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VANCOUVER,
BRITISH COLUMBIA--(Marketwire - March 30, 2009) - Imperial Metals
Corporation (TSX:III) reports net income of $59.6 million, revenues of
$229.7 million, operating income of $25.4 million and cash flow of
$76.3 million for the fiscal year ended December 31, 2008.
--------------------------------------------------------------------------- For the Years Ended 2008 2007 --------------------------------------------------------------------------- (expressed in thousands of dollars, except share amounts) Total Revenues $229,745 $264,987 Net Income $ 59,617 $ 22,729 Net Income per share $ 1.83 $ 0.71 Diluted Income per share $ 1.83 $ 0.70 Adjusted Net Income (2) $ 55,468 $ 31,885 Adjusted Net Income per share (2) $ 1.71 $ 1.00 Working Capital (3) $ 54,211 $ 9,030 Total Assets $384,901 $320,741 Total Long Term Debt (including current portion) $ 4,648 $ 9,514 Cash dividends declared per common share $ 0.00 $ 0.00 Cash Flow (1) $ 76,334 $ 61,876 Cash Flow per share (1) $ 2.35 $ 1.94 --------------------------------------------------------------------------- (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 non-cash 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) Refer to previous table under heading Calculation of Adjusted Net Income for details of the calculation of these amounts for 2008 and 2007. (3) Defined as current assets less current liabilities. 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. ------------------------------------
Revenues
were $229.7 million in 2008 compared to $265.0 million in 2007. The decrease is the result
of lower sales volumes on lower copper prices. The London Metals
Exchange cash settlement copper price per pound averaged US$3.15 in
2008 compared to US$3.23 in 2007. The average US Dollar/CDN Dollar
exchange rate over the same period was about 1% less in 2008 compared
to 2007. In
CDN Dollar terms the average copper price in 2008 was 3% less than the
2007 average copper price.
Revenue in the fourth quarter of 2008 was reduced by $50.1 million for
the revaluation of accounts receivable at September 30, 2008 for
shipments settling in the fourth quarter of 2008, and for shipments
sold in the fourth quarter of 2008 settling in 2009. The copper price
was significantly lower than when the revenue was initially recorded.
Operating income decreased to $25.4 million from $57.2 million in 2007
as result of lower contribution margins from mine operations and a
$16.2 million impairment charge against mineral properties.
Net income for the year ended December 31, 2008 was $59.6 million
($1.83 per share) compared to $22.7 million ($0.71 per share) in 2007.
Although operating income declined by $31.8 million from 2007 to 2008
net income was higher in 2008 as the decline was more than offset by
the large increase in realized and unrealized gains on derivative
instruments, net of provisions for loss on counterparty default.
Cash flow increased to $76.3 million in 2008 from $61.9 million in
2007. The $14.4 million increase is primarily the result of reduced
cash income taxes. Cash flow is a measure used by the Company to evaluate
its performance, however, it is not a term recognized under generally
accepted accounting principles. Cash flow is defined as cash flow from
operations before the net change in non-cash working capital balances.
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 $46.7 million, down slightly from $47.7
million in 2007. Expenditures in 2008 were financed by cash flow from
the Mount Polley and Huckleberry mines. At December 31, 2008 the
Company had $41.4 million (2007-$30.3 million) in cash and cash
equivalents and short term investments.
Derivative Instruments
The Company has not hedged gold or silver, only copper and the CDN/US
Dollar exchange rate. During 2008 the Company recorded $84.5 million in
gains on derivative instruments, almost exclusively for copper,
compared to losses of $19.7 million in 2007. These gains and losses
result from the mark to market valuation of the derivative instruments
based on changes in the price of copper and the CDN/US Dollar exchange
rate. The rapid decline in the price of copper during the latter part
of 2008 resulted in large gains being recorded by the Company. 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 utilizes a variety of instruments 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 and exchange rates compared to the copper price and
exchange rate at the time when these contracts were entered into and
the type and length of time to maturity of the contracts.
During the year ended December 31, 2008 a portion of
the Company's derivative instruments were with Lehman Brothers
Commodity Services Inc. ("LBCS"), a subsidiary of Lehman
Brothers Holdings Inc. ("Lehman"). Both Lehman and LBCS have
filed for bankruptcy protection. As a result of the bankruptcy filing
of LBCS and Lehman, the uncertainty regarding the timing of, and the
ultimate recovery of the LBCS derivatives, the Company has made a
provision for the full amount of the LBCS derivatives.
