SOURCE: International Minerals Corporation

International Minerals Corporation

May 15, 2013 18:00 ET

International Minerals Reports Third Fiscal Quarter Ending March 31, 2013 Financial Results and Operating Highlights

Significant Cost Reductions Planned

SCOTTSDALE, AZ--(Marketwired - May 15, 2013) -  International Minerals Corporation (TSX: IMZ) (SWISS: IMZ) (the "Company") reports operating highlights and financial results for the third fiscal quarter ended March 31, 2013 ("Q3 2013") together with details of the Company's planned cost-cutting measures to significantly reduce expenditures.

Currency amounts are in US Dollars and all income-related amounts are after-tax, unless otherwise stated.

Summary of Financial Results for Q3 2013:

  • The Company reported $2.2 million in income from continuing operations ($0.02 per share) due primarily to income of $4.2 million from IMZ's 40% ownership in the Pallancata silver mine in Peru.

    Since Pallancata began commercial operations in 2007, it has reported both positive cash flow and earnings in every quarter of every year of production, which is a significant achievement for any mining operation.

  • The Company reported a net and comprehensive loss of $4.7 million (a loss of $0.04 per share) due primarily to a $7.0 million loss from discontinued operations related to additional write-downs associated with the sale of the Ecuadorian properties.

  • Subsequent to the end of Q3 2013, IMZ received a $5.9 million cash distribution from Pallancata bringing the Company's 40%-share of cumulative free cash flow from Pallancata to approximately $125.6 million since August 2009 on a pre-production investment by IMZ of only $5 million.

  • Minera Suyamarca (owned 40% by IMZ and 60% by Hochschild Mining) closed a $140 million debt facility with two Peruvian banks at a low interest rate to partially fund the construction and development costs for the Inmaculada gold-silver project. This loan is non-recourse to IMZ and Hochschild. See news release dated March 25, 2013 for further details.

  • IMZ paid a cash dividend of C$0.12 per common share (a total of $14.3 million). This was the first-ever dividend payment made by the Company. 

  • IMZ remains in a strong financial position with over $53 million in cash and equivalents and approximately $77 million in working capital at March 31, 2013.

2013 Cost Reduction Program:

In response to recent developments in the commodity and mining equity markets, the Company is responding aggressively and implementing immediate company-wide cost reductions in discretionary spending for calendar year 2013. Many of the cuts will also carry over into calendar-year 2014 and beyond as the Company recognizes the need to be continually assessing its technical and administrative cost structure in the future in order to optimize profitability and increase shareholder value.

At the Company's resource properties (excluding Pallancata and Inmaculada, which are discussed separately below), IMZ expects to reduce remaining 2013 cash outflows by $8.5 to $9.0 million (a 35% to 37% decrease) from budgeted amounts of $24.2 million to $15.2 to $15.7 million.

The $8.5 to $9.0 million in reduced expenditures consists of:

(i) Nevada (Gemfield development and exploration): reduction of $6.5 to $6.8 million (39% to 41%).

(ii) Peru (exploration): reduction of $1.5 to $1.7 million (47% to 53%).

(iii) Corporate and Investor Relations: reduction of $0.48 to $0.5 million (11% to 12%).

With respect to 2013 expenditure reductions at the Pallancata and Inmaculada, Hochschild is in the process of implementing an action plan to conserve capital, mitigate operating cost increases, and review all discretionary expenditures.

IMZ anticipates a reduction in total combined project expenditures at Pallancata and Inmaculada for 2013 of approximately $14 million (40% attributable to IMZ), which consists of:

(i) Pallancata: approximately $10.5 million from mining operations (a 7% reduction) and $1.2 million in exploration drilling (a 20% reduction).

(ii) Inmaculada: approximately $2.3 million in reduced exploration drilling (a 70% reduction).

IMZ expects that the cost reductions at Pallancata will have minimal impact on the annual production target for 2013 of 7.4 million ounces of silver and 26,000 ounces of gold (40% attributable to IMZ). IMZ's 40% share of capital spending for calendar 2013 at Inmaculada ($9.8 million) remains unchanged at this time.

