Imperial Metals buoyed by Red Chris Mine production

The completion of Red Chris Mine this year, and subsequent production start-up, has led to an increase in revenue for Imperial Metals. — Photo courtesy Imperial Metals

The start of production at Imperial Metals Red Chris mine helped the company boost revenues last quarter.

Here are some highlights on Imperial mines, including Mt Polley, from their quarterly financial report:

Revenues were $55.9 million in the September 2015 quarter compared to $22.7 million in the 2014 comparative quarter. Following completion of the construction of the Red Chris mine, commissioning of the mill commenced and the first concentrate was produced in February 2015. The Company achieved the accounting criteria for commercial production at Red Chris effective July 1, 2015 and began recording revenues and expenses for the Red Chris mine on the Statement of Income effective July 1, 2015. Revenue in the current quarter is primarily from three shipments of concentrate from Red Chris compared to one shipment of concentrate from Mount Polley in the 2014 comparative quarter.

Imperial Metals recorded a net loss of $29.3 million in the September 2015 quarter compared to net loss of $49.2 million in the 2014 comparative quarter. The adjusted net loss in the September 2015 quarter was $9.4 million or $0.12 per share, versus adjusted net income of $3.7 million or $0.05 per share in the 2014 comparative quarter. Adjusted net income or loss is calculated by removing the unrealized gains and losses, net of related income taxes, resulting from foreign exchange movements on non-current debt, from mark to market revaluation of gold and foreign exchange derivative instruments, and non-recurring rehabilitation provision and insurance recoveries related to the Mount Polley tailings dam breach. Adjusted net income is not a measure recognized under IFRS in Canada. It is intended to show the current period financial results excluding the effect of items not settling in the period or non-recurring in nature.

The September 2015 quarter net loss of $29.3 million included a foreign exchange loss related to changes in CDN/US Dollar exchange rates of $33.0 million compared to a foreign exchange loss of $18.9 million in the 2014 comparative quarter. The $33.0 million foreign exchange loss is comprised of a $29.3 million loss on the senior notes, a $2.8 million loss on long term equipment loans, and a loss of $0.9 million on other debt and operational items. The average CDN/US Dollar exchange rate in the September 2015 quarter was 1.309 compared to an average of 1.089 in the September 2014 quarter. The CDN/US Dollar exchange rate at September 30, 2015 was 1.339 compared to 1.247 at June 30, 2015.

The Company recorded an unrealized net gain of $12.2 million on gold and foreign exchange derivatives in the September 2015 quarter compared to an unrealized net gain of $9.8 million in the 2014 comparative quarter. Gains of $2.2 million were realized on gold derivatives and a $0.4 million gain was realized on foreign currency swaps in the September 2015 quarter compared to a small realized loss on gold derivatives and a $0.4 million loss on foreign currency swaps in the 2014 quarter.

Cash flow was $15.8 million in the September 2015 quarter compared to a negative cash flow of $59.1 million in the 2014 comparative quarter. The increase of $74.9 million is primarily related to the $67.4 million rehabilitation provision in the September 2014 quarter related to the Mount Polley dam breach.

Capital expenditures, inclusive of capitalized interest, decreased to $24.3 million from $93.1 million in the 2014 comparative quarter. Expenditures in the current quarter were financed from cash flow from operations and debt and equity financings completed in the quarter.

Red Chris Mine

The Red Chris mine achieved the accounting criteria for commercial production effective July 1, 2015 at which time the revenues from and expenses of operating the mine are reported through the Statement of Income. An Impact, Benefit and Co-Management Agreement with the Tahltan Nation was signed July 27, 2015. The agreement had earlier been approved by a referendum with 87% of respondents voting in favour.

Copper production for the 2015 third quarter, as previously reported in the Company's October 13, 2015 press release, was 20.7 million pounds copper and 9,281 ounces gold, increases of about 64% and 100% respectively from the 2015 second quarter. Subsequent to the October 13, 2015 press release, the weightometer on the SAG mill feed conveyor that determines the tonnage delivered to the mill was inspected by the third party manufacturer. The service report delivered by the manufacturer after the inspection determined this belt scale measuring ore feed to the SAG mill was reading approximately 10% low. As a result, our production statistics beginning July 1, 2015 have been adjusted to reflect additional tonnage processed and adjusted recovery rates. In the 2015 third quarter the mill achieved an average throughput of 29,147 tonnes per day. As a result of the additional tonnage, metal recoveries for the third quarter have been adjusted to 72.9% for copper and 41.9% for gold from the 81.7% copper and 44.8% gold previously reported. The revisions to tonnage milled did not change the metal production reported.

