/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES/
Imperial Metals Corporation (the "Company") (TSX:III) today announced the launch
of a US$325 million senior notes offering, guidance on 2013 annual financial
results, and an update on the Red Chris project.
US$325 Million Senior Notes Offering and Associated Financings
Imperial reports it intends to offer US$325 million of senior unsecured notes
maturing in 2019 (the "Notes"). The interest rate and other terms of the Notes
will be determined based on prevailing market conditions. The Company intends to
use the net proceeds of the Notes to repay existing indebtedness, to fund
capital expenditures related to the Red Chris project, and for general corporate
purposes.
Concurrently with the consummation of the Notes offering, the Company intends to
enter into a new senior secured credit facility with a syndicate of banks. The
new facility is expected to be comprised of a $50 million tranche to be used for
general corporate purposes, and a second $150 million tranche to be used to fund
Red Chris project costs. The closing of the offering of the Notes and the
completion of the new senior secured credit facility are conditional on one
another.
In addition, concurrent with the closing of the offering of the Notes and the
completion of the new senior secured credit facility, the Company intends to
enter into a $75 million junior unsecured loan facility with Edco Capital
Corporation. This corporation is owned by Mr. N. Murray Edwards, a significant
shareholder of the Company. This junior unsecured facility is available to fund
project cost overruns associated with the Red Chris project, backstop the
payment of certain third party reimbursement obligations relating to the Iskut
extension of the Northwest Transmission Line ("NTL") and for general corporate
purposes. In connection with this facility, Edco Capital Corporation will
receive a $750,000 commitment fee and warrants to acquire 750,000 of the
Company's shares at $20 per share. These transactions with Edco Capital
Corporation are exempt from the formal valuation and minority approval
requirements of Multilateral Instrument 61-101 as they represent less than 25%
of the Company's market capitalization.
The offer and sale of the Notes will not be registered under the United States
Securities Act of 1933, as amended (the "Securities Act") or the securities laws
of any state or the securities laws of any other jurisdiction. The Notes may not
be offered or sold in the United States absent registration or an applicable
exemption from the registration requirements of the Securities Act and
applicable state securities laws. Accordingly, the Notes will be offered and
sold in the United States only to "qualified institutional buyers" in accordance
with Rule 144A under the Securities Act, and outside the United States in
reliance on Regulation S under the Securities Act. In addition, in all cases,
the Notes may only be offered and sold on a private placement basis pursuant to
an exemption from the prospectus requirements of the Securities Act (British
Columbia) and, if applicable, securities laws in other provinces and territories
in Canada. Further, the Notes may only be offered and sold outside the United
States and Canada on a private placement basis pursuant to certain exemptions
from applicable securities laws.
This press release shall not constitute an offer to sell or the solicitation of
an offer to buy the Notes, nor shall there be any offer or sale of the Notes in
any jurisdiction in which such offer, solicitation or sale would be unlawful.
The material change report in relation to the above transactions will be filed
less than 21 days before the expected date of the closing as the Company intends
to complete this transaction as soon as commercially feasible.
New Non-IFRS Financial Measures
In an offering memorandum to be distributed to prospective investors of the
Notes, the Company has disclosed certain information relating to the Company's
cash cost per pound of copper produced and Adjusted EBITDA. The Company is
furnishing such information in Schedule A to this press release.
Guidance on 2013 Annual Financial Results
The Company expects to report its financial results for the year ended December
31, 2013 in the last week of March. In connection with the Notes offering, the
Company is providing to prospective purchasers of the Notes certain preliminary
information with respect to its expected results for the year ended December 31,
2013 as set forth below:
Revenues: Sales volumes for the Mount Polley mine for the fourth quarter of 2013
were similar to the prior quarters in 2013 and therefore the Company expects
revenues to be in the range of $178 million to $196 million for the year 2013.
Adjusted EBITDA: In conjunction with the disclosure of this new non-IFRS
financial measure as disclosed in Schedule A to this press release the Company
expects Adjusted EBITDA for 2013 to be in the range of $82 million to $91
million.
Capital expenditures: The Company expects capital expenditures to be
approximately $367.0 million to $405.0 million for the year ended December 31,
2013.