In October 2008 the Company gave notice of default and termination of
the derivative instruments to LBCS. The value of the LBCS derivatives
on the termination date was US$21.9 million. LBCS has not provided
valuation of the derivative instruments (the "LBCS
derivatives") held by the Company at the termination date and
therefore the Company obtained valuations of the derivatives from other
counterparties and recorded the value of the LBSC derivatives in its
accounts based on those valuations. The LBCS derivatives consisted of
puts purchased by the Company which were financed by the sale of calls
with no net cash outlay by the Company. The net impact on the financial
statements of the Company resulting from the loss of the LBCS
derivatives is the same as if the Company had never entered into the
derivative instruments with LBCS.
Hedges for Mount Polley cover about 17% of 2009 copper settlements via
min/max zero cost collars. Hedges for Huckleberry include puts
extending out to the first quarter of 2010 covering about 100% of
copper settlements in the period and forwards sales in 2009 covering
about 30% of copper settlements in 2009.
At December 31, 2008 the Company has unrealized income of $47.4 million
on its derivative instruments. This represents an increase in fair
value of the derivative instruments from the dates of purchase to
December 31, 2008 due to the decline in the price of copper in the last
half of 2008. Refer to Note 13 to the audited consolidated financial
statements for the year ended December 31, 2008 for further details.
The Company has granted security to certain hedge counterparties to
cover potential losses in excess of the credit facilities granted by
the counterparties. At December 31, 2008 the Company had $4.2 million
on deposit with counterparties.
General
Copper prices were slightly lower in 2008 than in 2007, averaging about
US$3.15/lb compared to US$3.23/lb in 2007. The US Dollar declined
during 2008 ending the year stronger against the CDN Dollar. Factoring
in the decrease in the average exchange rate the price of copper
averaged CDN$3.36/lb in 2008, about 3% less than the 2007 average of
CDN$3.47/lb. The copper price fell rapidly in the last quarter of 2008
averaging US$1.79/lb or CDN$2.17/lb.
The increases during the last few years in certain costs resulting from
changes in market conditions for such items as labour, fuel and other
consumables, impacted the profitability of Mount Polley, Huckleberry
and of resource projects generally. Changes in economic conditions in
the latter part of 2008 have reversed this trend with some items such
as fuel, falling significantly in the last six months. These cost
reductions will offset a portion of the decline in copper price.
Mount Polley --------------------------------------------------------------------------- Mine Production for the Years Ended December 31 2008 2007 2006 --------------------------------------------------------------------------- Ore milled (tonnes) 6,848,983 6,444,112 6,235,221 Ore milled per calendar day (tonnes) 18,713 17,655 17,083 Grade % - Copper 0.552 0.461 0.474 Grade g/t - Gold 0.306 0.242 0.265 Recovery % - Copper 72.41 78.66 85.31 Recovery % - Gold 69.71 69.34 71.89 Copper produced (lbs) 60,305,759 51,506,144 55,548,194 Gold produced (oz) 47,001 34,833 38,164 Silver produced (oz) 522,340 370,731 422,568 ---------------------------------------------------------------------------
Mining in the Bell pit was completed in the
2008 third quarter, and mining in the Wight pit will be completed in
2009. The Springer pit will supply the majority of mill feed in 2009.
Exploration at Mount Polley focused on the Pond and Boundary zones.
Pond zone exploration led to the design of a small open pit containing
proven and probable reserves of 1,372,216 tonnes ore grading 0.476%
copper, 0.27 g/t gold and 6.898 g/t silver. This reserve is planned for
open pit mining in 2009 subject to obtaining required approvals.
Drilling at the Boundary zone continued to intersect high grade
copper/gold mineralization at depth, with intercepts such as hole
ND08-56 which graded 4.29% copper and 1.42 g/t gold over 13.7 metres.
This zone can add to the potential underground resource already
outlined below the Wight pit. The Boundary zone may become the first
zone to be mined underground at Mount Polley. Further drilling to
define the extent of this higher grade mineralization is underway.