During the current quarter, mining activities continued in the Main and East zones, with the bulk (approximately 78%) of the mill feed coming from the Main zone with higher grade East zone ores (approximately 22%) being blended with the Main zone ores. The ore grade averaged 0.480% copper and 0.257 g/t gold. The mine moved an average of 68,931 tonnes of material per day during the third quarter 2015. Plans to increase stripping are being implemented so that East zone ores will be more consistently available for blending. This plan includes moving two Caterpillar 793 haul trucks and an excavator from Mount Polley to Red Chris to increase the mining capacity at Red Chris to 100,000 tonnes per day.

Mount Polley Mine

Mount Polley restarted operations on August 5, 2015 following receipt of permit amendments on July 5, 2015 which allowed recommencement of the mine using a modified operation plan that includes the use of the Springer pit to contain the tailings produced. The mine is operating on a one week on, one week off basis, with ore being mined from the Cariboo pit, and the Boundary zone underground mine.

During the 2015 third quarter, 596,379 tonnes of ore were treated following the restart of milling operations on August 5, utilizing about 50% of mill capacity. Mill throughput and metal production have been very close to targeted levels. A total of 5,711 tonnes of concentrate containing 2.91 million pounds copper and 4,760 ounces gold were produced to September 30, 2015.

Huckleberry Mine

Huckleberry production was in line with targets, with throughput averaging 18,830 tonnes per day and production of 11.49 million pounds copper. During the quarter the copper grade averaged 0.331% copper and copper recovery was 90.8%.

Sterling Mine

Sterling underground mining operations were terminated at the end of May 2015. Approval of the environmental assessment for the open pit mine from the Bureau of Land Management is pending. No gold was shipped from site during the September 2015 quarter.

An exploration program that includes soil sampling and geological mapping is being conducted in an area of favorable geology along the northern flank of Bare Mountain. Some staff and much of Sterling's underground mining equipment has been transferred to Mount Polley to assist in the underground mining of the Boundary zone.

Outlook

Operations at Red Chris will focus on maximizing throughput and metallurgical performance of the processing plant. Operating time averaged 90.15% for the quarter, 97.98% of the targeted operating time of 92%. Additional launders have recently been installed in the roughing circuit to increase the mass pull and recovery.

Mining operations at Red Chris are being ramped up with equipment from Mount Polley to support an increase in the daily mining rate to 100,000 tonnes per day in early 2016.

During the 2015 third quarter, based on the Red Chris operating statistics summarized above, Red Chris met its completion criteria as required in the senior credit facility. As such, a notice to this effect has been submitted to our lending syndicate for approval.

Construction work at the Red Chris tailings storage facility was completed for the 2015 season in early October. During the 2016 construction season, work will include an addition on the North dam and the construction of a new dam at the south end of the facility. Permitting of the construction of the South dam is underway, and the permitting is targeted to be complete in time for the 2016 construction season which begins April 2016.

Mount Polley restarted operations on August 5, 2015 using a modified operation plan that includes the use of the Springer pit to contain the tailings produced. The permit allows for a maximum of 4.0 million tonnes of tailings to be stored in the Springer pit. The plant has been working a one week on one week off schedule however, beginning late in the fourth quarter the mine will shift to continuous operations during the winter months. This will fill the Springer pit sooner but with impending winter freezing temperatures it is prudent to operate the mill continuously.

Mount Polley production has been close to target, and the fourth quarter production is expected to be approximately 11,000 tonnes concentrate containing 5.8 million pounds copper and 11,000 ounces gold.

Applications will be made to allow for the use of the repaired and buttressed tailings facility at Mount Polley.

The Huckleberry plant is operating well, and copper production of 11.5 million pounds in the September 2015 quarter was up 9% from the comparable 2014 quarter. Huckleberry is on target to meet its expected 2015 copper production of 44 million pounds. Work on an optimized mine plan, given the drop in copper prices, is in progress and is expected to be completed by the end of the year. Cost control initiatives have been undertaken at Huckleberry to reduce costs, and have included a reduction in the workforce.

We continue to minimize expenditures on all other projects, and implement cost control initiatives on the operations. Environmental and permitting work continues at Ruddock Creek and Sterling, but on all other projects only minimum work is being undertaken to maintain claims in good standing.