Financial Performance for the Three-Month Period Ended March 31, 2013 (Q3 2013):

The Company reported:

  • net income from continuing operations of $2.2 million ($0.02 per share) compared to $5.5 million ($0.04 per share) for the fiscal quarter ended March 31, 2012 ("Q3 2012"). The decline in income period-over-period reflects lower earnings from the Pallancata Mine which was caused mainly by lower silver production (due to lower grades) and lower gold and silver prices.

  • a net loss from discontinued operations of $7.0 million compared to net income of $0.7 million for Q3 2012. The loss in Q3 2013 represents an additional impairment charge of $5.8 million related to the anticipated sale of the Ecuador properties combined with on-going maintenance costs in Ecuador of approximately $1.1 million. The contribution to income in Q3 2012 reflected income from the Ruby Hill mine royalty in Nevada (sold in May 2012).

  • a Q3 2013 net and comprehensive loss of $4.7 million (a loss of $0.04 per share) compared to net and comprehensive income $6.2 million ($0.05 per share) for Q3 2012, with the reduction in income primarily due to the additional write-down of the carrying value of the Ecuadorian mineral properties and the decline in earnings from the Pallancata Mine as explained above.

  • cash flow used in continuing operations for Q3 2013 of $1.1 million compared to $6.9 million in Q3 2012 for the same reasons discussed above.

At the Pallancata Mine:

(i) The Company's 40% share of income was approximately $4.2 million compared to $11.2 million for Q3 2012, with the decline primarily caused by lower silver production and lower gold and silver prices, together with a modest 2% increase in overall production costs.

(ii) Production (on a 100% basis) was approximately 1.6 million ounces of silver (Q3 2012: 1.8 million ounces) and 6,525 ounces of gold (Q3 2012: 5,612 ounces).

The Company's 40% share was approximately 643,218 ounces of silver (Q3 2012: 712,049 ounces) and 2,610 ounces of gold (Q3 2012: 2,245 ounces).

The primary reason for the reduction in silver production was a decrease in the grade of ore processed.

(iii) Direct site cash costs (as defined by the Gold Institute) were $5.87 per ounce of silver produced after gold by-product credit (similar to Q3 2012 at $5.34 per ounce).

Total cash costs after gold by-product credit (also as defined by the Gold Institute) were $10.15 per ounce of silver produced (similar to Q3 2012 at $9.48 per ounce).

The increase in costs (both direct and total) is largely attributable to lower silver production.

Financial Performance for the Nine-Month Period Ended March 31, 2013 (YTD 2013):

The Company reported:

  • net income from continuing operations of $18.4 million ($0.16 per share) for YTD 2013 compared to $30.4 million ($0.25 per share) for the nine-month period ended March 31, 2012 ("YTD 2012"). The reduction in income is mainly attributable to lower earnings from the Pallancata Mine caused primarily by lower silver and gold production (due to lower grades) and lower gold and silver prices.
     
  • a net loss from discontinued operations of $23.7 million compared to net income of $2.2 million for YTD 2012, the year-over-year increase in loss reflecting primarily the write-down of the carrying value of the Ecuadorian resource properties, while the contribution to income in YTD 2012 reflected revenue from the Ruby Hill mine royalty of $2.2 million. 

  • a net and comprehensive loss of $5.3 million (a loss of $0.04 per share) compared to net and comprehensive income of $32.5 million ($0.27 per share) for YTD 2012, due mainly to the large write-down ($23.7 million) for YTD 2013 of the carrying value for the discontinued operations in Ecuador.

  • cash flow from continuing operations of $7.5 million compared to $20.7 million for YTD 2012, with the change representing the difference in the cash distributions from the Pallancata Mine during the respective periods.

At the Pallancata Mine:

(i) The Company's 40% share of income was approximately $22.2 million compared to $39.7 million for YTD 2012 with the year-over-year decline caused primarily by lower gold and silver production and lower gold and silver prices.

Cash distributions paid to the Company for YTD 2013 totaled $10.0 million compared to $28.0 million in YTD 2012. An additional cash distribution of $5.9 million was received in April 2013.

(ii) Production (on a 100% basis) was approximately 5.4 million ounces of silver (YTD 2012: 6.4 million ounces) and 20,741 ounces of gold (YTD 2012: 23,286 ounces).