The financial data set forth in the paragraphs above are preliminary and are
subject to revision based upon the completion of the Company's 2013 financial
statements and the related audit of the Company's 2013 period by its independent
chartered accountants. Once the Company has completed its 2013 financial
statements and its independent chartered accountants have completed the audit of
the Company's financial statements for 2013, the Company may report financial
results that could differ, and such differences could be material.
Red Chris Project Update
To December 31, 2013 the Company had incurred $438.8 million on the construction
of Red Chris of which $47.8 million was in accounts payable and accruals at that
date. Between October 1, 2013 and December 31, 2013, the Company had borrowed
$90.0 million under an existing line of credit facility with Edco Capital
Corporation. Between January 1, 2014 and February 28, 2014, the Company borrowed
an additional $47.5 million under such line of credit facility. These borrowings
were primarily used to fund the Red Chris project. As at February 28, 2014, the
Company had borrowed $242.5 million under its $250.0 million existing line of
credit facility with Edco Capital Corporation and expects to borrow the
remaining $7.5 million available under that facility in the coming weeks.
The 287kv NTL from Skeena substation to Bob Quinn is under construction by BC
Hydro with a targeted completion date of May 2014. The 93 kilometre Iskut
extension of the NTL from Bob Quinn to Tatogga is under construction by the
Company with a targeted completion date of June 2014.
Construction of access roads and right of way clearing for the Iskut extension
of the NTL is 100% complete. A 150 person camp and laydown yards were
established along the route to store and assemble lattice structure components.
An experienced powerline constructor has installed to date approximately 57% of
the foundations and assembled 82% of the structures; the remaining foundations
and structures, hardware and conductor will be installed in the coming months.
Red Chris on-site work began in May 2012. The current status of site work is:
-- A construction camp to house 480 employees and contractors is fully
operational;
-- truck shop, warehouse and concentrate shed is complete and currently
being used as dry storage for equipment;
-- concrete placement and structural steel erection are complete for the
coarse ore handling facilities, the primary crusher building, the
mechanically stabilized earth wall, the overland conveyor, the transfer
towers and the reclaim tunnel;
-- concrete foundations for the 287kv main substation and the reagent
building are complete;
-- pre-engineered process plant building is fully enclosed and internal
concrete is approximately 97% complete;
-- mechanical installations site wide are approximately 50% complete;
-- North Starter Dam has been built to 1097 metre elevation providing
adequate water storage for mill startup;
-- tailings and reclaim system of pipelines and booster pump house is
approximately 25% complete.
Planned activities in 2014 will include the final installation of the primary
crusher, process water tanks, interior steel, grinding mills, electrical
equipment, reagent building and tailings system. Construction of the 287kv 17
kilometre powerline from Tatogga to the mine site began in January 2014. Mine
pre-development began in January 2014 with the start of stripping of overburden
from the East zone of the Red Chris mine. The Company is targeting to commence
commissioning of the Red Chris mine in June 2014 and to achieve full operations
in the fourth quarter of 2014.
The cost of constructing the Red Chris mine is now forecast to be $540 million,
approximately 8.0% over the December 2012 estimate. The major areas of increase
are:
-- Certain contractor tenders for 2013 Request for Proposals were above the
cost estimate. These increases were mitigated in part by Red Chris
choosing to self-perform the mechanical and piping installations;
-- Tailings impoundment area earthwork construction costs overran as
additional borrow materials were excavated to uncover suitable filter
zone and till core for placement and compaction. The filter zone was
screened, hauled and placed with small equipment at extra cost. The
additional sand and gravel overburden exposed during borrow development
was placed on the future 2015-2016 dam construction footprint, which
will result in lower tailing dam construction costs in 2015 than
previously forecast. Both these activities were not budgeted in the
original estimate.
About Imperial
Imperial is an exploration, mine development and operating company based in
Vancouver, British Columbia. The Company operates the Mount Polley copper/gold
mine in British Columbia and the Sterling gold mine in Nevada. Imperial has 50%
interest in the Huckleberry copper/molybdenum mine and has 50% interest in the
Ruddock Creek lead/zinc property, both in British Columbia. The Company is in
development of its wholly owned Red Chris copper/gold property in British
Columbia.
