Imperial Reports 2008 Third Quarter Financial Results: Financial News

Imperial Reports 2008 Third Quarter Financial Results
Friday November 7, 2008 5:01 pm ET

VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Nov 7, 2008 -- Imperial Metals Corporation (Toronto:III.TO - News) reports comparative financial results for the three and nine months ended September 30, 2008 and September 30, 2007 are summarized below and discussed in detail in the Management's Discussion and Analysis.

 

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                                        Three Months           Nine Months
Third Quarter Financial Results        Ended Sept 30         Ended Sept 30
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(unaudited) in thousands
 except per share amounts             2008      2007       2008       2007
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Revenues                          $ 53,642  $ 84,784  $ 235,150  $ 232,240
Operating Income                  $  9,885  $ 24,603  $  95,220  $  65,673
Net Income                        $ 23,452  $  7,576  $  69,353  $   8,878
Net Income Per Share              $   0.72  $   0.23  $    2.13  $    0.28
Adjusted Net Income (1)           $  5,361  $ 12,184  $  59,978  $  42,373
Adjusted Net Income Per Share (1) $   0.17  $   0.37  $    1.84  $    1.34
Cash Flow (1)                     $  7,891  $ 22,156  $  92,544  $  70,039
Cash Flow Per Share (1)           $   0.24  $   0.68  $    2.84  $    2.22
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(1) Adjusted Net Income, Adjusted Net Income Per Share, 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. Adjusted Net Income is defined as net
    income adjusted for certain items of a non-operational nature that
    pertain to future periods as described in further detail in the
    Management's Discussion and Analysis under the heading Adjusted Net
    Income. Cash Flow is defined as cash flow from operations before net
    change in working capital balances. Adjusted Net Income and Cash Flow
    Per Share are the same measures divided by the weighted average number
    of common shares outstanding during the period.

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 $53.6 million in the September 2008 quarter compared to $84.8 million in the 2007 quarter. Concentrate inventory levels returned to normal levels in the September 2008 quarter from the lower balances at June 30 and this, along with normal production levels, resulted in normal levels of ocean shipments in the September 2008 quarter. Variations in quarterly revenue attributed to the timing of concentrate shipments can be expected in the normal course of business.

Operating income for the three months ended September 30, 2008 decreased to $9.9 million from $24.6 million in the September 2007 quarter.

Net income was $23.4 million in the September 2008 quarter compared to $7.6 million in the 2007 quarter. Adjusted net income in the quarter was $5.4 million or $0.17 per share, versus $12.2 million or $0.37 per share in the September 2007 quarter. Adjusted net income is calculated by removing the unrealized gains and losses, net of related income taxes, resulting from mark to market revaluation of copper hedging and removing the unrealized share based compensation expense, net of taxes. Adjusted net income is not a term recognized under generally accepted accounting principles however it does show the current period financial results excluding the effect of items not settling in the current period.

Copper prices in the September 2008 quarter remained in range that resulted in minimal realized losses on derivative instruments of $1.4 million in the quarter compared to a loss of $6.1 million in the 2007 quarter. The decline in copper prices commencing in late September 2008 resulted in a large unrealized gain of $30.4 million in the September quarter compared to an unrealized loss of $5.2 million in the September 2007 quarter.

Cash flow decreased to $7.9 million in the September 2008 quarter compared to $22.2 million in 2007. The $14.3 million decrease is the result of lower operating margins on lower sales volumes and higher unrealized gains on derivative instruments.

Capital expenditures increased to $17.2 million from the $12.7 million in the comparative 2007 quarter. Expenditures in the September 2008 quarter were financed from cash flow from the Mount Polley and Huckleberry mines. At September 30, 2008 the Company had $62.0 million in cash, cash equivalents and short term investments.

During the September 2008 quarter the Company continued purchases under the Normal Course Issuer Bid and through November 3, 2008 the Company had purchased 414,887 common shares at a total cost of $2.6 million.

Mount Polley Mine

 

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Mine Production                                  Nine Months Ended Sept 30
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(unaudited)                                            2008           2007
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Ore milled (tonnes)                               5,138,147      4,878,194
Ore milled per calendar day (tonnes)                 18,752         17,869
Grade % - Copper                                      0.561          0.488
Grade g/t - Gold                                      0.304          0.243
Recovery % - Copper                                   74.08          79.41
Recovery % - Gold                                     69.09          70.79
Copper produced (lbs)                            47,080,160     41,658,194
Gold produced (oz)                                   34,694         26,998
Silver produced (oz)                                406,420        304,807
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Mill through-put and copper head grade averaged 19,339 tonnes per operating day and 0.575% copper during the third quarter period. Year to date mill through-put and copper head grade are up 5% and 15% respectively compared to the 2007 nine month period.

