British Columbia

EARNINGS/OUTLOOK – Imperial Metals Corp. Mar. 31 reported a significant jump in its 2013 income to $41 million, or C55 cents per share, compared with income of $32.6 million, or C44 cents per share, in 2012. In addition to changes in revenues and income from mine operations, variations in net income period over period are predominately attributable to movements in foreign exchange and realized and unrealized gains and losses on derivative instruments and taxes. Imperial said its 2013 earnings were negatively impacted by foreign exchange losses of C2.5 million compared with foreign exchange losses of C$500,000 in 2012, primarily on foreign exchange movements on the increased U.S. dollar debt being carried by the company. The average CDN/US Dollar exchange rate in 2013 was 1.03 compared to an average of 1.00 in 2012, and at Dec. 31, 2013 the CDN/US Dollar exchange rate was 1.06. Imperial also reported recorded gains on derivative instruments in 2013 of C$1.6 million compared with losses of C$2.8 million in 2012. The decrease in the copper and gold price compared to the price in the derivative contracts resulted in a gain in 2013 compared to a loss in 2012. Revenues totaled C$187.8 million in 2013 compared with C$199.4 million in 2012. Revenues are impacted by the timing and quantity of concentrate shipments, metal prices and exchange rate, and period end revaluations of revenue attributed to concentrate shipments where copper price will settle at a future date. The decrease in revenue in 2013 over 2012 is due to lower copper and gold prices partially offset by a weaker Canadian dollar and a larger volume of concentrate shipped for the year. There were eight concentrate shipments in 2013 compared to seven shipments in 2012. The increase in shipment volumes was more than offset by lower copper and gold prices in 2013 compared to 2012. The London Metals Exchange cash settlement copper price per pound averaged US$3.32 in 2013, compared with US$3.61 in 2012. The London Metals Exchange cash settlement gold price per troy ounce averaged US$1,411 in 2013 compared to US$1,667 in 2012. The Canadian dollar compared to the U.S. dollar averaged about 3 percent lower in 2013 than in 2012. In Canadian dollar terms the average copper price in 2013 was C$3.42/lb. compared with C$3.61/lb. in 2012 and the average gold price in 2013 was C$1,451.oz, compared with C$1,667/oz in 2012. Revenue in 2013 was decreased by a $7.1 million negative revenue revaluation compared to a negative revenue revaluation of $2.5 million in 2012. Negative revenue revaluations are the result of the copper price on the settlement date and/or the current period balance sheet date being lower than when the revenue was initially recorded or the copper price at the last balance sheet date. The copper price started the year at US$3.67 per pound and ended the year at US$3.35 per pound, compared to the prior year where the copper price started the year at US$3.48 per pound and ended the year US$3.59 per pound. Income from mine operations increased to C$64.3 million from C$56.9 million in 2012 as result improved contribution margins from mine operations. Capital expenditures of C$397.2 million in 2013, inclusive of equipment financed by long-term debt and capitalized interest, nearly doubled from C$147.9 million in 2012. The expenditures in 2013 were financed by cash flow from the Mount Polley mine, short term and non-current debt and C$38.9 million in equipment financing. At Dec.31, 2013 the company had C$3.1 million (December 2012 - C$2.8 million) in cash. The short-term debt balance at year-end 2013 totaled C$132.4 million (Dec. 31, 2012 – C$92.4 million). The increase in the short-term debt is primarily due to funding the development of the Red Chris project in northwestern British Columbia with short-term debt, which subsequent to year’s end was fully repaid from long-term financings. At Dec. 31, 2013, Imperial had incurred expenditures of C$438.8 million on the construction of Red Chris, of which C$47.8 million was in accounts payable and accruals. Until closing of the long-term financing arrangements for the Red Chris project in March 2014, the expenditures on Red Chris were financed from cash flow from operations, a line of credit facility from the company’s bankers, equipment loans and a C$250 million line of credit facility from Edco Capital Corp. Concurrent with the closing of the long-term financing arrangements after year’s end, the existing bank line of credit and the line of credit facility from Edco Capital Corp. were repaid in full and cancelled. The long-term financing arrangements for the company, to be utilized primarily for the construction of Red Chris, consist of US$325 million 7 percent five-year senior unsecured notes, a senior secured C$200.0 million revolving credit facility, and a five-year C$75 million junior unsecured credit facility with Edco Capital. The 287kv Northwest Transmission Line from Skeena substation to Bob Quinn is under construction by BC Hydro with a targeted completion date of May 2014. The 93-kilometer Iskut extension of the NTL from Bob Quinn to Tatogga is under construction by Imperial 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 complete. Red Chris on-site work began in May 2012. Currently, a construction camp to house 480 employees and contractors is fully operational; many facilities are complete; the pre-engineered process plant building is fully enclosed and internal concrete is about 97 percent complete; mechanical installations site wide are roughly 50 percent complete; and a tailings and reclaim system of pipelines and booster pump house is about 25 percent 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-kilometer power line from Tatogga to the mine site began in January, along with mine pre-development with the start of stripping of overburden from the East zone of the Red Chris mine. The cost of constructing the Red Chris mine is now forecast to be C$540 million, about 8.0 percent more than the December 2012 estimate. Imperial aims to begin commissioning the Red Chris mine in June and to achieve full operations in the fourth quarter of 2014. Exploration activities by Imperial in 2014 will be limited in scope, and will be conducted at its Mount Polley, Huckleberry and Sterling mining operations.