Cautionary Note Regarding "Forward-Looking Information"
This press release contains "forward-looking information" or "forward-looking
statements" within the meaning of Canadian and United States securities laws,
which we will refer to as "forward-looking information". Except for statements
of historical fact relating to the Company, certain information contained herein
constitutes forward-looking information. When we discuss the Notes offering;
mine plans; costs and timing of current and proposed exploration or development;
development; production and marketing; capital expenditures; construction of
transmission lines; cash flow; working capital requirements and the requirement
for additional capital; operations; revenue; margins and earnings; future prices
of copper and gold; future foreign currency exchange rates; future accounting
changes; future prices for marketable securities; future resolution of
contingent liabilities; receipt of permits; or other matters that have not yet
occurred, we are making statements considered to be forward-looking information
or forward-looking statements under Canadian and United States securities laws.
We refer to them in this press release as forward-looking information. The
forward-looking information in this press release may include words and phrases
about the future, such as: plan, expect, forecast, intend, anticipate, estimate,
budget, scheduled, targeted, believe, may, could, would, might or will.
Forward-looking information includes disclosure relating to the launch of the
Notes offering and the guidance on 2013 annual financial results (including
expected revenues) and project development plans, costs and timing. We can give
no assurance the forward-looking information will prove to be accurate. It is
based on a number of assumptions management believes to be reasonable, including
but not limited to: the continued operation of the Company's mining operations,
no material adverse change in the market price of commodities or exchange rates,
that the mining operations will operate and the mining projects will be
completed in accordance with their estimates and achieve stated production
outcomes and such other assumptions and factors as set out herein. It is also
subject to risks associated with our business, including but not limited to: the
risk that the financing may not be completed on the terms expected or at all,
involving the need to negotiate and execute a purchase agreement and related
documents, the need for continued cooperation of the dealers and the need to
successfully market the Notes; risks inherent in the mining and metals business;
commodity price fluctuations and hedging; competition for mining properties;
sale of products and future market access; mineral reserves and recovery
estimates; currency fluctuations; interest rate risks; financing risks;
regulatory and permitting risks; environmental risks; joint venture risks;
foreign activity risks; legal proceedings; and other risks that are set out in
the Company's Management's Discussion & Analysis in its 2012 Annual Report. If
our assumptions prove to be incorrect or risks materialize, our actual results
and events may vary materially from what we currently expect as provided in this
press release. We recommend you review the Company's most recent Annual
Information Form and Management's Discussion & Analysis in its 2012 Annual
Report, which includes discussion of material risks that could cause actual
results to differ materially from our current expectations. Forward-looking
information is designed to help you understand management's current views of our
near and longer term prospects, and it may not be appropriate for other
purposes. We will not necessarily update this information unless we are required
to by securities laws.
SCHEDULE A
Non-IFRS Financial Measures
The Company is disclosing for the first time two non-IFRS financial measures
which are described further below. The Company expects to include these
financial measures in future quarterly and annual financial reports.
Cash Cost per Pound of Copper Produced
The cash cost per pound of copper produced, derived from the sum of cash
production costs, transportation and offsite costs, treatment and refining
costs, net of by-product and other revenues, divided by the number of pounds of
copper produced during the period, 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 two copper producing mines, Mount Polley and
Huckleberry, and on a composite basis for these two mines.
Cash costs of production include direct labour, operating materials and
supplies, equipment and mill costs, and applicable overhead. Offsite costs
include transportation, warehousing, marketing, and related insurance. Treatment
and refining costs are costs for smelting and refining concentrate.
Treatment and refining costs applicable to the concentrate produced during the
period are calculated in accordance with the contracts the Company has with its
customers.
By-product and other revenues represent (i) revenue calculated based on average
metal prices for by-products produced during the period based on contained metal
in the concentrate; and (ii) other revenues as recorded during the period.
Cost of sales, as reported on the consolidated statement of comprehensive
income, includes depletion and depreciation and share based compensation,
non-cash items. These items, along with management fees charged by the Company
to Huckleberry, are removed from cash costs. The resulting cash costs are
different than the cost of production because of changes in inventory levels and
therefore inventory and related transportation and offsite costs are adjusted
from a cost of sales basis to a production basis. The cash costs for copper
produced are converted to US$ using the average US$ to Cdn$ exchange rate for
the period divided by the pounds of copper produced to obtain the cash cost per
pound of copper produced in US$.
