site, 77 reverse circulation and 13 Diamond drill holes were used to test regional exploration targets.
For the 2008 field season, targets arising from the regional exploration program will continue to be pursued, and seven Diamond drill holes are planned to test for supergene enrichment on the Upper Ridge zone at Whiting Creek.
At Sterling, the construction of a 3,352 foot decline to access the 144 zone was completed in November 2007. Underground drilling commenced in early 2008 with the objective of outlining sufficient reserves to restart mining operations. (ref: news release dated Mar 13/08)
Mineral resources for the 144 zone drilled to date are 194,640 tonnes, grading 7.41 g/t gold containing over 45,000 ounces of gold. Drilling on additional targets in the Sterling area also commenced in early 2008 after completion of surface work in 2007.
The wholly owned Sterling gold property is located about 115 miles northwest of Las Vegas.
At Red Chris, six Diamond drill holes were drilled to test the depth extent of the Main and East zones. One of the six holes drilled to a depth of over one kilometer in the East zone, intercepted 1024.1 metres grading 1.01% copper and 1.26 g/t gold, the best hole ever drilled by the Company and one of the longest mineralized intercepts ever drilled in British Columbia. That drill hole collared in high grade, was mineralized over its entire length and ended in high grade indicating that the zone has good potential for expansion. A second drill hole was collared 725 metres to the west of the first one, returning 996 metres grading 0.40% copper and 0.38 g/t gold. The drill hole was also continuously mineralized from the collar to the final depth, and although the grade was lower, that result lends great credence to the size potential for the zone. Further drilling is planned to follow up on the excellent results of this initial test of the depth extent of the deposit. (ref: news release dated Dec 10/07)
Red Chris is a copper/gold deposit located 20 kilometres southeast of Iskut in northwest British Columbia. The development of the Red Chris project into a mine is dependant upon a number of factors including the construction of a power line to service the northwest portion of British Columbia and the resolution of the challenge to the Federal environmental assessment.
For detailed financial information refer to Imperial's 2007 Annual Report, available on the Company's website and on SEDAR (www.sedar.com).
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