The Company's 40% share was approximately 2.2 million ounces of silver (YTD 2012: 2.5 million ounces) and 8,296 ounces of gold (YTD 2012: 9,314 ounces).

The primary reason for the decrease in gold and silver production period-over-period was a function of a decrease in the grade of ore processed.

(iii) Direct site cash costs were $5.21 per ounce of silver produced after gold by-product credit (YTD 2012: $2.71 per ounce).

Total cash costs after gold by-product credit were $9.37 per ounce of silver produced (YTD 2012: $6.87 ounce).

The increase in costs (both direct and total) is largely attributable to lower silver production, lower by-product credits and an increase in mine G&A costs. However, on a positive note, in YTD 2013 compared to YTD 2012, spending in all cost centers decreased with the exception of mine G&A.

Operating Statistics for the Pallancata Mine (100% Basis; 40% attributable to IMZ)

The table below reports key operating and cost statistics for the Pallancata Mine (on a 100% basis) for the quarters ended March 31, 2013 and 2012 and for the calendar years ended December 31, 2012 and 2011, together with the comparative results for the quarter ended December 31, 2012.

                     
    Quarter
Ended
3/31/2013
  Quarter
Ended
3/31/2012
  Quarter
Ended
12/31/2012
  Year
Ended
12/31/2012
  Year
Ended
12/31/2011
Ore mined (tonnes)   240,209   221,556   301,894   1,059,329   1,039,674
Ore processed (tonnes)   251,702   257,339   288,858   1,094,250   1,070,467
Head grade- Ag (g/t)   239   263   255   256   301
Head grade-Au (g/t)   1.1   1.0   1.1   1.1   1.33
Concentrate produced (tonnes)   1,765   1,745   2,212   8,308   8,608
Silver production (oz)   1,608,044   1,780,122   1,941,821   7,440,604   8,768,394
Gold production (oz)   6,525   5,612   7,402   26,231   33,881
Silver Sold (oz)   1,539,220   1,826,000   2,071,312   7,279,600   9,063,800
Gold sold (oz)   5,926   5,500   7,765   25,100   33,900
IMZ direct site costs ($/oz Ag after by-product credit)  
5.87
 
5.34
 
5.18
 
5.14
 
2.20
IMZ total cash costs ($/oz Ag after by-product credit)   10.15  
9.48
 
9.58
 
9.16
 
6.38
                     

Notes:
1. The reported head grades for silver and gold are based on the overall metallurgical balance for the process plant.
2. The difference between "produced" metal ounces and "sold" metal ounces is in-process concentrate. Silver sales have been rounded.
3. Silver and gold ounces sold are reported as gross ounces.
4. Direct site costs (using the Gold Institute definition) per ounce silver and total cash costs per ounce silver reflect a "mined ore inventory adjustment". IMZ believes that this calculation more accurately matches costs with ounces of production (Also see notes 5 and 6 below).
5. Direct site costs comprise mine operating costs, mined ore inventory adjustment, toll processing costs and mine general and administrative (G&A) costs. The costs per ounce are net of gold by-product credits.
6. Total cash costs (using the Gold Institute definition) comprise: direct site costs (as defined in note 5), Hochschild management fee, concentrate transportation and smelting costs, local and regional taxes and the government royalty. The costs per ounce are net of gold by-product credits.

Company Outlook

During the remainder of the 2013 fiscal and calendar years, the Company will focus on:

  • At the 40%-owned Pallancata Silver Mine, working with Hochschild to (a) produce approximately 7.4 million ounces of silver and 26,000 ounces of gold in calendar 2013 (the Company's estimate on a 100% project basis), (b) increase mineral resources and reserves to extend the existing mine life (approximately 3.5 years based on current reserves) and (c) increase profitability by reducing both operating and capital expenditures.

  • At the 40%-owned Inmaculada gold-silver project, also partnered with Hochschild, advancing the project to production in the second half of 2014, subject to financing of IMZ's share of the remaining capital expenditure (approximately $50 million) and the timely receipt of all required permits.

  • Continually evaluating all facets of the Company's capital, technical and administrative expenditures to reduce costs in response to the current depressed market conditions in the mining sector and precious metal markets.

