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Message: Imperial Reports 2008 Financial Results
| March 30, 2009 | |||
| Imperial Reports 2008 Financial Results | |||
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
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(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
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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 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.
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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 --------------------------------------------------------------------------- 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
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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
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(i) 50% allocable to Imperial
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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