Financial woes mount for Imperial

Despite cost-cutting efforts, Imperial Metals (IPM-T) is still not producing profits at its Mount Polley and Huckleberry copper mines in B.C.

The company lost $4.4 million, or 5 per share, on revenues of $19.5 million during the second quarter, compared with a loss of $2 million, or 3 per share, on revenues of $25.2 million a year earlier.

The company tabled a first-half loss of $4.6 million, or 6 per share, on revenues of $44.4 million. This compares with a net loss of $2.9 million, or 4 per share, on revenues of $49.3 million during the first six months of 1999.

Imperial’s 50%-owned open-pit Huckleberry mine, situated southwest of Houston, cranked out 16.2 million lbs. copper and 219,159 lbs. molybdenum during the recent quarter (Imperial’s share – 8.1 million lbs. copper and 109,580 lbs. molybdenum). This marks a significant drop from 20.8 million lbs. copper and 262,350 lbs. molybdenum produced during the 1999 second quarter (Imperial’s share – 10.4 million lbs. copper and 131,175 lbs. molybdenum).

For the first six months, the mine produced 35.2 million lbs. of copper and 598,857 lbs. of molybdenum.

The company’s 52.5%-owned Mount Polley open pit copper-gold mine near Williams Lake produced 7.1 million lbs. of copper and 16,700 oz. gold during the quarter, (Imperial’s share – 3.7 million lbs. copper and 8,767 oz. gold).

Both mines were unable to conclude satisfactory arrangements for the extension of their economic plans, which were sponsored by the Job Protection Commission of B.C. Imperial says the termination of the plan’s benefits will boost operating costs. This will ultimately reduce their ability to pay debts.

While the Huckleberry mine has arranged a flexible debt repayment valid until the end of 2001, Mount Polley mine has so far been unable to make a similar arrangement. The mine was unable to generate sufficient free cash flow to cover its August loan payment and Imperial is in discussions with Sumitomo, its principal lender, for alternative debt payment arrangements. One of the alternatives being considered is the possibility of Imperial forfeiting or changing its economic interest in Mount Polley.

In other news, Imperial agreed to sell the Similco and Invermay copper projects to Leader Mining International (LMN-V) for $1 million in cash and warrants to buy 2 million Leader shares for $1.00 per share, good for two years. A 3% net smelter royalty was tacked onto the agreement. It can be bought down to 1% for an additional $2 million.

The company’s Silvertip silver-lead-zinc project near Watson Lake B.C., remains under option to Peruvian Gold (PVO-V), which stands to earn a 60% interest by spending $5 million over three years. Peruvian recently decided to merge with Patriot Computers. Its mining assets will be transferred to a new corporation, Tumi Resources. Imperial is unsure how this agreement will affect ongoing work at Silvertip.

At Imperial’s Sterling gold mine near Beatty, Nevada, gold leaching operations were maintained on a better than cash break-even basis during the quarter. Exploration is testing the area surrounding the mine. Five targets have been delineated and drilling is anticipated once assay results have been received.