  • At the 100%-owned Goldfield gold property in Nevada, completing the permitting and commencing construction (subject to financing) at the Gemfield project, with a goal of commencing production in the second half of 2015.

  • Completing the sale of the Company's properties in Ecuador.

  • Continuing to seek strategic acquisitions in precious metals properties and/or companies in low political risk countries in the Americas.

The technical disclosure in this news release has been reviewed by IMZ's Qualified Person, Nick Appleyard, VP Corporate Development.

Hochschild Mining plc does not accept any responsibility for the adequacy or inadequacy of the disclosure made in this news release and any such responsibility is hereby disclaimed in all respects.

The complete consolidated financial statements and MD&A can be found on the Company's website at: http://www.intlminerals.com/investors/financial-reports.

Cautionary Statement:

The Gold Institute definitions of Direct Site Costs and Total Cash Costs are non-IFRS financial measures, which Company management believes are useful in measuring operational performance. Some of the statements contained in this release are "forward-looking statements" within the meaning of Canadian securities law requirements. Forward-looking statements in this release include statements related to: mine production expectations; timing of construction and production of projects; financing of capital projects; estimates of financial results; and completion of the sale of the Ecuadorian properties. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties such as: mining, production and processing risks; risks relating to obtaining construction and mining permits; risks related to financing capital projects; risks associated with estimating financial results; risks of obtaining government approvals for the sale of the Ecuadorian properties and the uncertainty in estimating and then receiving their fair market value; and other risks and uncertainties detailed in the Company's Annual Information Form for the year ended June 30, 2012, which is available at www.sedar.com under the Company's name. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 
 
INTERNATIONAL MINERALS CORPORATION
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(Expressed in United States dollars)
(Unaudited)
         
    March 31,
2013
  June 30,
2012
             
ASSETS            
             
Current            
  Cash and equivalents   $ 53,699,941   $ 81,243,474
  Receivables     44,008     79,105
  Due from related party     5,957,578     6,210,377
  Prepaid expenses and deposits     84,014     35,373
  Investments     1,592,885     2,557,195
  Discontinued operations - Ecuador resource properties     19,794,278     39,976,344
             
    Current assets     81,172,704     130,101,868
             
Non-current            
  Property, plant and equipment     32,617,448     359,724
  Investment in associate     176,160,126     133,146,660
  Investment in resource properties     51,215,576     72,401,093
  Reclamation bonds     -     185,100
               
    Non-current assets     259,993,150     206,092,577
             
Total assets   $ 341,165,854   $ 336,194,445
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
             
Current            
  Accounts payable   $ 1,515,138   $ 1,397,461
  Accrued severance and payroll costs      821,027     736,500
  Due to related parties     4,141     17,649
  Discontinued operations - mine royalty     113,152     113,152
  Discontinued operations - Ecuador resource properties     1,529,523     1,103,150
               
    Current liabilities     3,982,981     3,367,912
             
Non-current            
  Deferred income tax liability     8,160,000     8,160,000
               
    Non-current liabilities     8,160,000     8,160,000
             
Shareholders' equity            
  Capital stock     240,817,227     240,784,904
  Reserves     5,499,422     4,869,396
  Equity gain on carried interest     40,000,000     16,782,196
  Retained earnings     42,706,224     62,230,037
               
    Capital and reserves attributable to the shareholders of the Company     329,022,873     324,666,533
             
Total liabilities and shareholders' equity   $ 341,165,854   $ 336,194,445
             
             
Nature and continuance of operations
Subsequent Events
 
Approved on May 8, 2013 by the Directors:    
         
"Stephen J. Kay" Director   "W. Michael Smith" Director
Stephen J. Kay     W. Michael Smith  
         

The accompanying notes are an integral part of these consolidated financial statements and can be found on the Company's website at: http://www.intlminerals.com/investors/financial-reports.