Copper recovery for the nine months in 2008 is down about 5% compared to last year, 74% versus 79%. With a portion of mill feed coming from the more highly oxidized Springer pit, the copper oxide ratio for the first nine months of 2008 has been 15.7% up from 5.7% in the same period in 2007. The copper oxide ratio negatively impacts copper recovery as copper oxide minerals have poor flotation recoveries.

Mining in the Bell pit is now complete, and mining in the Wight pit is expected to be completed near year end. The Springer pit is scheduled to supply the majority of mill feed in 2009.

The current exploration program at Mount Polley has been focused on finding high grade ore to replace the Wight pit mill feed that has been available at Mount Polley for the last three years. Exploration has been successful in this task with high grade intervals being returned recently from drilling in the Boundary zone, Pond zone, and in the wall of the Wight pit. The drilling in the wall of the Wight pit further defined a high grade pod of mineralization called the Kidney zone. It is expected this pod will be mined following the completion of the currently planned Wight pit.

Work on the design of a pit to mine the mineralization discovered in the Pond zone is proceeding, and we plan to add this pit to the 2009 mine plan.

Imperial owns 100% of the Mount Polley open pit copper/gold mine located 56 kilometers northeast of Williams Lake, British Columbia.

Huckleberry Mine

 

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Mine Production                                  Nine Months Ended Sept 30
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(100% - Imperial owns 50%) (unaudited)                 2008           2007
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Ore milled (tonnes)                               4,457,955      4,876,843
Ore milled per calendar day (tonnes)                 16,270         17,864
Grade (%) - Copper                                    0.313          0.481
Grade (%) - Molybdenum                                0.006          0.015
Recovery (%) - Copper                                 88.50           87.8
Recovery (%) - Molybdenum                              22.0           17.7
Copper produced (lbs)                            27,246,753     45,435,101
Gold produced (oz)                                    2,305          5,071
Silver produced (oz)                                182,696        161,015
Molybdenum produced (lbs)                           137,407        278,063
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As mining progresses in the Main Zone Extension (MZX), 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 0.331% copper and 16,915 tonnes per day in this quarter. As a result, copper production increased from 8.2 million pounds in the first quarter to 10.1 million pounds this quarter.

Mine design work continues on a plan to further expand the MZX pit, the plan could potentially add about two years of mine life.

Exploration in 2008 focused on targets resulting from the regional exploration program. Six holes were completed at the Whiting Creek prospect, located 8 kilometres north of the Huckleberry mill.

Imperial owns 50% of the Huckleberry open pit copper/molybdenum mine located 123 kilometres southwest of Houston, British Columbia.

Sterling

At the Sterling property, the completed phase of the underground drill program included 52 holes totaling over 13,000 feet. The objective of this program was to define and expand the 144 zone. Results confirmed high grade mineralization within the 144 zone; the discovery and definition of the east extension of the 144 zone; the discovery of an open mineralization trend on the west side of the 144 zone; and the discovery of the gold-hosting potential of the latite dike which divides the main 144 zone from the east extension.

An operations plan has been submitted and approved, and the required bonding has been placed with the State of Nevada and the Bureau of Land Management that would permit the restart of mining and heap leach operations at the Sterling mine.

The wholly owned Sterling gold property is located 185 kilometres northwest of Las Vegas, Nevada.

Red Chris

At the Red Chris property, a 17 kilometre exploration access was constructed over a four month period and completed in September 2008. The new road allows all weather access to the site and reduces the need for helicopter support resulting in safer working conditions, extends the working season and lowers exploration cost.

The Red Chris camp became operational in September and is currently being upgraded for winter operation. A 12 hole deep drill program is now underway in the East zone. The target depth of these holes is 1,500 metres and work is expected to extend into 2009.

The Red Chris property is located 80 kilometres south of Dease Lake in northwest British Columbia.

Outlook

With the dramatic and quick change in the price of metals, the Company will be reassessing mining and exploration plans for 2009. At our mining operations, the focus will be on cutting metal production costs. In the current price environment, exploration plans may be cut back, and the focus shifted to search for resources near existing processing facilities.

Detailed financial information is provided in Management's Discussion and Analysis in the Third Quarter Report available on the Company's website and on SEDAR (www.sedar.com).