The following tables reconcile cost of sales as shown on the consolidated
statement of comprehensive income to the cash cost per pound of copper produced
in US$:
Estimated Cash Cost per Pound of Copper Produced - Twelve Months Ended
December 31, 2012
----------------- ------------------------------- -----------
(Cdn$ in
thousands, Total per
except Huckle- Huckle- Financial
quantity berry berry Mount Statements
amounts) 100% 50% Polley Corporate (i) Composite
----------------- ------------------------------- -----------
A B C=A+B
Cost of Sales $93,154 $46,577 $142,052 $410 $142,462 $188,629
Less:
Depletion and
depreciation (11,743) (5,871) (15,112) (488) (15,600) (20,983)
Share based
compensation - - (214) - (214) (214)
Management
fees paid by
Huckleberry
to Imperial
eliminated
on
consolidation (1,096) (548) - - - (548)
----------------- ------------------------------- -----------
Cash costs
before
adjustment
to
production
basis 80,315 40,158 126,726 $(78) $126,648 166,884
----------------------
Adjust for
inventory
change 4,602 2,301 (3,663) (1,362)
Adjust
transportation
and offsite
costs 626 313 (686) (373)
Treatment and
refining
costs 13,460 6,730 6,671 13,401
By-product and
other
revenues (10,286) (5,143) (88,560) (93,703)
----------------- --------- -----------
Cash cost of
copper
produced in
Cdn$ $88,717 $44,359 $40,488 $84,847
----------------- --------- -----------
US$ to Cdn$
exchange rate 0.9994 0.9994 0.9994 0.9994
----------------- --------- -----------
Cash cost of
copper
produced in
US$ $88,664 $44,386 $40,512 $84,898
----------------- --------- -----------
Copper
produced
(000's lbs) 35,112 17,556 33,790 51,346
Cash cost per
pound of
copper
produced in
US$ $2.53 $2.53 $1.20 $1.65
(i)after giving effect to restatement for IFRS11
Estimated Cash Cost per Pound of Copper Produced - Nine Months Ended
September 30, 2013
----------------- ------------------------------- -----------
(Cdn$ in
thousands,
except Huckle- Huckle- Total per
quantity berry berry Mount Financial
amounts) 100% 50% Polley Sterling Statements Composite
----------------- ------------------------------- -----------
A B C=A+B
Cost of Sales $76,491 $38,246 $88,535 $2,980 $91,515 $126,781
Less:
Depletion and
depreciation (13,989) (6,995) (11,714) (725) (12,439) (18,709)
Share based
compensation - - (103) - (103) (103)
Management
fees paid by
Huckleberry
to Imperial
recorded as
revenue by
Imperial on
the equity
basis of
accounting
for
Huckleberry (809) (405) - - - (405)
----------------- ------------------------------- -----------
Cash costs
before
adjustment
to
production
basis 61,693 30,846 76,718 $2,255 $78,973 107,564
----------------------
Adjust for
inventory
change 1,265 633 (3,728) (3,096)
Adjust
transportation
and offsite
costs 421 210 (1,068) (858)
Treatment and
refining
costs 11,647 5,823 5,966 11,789
By-product and
other
revenues (7,868) (3,934) (53,501) (57,435)
----------------- --------- -----------
Cash cost of
copper
produced in
Cdn$ $67,158 $33,578 $24,387 $57,964
----------------- --------- -----------
US$ to Cdn$
exchange rate 1.0236 1.0236 1.0236 1.0236
----------------- --------- -----------
Cash cost of
copper
produced in
US$ $65,609 $32,803 $23,825 $56,628
----------------- --------- -----------
Copper
produced
(000's lbs) 30,833 15,417 29,264 44,681
Cash cost per
pound of
copper
produced in
US$ $2.13 $2.13 $0.81 $1.27
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
We define Adjusted EBITDA as net income (loss) before interest expense, taxes
and depletion and depreciation and as adjusted for the items described in the
reconciliation table below.
Adjusted EBITDA is not necessarily comparable to similarly titled measures used
by other companies. We believe that the presentation of Adjusted EBITDA is
appropriate to provide additional information to investors about certain
non-cash or unusual items that we do not expect to continue at the same level in
the future, or other items that we do not believe to be reflective of our
ongoing operating performance. We further believe that our presentation of this
non-IFRS financial measure provides information that is useful to investors
because it is an important indicator of the strength of our operations and the
performance of our core business.