   
   
   
INTERNATIONAL MINERALS CORPORATION  
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME  
(Expressed in United States dollars)  
For the three and nine month periods ended March 31 (Unaudited)  
   
                         
    3-Month Period
3/31/2013
    3-Month Period
3/31/2012
    9-Month Period
3/31/2013
    9-Month Period
3/31/2012
 
                                 
Revenue   $ -     $ -     $ -     $ -  
                                 
Income from associate, Minera Suyamarca S.A.C.     4,209,121       11,211,600       22,249,972       39,749,600  
                                 
Other income (loss)     (142,483 )     (1,149,112 )     884,852       (86,107 )
                                 
    Total income     4,066,638       10,062,488       23,134,824       39,663,493  
                                 
Expenses                                
  Amortization and depreciation     (196,533 )     (195,713 )     (587,997 )     (581,290 )
  Salaries and employee benefits     (739,052 )     (1,899,756 )     (1,631,239 )     (2,832,807 )
  Administrative costs     (635,543 )     (788,986 )     (1,719,389 )     (2,088,208 )
  Stock-based compensation     (250,722 )     (163,268 )     (759,699 )     (338,007 )
  Financing expense     -       (548,050 )     -       (1,646,042 )
  Write-off of resource properties     -       (288,141 )     -       (348,604 )
                                 
    Total expenses     (1,821,850 )     (3,883,914 )     (4,698,324 )     (7,834,958 )
                                 
Income from continuing operations before taxes     2,244,788       6,178,574       18,436,500       31,828,535  
                                 
Income taxes     -       (656,000 )     -       (1,476,000 )
                                 
Income from continuing operations after taxes     2,244,788       5,522,574       18,436,500       30,352,535  
                                 
Discontinued operations, net of taxes                                
  Income from mine royalty     -       668,300       -       2,185,903  
  Costs and write down - Ecuador resource properties     (6,977,992 )     -       (23,737,646 )     -  
                                 
Income (loss) from discontinued operations     (6,977,992 )     668,300       (23,737,646 )     2,185,903  
                                 
Net income and comprehensive income (loss) after taxes   $ (4,733,204 )   $ 6,190,874     $ (5,301,146 )   $ 32,538,438  
                                 
Income from continuing operations after taxes per common share                                
  Basic   $ 0.02     $ 0.04     $ 0.16     $ 0.25  
  Diluted   $ 0.02     $ 0.04     $ 0.16     $ 0.25  
Income (loss) from discontinued operations after taxes per common share                                
  Basic   $ (0.06 )   $ 0.01     $ (0.20 )   $ 0.02  
  Diluted   $ (0.06 )   $ 0.01     $ (0.20 )   $ 0.02  
Net income (loss) after taxes per common share                                
  Basic   $ (0.04 )   $ 0.05     $ (0.04 )   $ 0.27  
  Diluted   $ (0.04 )   $ 0.05     $ (0.04 )   $ 0.27  
                                 
Weighted average number of common shares outstanding - Basic     117,586,376       119,586,197       117,586,212       120,134,377  
Weighted average number of common shares outstanding - Diluted     117,717,973       119,903,351       117,859,111       120,879,295  
                                 

The accompanying notes are an integral part of these consolidated financial statements and can be found on the Company's website at: http://www.intlminerals.com/investors/financial-reports.

                         
                         
                         
   