Mount Polley exploration expenditures were $3.2 million in 2008
compared to $4.8 million in 2007. With the expanded land base, ongoing
exploration at Mount Polley focused on identification of additional
mineralized zones and expansion of identified zones. Drilling in 2008
tested eight zones on the property and provided further encouraging
results. Drilling in 2008 included 63 diamond drill holes totaling 19,440 metres
compared to 121 diamond drill holes totaling 39,503 metres
in 2007.
In February 2008 the Company's unionized workforce at Mount Polley
ratified an extension to the collective agreement to December 31, 2012.
Huckleberry
The financial results of Huckleberry continue to have a significant
impact on Imperial's results. Huckleberry contributed $8.3 million in
net income to Imperial in 2008 compared to $11.1 million in net income
in 2007. Huckleberry's net income declined due to a $15.8 million
impairment charge taken against mineral properties which reduced the
carrying value of Huckleberry's depletable mineral properties to nil.
Notes 5 and 16 to the audited consolidated financial statements of the
Company disclose information regarding the writedown and the impact of
Huckleberry operations on the financial position and results of
operations of Imperial.
--------------------------------------------------------------------------- Mine Production(i) for the Years Ended December 31 2008 2007 2006 --------------------------------------------------------------------------- Ore milled (tonnes) 6,031,300 6,477,600 6,646,200 Ore milled per calendar day (tonnes) 16,479 17,747 18,209 Grade % - Copper 0.316 0.442 0.556 Grade % - Molybdenum 0.006 0.013 0.015 Recovery % - Copper 88.5 87.4 86.9 Recovery % - Molybdenum 23.2 8.1 14.3 Copper produced (lbs) 37,219,000 55,145,000 70,838,000 Gold produced (oz) 3,058 5,847 9,255 Silver produced (oz) 245,781 212,735 246,353 Molybdenum produced (lbs) 187,798 304,224 306,250 --------------------------------------------------------------------------- (i) 50% allocable to Imperial
Mining
progresses in the Main Zone Extension (MZX) and both the copper grade
and the mill through-put increased from an average of 0.295% copper and
15,830 tonnes per day for the first quarter to 0.325% copper and 17,101
tonnes per day in the fourth quarter. As a result, copper production
increased from 8.2 million pounds in the first quarter to 10.1 million
pounds in the fourth quarter. Mine design work continues on a plan to
further expand the MZX pit, which could potentially add about two years
of mine life.
Exploration in 2008 focused on targets resulting from the regional
exploration program. At the Whiting Creek property, located eight
kilometres north of the Huckleberry mill, seven diamond drill holes
totaling 2,028
metres were completed. Molybdenum results were
encouraging. Diamond drill hole WC08-02 graded 0.022% molybdenum and
0.056% copper over 360.45 metres. Further work is planned
for 2009.
Red Chris
At the Red Chris copper/gold property, a 17 kilometre
access road to the camp was completed in September 2008. The new road
allows all weather access to the site, extends the working season,
lowers exploration costs, and reduces the need for helicopter support
resulting in safer working conditions.
The Red Chris camp became operational in September and was upgraded for
winter operation. A 12 hole deep drill program was initiated in the
East zone. The target depth of these holes is 1,500 metres.
By year end, three holes were drilled, two of which returned excellent
grades over the entire length, but were lost prior to reaching their
target depth of 1,500
metres due to drilling difficulty. The third
hole collared outside the mineralized zone intersected mineralization
at a depth of 800
metres confirming the zone is widening at depth.
Drilling of the remaining 9 holes is expected to continue in 2009. The
Company spent $1.5 million on the 2008 drill program.
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 review as
described in Note 21(a) to the audited consolidated financial
statements.
Sterling
At the Sterling property during 2008 an underground drill program was
conducted to define and expand the 144 zone. A total of 52 holes
totaling over 13,000
feet were completed. Positive results received
included confirmation of high grade mineralization within the 144 zone,
discovery and definition of the east extension of the 144 zone,
discovery of an open mineralization trend on the west side of the 144
zone, and discovery of the gold-hosting potential of the latite dike
which divides the main 144 zone from the east extension. To follow up
on this work, 150
feet of underground development is being
completed to provide additional underground drill stations. The site
has been permitted and bonding has been put in place to allow for a
restart of mine operations.
Detailed financial information is available in the Company's 2008
Annual Report, available on www.sedar.com and www.imperialmetals.com.
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