Adjusted EBITDA is not a measurement of operating performance or liquidity under
IFRS and should not be considered as a substitute for earnings from operations,
net income or cash generated by operating activities computed in accordance with
IFRS. Adjusted EBITDA has limitations as an analytical tool. Some of the
limitations are:
-- adjusted EBITDA does not reflect our cash expenditures or future
requirements for capital expenditures or contractual commitments;
-- adjusted EBITDA does not reflect changes in, or cash requirements for,
our working capital needs;
-- adjusted EBITDA does not reflect the interest expense, or the cash
requirements necessary to service interest or principal payments, on our
debt;
-- although depletion and depreciation are non-cash charges, the assets
being depleted and depreciated will often have to be replaced in the
future. Adjusted EBITDA does not reflect any cash requirements for such
replacements. In particular, as a company in the mining business, we
record the depletion of our mineral reserves as we extract minerals from
our mines, but we expect to use cash in the future to acquire other
mineral reserves in the ordinary course of our business.
-- although accretion expense is a non-cash charge, this represents the
accretion of the liability related to the future site reclamation costs,
calculated on a net present value basis, that will exist at the end of
each mine life, based on the mining area disturbed at a given statement
of financial position date. Adjusted EBITDA does not reflect any cash
requirements for such reclamation activities, as those will occur upon
the closing of each mine; and
-- other companies in our industry may calculate Adjusted EBITDA
differently that we do, limiting its usefulness as a comparative
measure.
Because of these limitations, Adjusted EBITDA should not be considered as a
measure of discretionary cash available to us to invest in the growth of our
business.
A reconciliation of net income to Adjusted EBITDA is set out below and for all
of the periods presented, the Company has given effect to the adoption of IFRS11
in order to be able to compare all periods on the same basis.
Adjusted EBITDA
Twelve
Months
Year Ended Nine Months Ended Ended
------------------------------------------------------
Dec 31 Dec 31 Dec 31 Sept 30 Sept 30 Sept 30
(Cdn$ in thousands) 2010 2011 2012 2012 2013 2013
------------------------------------------------------
Net Income (a) $38,375 $48,708 $32,626 $20,908 $32,883 $44,601
Adjustments:
Interest expense 581 1,040 667 341 35 361
Accretion of debt 154 - - - - -
Accretion of future
site reclamation
provisions 226 208 292 224 220 288
Depletion and
depreciation 21,615 20,110 15,600 11,058 12,845 17,387
Income and mining tax
expense 1,816 17,049 18,540 11,412 17,038 24,166
Unrealized losses
(gains) on
derivative
instruments 2,290 (8,031) 2,377 3,652 (141) (1,416)
Foreign exchange
losses (gains) 1,543 (1,231) 455 173 557 839
Share based
compensation 8,636 5,165 2,945 2,385 1,399 1,959
Bad debt recovery - (14,112) - - - -
Revaluation (gains)
losses on marketable
securities (168) (4) (209) (139) 343 273
Gains on sale of
mineral properties (90) (1,437) (708) (76) (48) (680)
------------------------------------------------------
Adjusted EBITDA (a) $74,978 $67,465 $72,585 $49,938 $65,131 $87,778
------------------------------------------------------
(a) Net income and Adjusted EBITDA include our 50% portion of the net income
from Huckleberry to reflect our adoption of IFRS11. For the years ended
December 31, 2010, 2011 and 2012, our 50% interest in the net income of
Huckleberry was $22.8 million, $27.7 million and $5.5 million,
respectively. For the nine months ended September 30, 2012 and 2013, our
50% interest in the net income of Huckleberry was $3.8 million and $3.9
million, respectively. However, we are not able to control the timing
and amount, if any, of cash distributions that Huckleberry may make to
us.
FOR FURTHER INFORMATION PLEASE CONTACT:
Imperial Metals Corporation
Brian Kynoch
President
604.669.8959
Imperial Metals Corporation
Andre Deepwell
Chief Financial Officer
604.488.2666
Imperial Metals Corporation
Gordon Keevil
Vice President Corporate Development
604.488.2677
Imperial Metals Corporation
Sabine Goetz
Shareholder Communications
604.488.2657
investor@imperialmetals.com
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