3-Month Period
Ended
3/31/2013
   
3-Month Period
Ended
3/31/2012
   
9-Month Period
Ended
3/31/2013
   
9-Month Period
Ended
3/31/2012
 
CASH FLOW FROM CONTINUING OPERATIONS                                
  Net income for the period from continuing operations   $ 2,244,788     $ 5,522,574     $ 18,436,500     $ 30,352,535  
  Adjustments to net income:                                
    Amortization and depreciation     196,533       195,713       587,997       581,290  
    Stock-based compensation     250,722       163,268       759,699       338,007  
    Unrealized foreign exchange loss (gain)     25,366       736,694       3,959       (767,798 )
    Realized gain on sale of investments     (12,398 )     -       (189,922 )     -  
    Unrealized loss (gain) on investments     419,824       (256,845 )     6,117       4,567  
    Write-off of resource properties     -       288,141       -       348,604  
    Financing expense     -       548,050       -       1,646,042  
    Equity income from investment in associate     (4,209,121 )     (11,211,600 )     (22,249,972 )     (39,749,600 )
    Interest income     (70,848 )     (57,118 )     (276,828 )     (348,625 )
    Deferred income tax expense     -       656,000       -       1,476,000  
    Cash distributions received from investment in associate     -       -       10,000,000       28,000,000  
  Changes in non-cash working capital items:                                
    Decrease (increase) in receivables     107,935       (2,615,238 )     37,650       78,029  
    (Increase) decrease in prepaid expenses and deposits     (60,263 )     91,013       (48,641 )     31,301  
    (Decrease) increase in accounts payable     (141,350 )     (134,430 )     257,054       (800,980 )
    (Increase) decrease in due from related party     (14,556 )     106,736       166,008       481,506  
  Increase (decrease) in accrued severance and payroll costs     174,123       (64,521 )     14,500       (123,358 )
  Increase (decrease) in due to related party     2,538       (5,859 )     (13,508 )     (50,585 )
    Income tax paid     -       (820,000 )     -       (820,000 )
  Net cash flow (used in) provided by continuing operations     (1,086,707 )     (6,857,422 )     7,490,613       20,676,935  
                                 
    Discontinued operations - mine royalty     -       1,324,347       -       4,204,595  
    Discontinued operations - Ecuador resource properties     (1,234,006 )     220,634       (3,129,207 )     92,886  
  Net cash flow (used in) provided by discontinued operations     (1,234,006 )     1,544,981       (3,129,207 )     4,297,481  
                                 
  Net cash (used in) provided by operating activities     (2,320,713 )     (5,312,441 )     4,361,406       24,974,416  
                                 
CASH FLOW FROM (USED IN) FINANCING ACTIVITIES                                
  Proceeds from the issuance of common shares     -       398,156       18,327       1,067,516  
  Convertible debenture interest payment     -       -       -       (1,097,992 )
  Repurchase of common shares     -       (5,897,784 )     -       (12,508,115 )
  Dividends paid to shareholders     (14,338,345 )     -       (14,338,345 )     -  
                                 
  Net cash flow used in financing activities     (14,338,345 )     (5,499,628 )     (14,320,018 )     (12,538,591 )
                                 
CASH FLOW FROM (USED IN) INVESTING ACTIVITIES                                
  Resource property expenditures     (795,365 )     (2,149,227 )     (5,023,693 )     (10,729,163 )
  Purchase of investments     -       -       -       (157,165 )
  Sale of investments     17,353       -       1,171,206       -  
  Interest received     75,852       39,058       274,275       301,519  
  Cash contributions to investment in associate     -       -       (8,000,000 )     -  
  Capital expenditures - property, plant and equipment     (2,668,475 )     -       (6,112,540 )     -  
  Purchase of property and equipment     (19,000 )     (62,979 )     (79,269 )     (194,999 )
  Reclamation bonds     -       -       185,100       -  
  Cash received on sale of interest in Inmaculada     -       2,650,000       -       2,650,000  
  Discontinued operations - Ecuador resource properties     -       (1,641,004 )     -       (6,554,517 )
                                   
  Net cash flow used in investing activities     (3,389,635 )     (984,152 )     (17,584,921 )     (14,684,325 )
                                 
Change in cash and equivalents for the period     (20,048,693 )     (11,796,221 )     (27,543,533 )     (2,248,500 )
Cash and equivalents, beginning of period     73,748,634       95,386,957       81,243,474       85,839,236  
                                 
Cash and equivalents, end of period   $ 53,699,941     $ 83,590,736     $ 53,699,941     $ 83,590,736  
                                 

Supplemental disclosure with respect to cash flows

The accompanying notes are an integral part of these consolidated financial statements and can be found on the Company's website at: http://www.intlminerals.com/investors/financial-reports.

Contact Information

  • For additional information, contact:

    In North America
    Paul Durham
    VP Corporate Relations
    Tel: +1 203-883-8358

    In Europe
    Oliver Holzer
    Marketing Consultant
    +41 44 853 00 47

    Renmark Financial Communications:
    Christine Stewart
    +1-416-644-2020
    or
    Robert Thaemitz
    +1-514-939-3989

    Or send an email to: Email Contact
    Internet Site: http://www.intlminerals.com