Imperial Metals Corporation (III) Earnings Call Transcript & Summary

Hello, everyone, and welcome to Imperial Metals Corporation's Annual General Meeting of Shareholders. My name is Pierre Lebel. I'm Chairman of Imperial and will chair today's meeting. This morning, we are pleased to host this meeting through a virtual meeting platform, accessible to all our shareholders, regardless of physical location to participate, submit questions and vote. Under this new format, the polls will close after the vote has been called for the last motion, so we encourage you to vote now if you have not already done so. Joining me today are Brian Kynoch, President and Chief Executive Officer; and Andre Deepwell, Chief Financial Officer. I will now proceed with the formal business of the meeting. There will be a presentation of the year's highlights by our President, Brian Kynoch, following the formal portion of this meeting. I will now officially call the meeting to order and appoint Andre Deepwell to act as Secretary of the meeting; and Jenny Karim of Computershare Investor Services to act as Scrutineer of the meeting. Only registered shareholders who held shares in their name as of April 6, 2020, the record date of this meeting, or their validly appointed proxyholders are entitled to vote at this meeting. If you have questions about the matters before this meeting, we ask that you submit them now. I will now commence the formal business of the meeting. The business of the meeting is described in the management information circular dated April 6, 2020, which accompanied the notice of the meeting. We will conduct the votes on the matters before us by poll. On a poll, every shareholder entitled to vote on the matter has 1 vote in respect of each share held to be voted on the matter and held by that shareholder. You may vote online at any time during this meeting until I announce that the polls are closed. The final voting results will be available on SEDAR and Imperial's website. The notice calling this meeting and the other required materials were mailed to shareholders of the company on April 14, 2020. These documents and the proof of service is retained with the records of this meeting. A quorum is present, and I now declare that the meeting has been duly called and properly constituted for the transaction of business. The Interim Scrutineer's report on attendance at this Annual General Meeting confirms participation in this meeting by 90 shareholders represented in person or by proxy holding a total of 93,443,664 shares, and this represents 72.7% of the issued and outstanding common shares of the company. The last Annual General Meeting of the company was held on June 25, 2019. And I direct that the reading of the minutes of that meeting be dispensed with and that the minutes be approved as if read. The next item of business is the presentation of the annual consolidated financial statements of the company as at December 31, 2019, together with the report of the auditors. The 2019 annual report, together with the related management discussion and analysis were mailed to shareholders who have requested a copy and are available on SEDAR and on Imperial's website. I declare that the financial statements of the company for the financial year ended December 31, 2019, and the auditor's report thereon have been received. We will now proceed with the election of directors for the ensuing year. If you have not yet voted, please submit your votes now. The nominees recommended by management for election of directors are: Brian Kynoch, Pierre Lebel, Larry Moeller, Theodore Muraro, Janine North, James Patrick Veitch and Edward Yurkowski. If elected, they will hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed, unless their office is earlier vacated or they become disqualified to act as the director. All of the nominees have consented to their election. Given that the company has adopted an advanced notice policy, and the company has not received notice of any nominations pursuant to such policy, I declare the nominations closed. As Chair, I propose the following motion: that the 7 nominees recommended by management be elected as directors of the company to hold office until the next Annual General Meeting of Shareholders or until their successors are duly elected or appointed unless their office is earlier vacated. The final voting results will be available on SEDAR and Imperial's website. The next item of business is the appointment of auditors. If you have not yet voted, please submit your vote now. Deloitte LLP, the current auditor of the company is proposed as auditor of the company to hold office until the next Annual General Meeting of Shareholders. As Chair, I propose the following motion: that Deloitte LLP be appointed auditor of the company until the close of the next Annual General Meeting of shareholders and that the directors be authorized to fix the auditor's remuneration. [Voting]

There being no questions, I declare the polls now closed for the approval of all matters before this meeting. Details of the final voting results will be available on SEDAR and the company's website after this meeting. Preliminary results of votes cast in the election of directors are as follows: Brian Kynoch, in favor, 99.9%; Pierre Lebel, in favor, 95.6%; Larry Moeller, in favor, 99.9%; Theodore Muraro, in favor, 99.8%; Janine North, in favor, 99.9%; James Patrick Veitch, in favor, 99.9%; Edward Yurkowski, in favor, 99.8%. I now declare all those nominated have been elected directors of the company to hold office until the next Annual General Meeting. For the information of the meeting, with respect to the company's majority voting policy, each nominee has received a greater number of votes in favor of election than the number of votes withheld from election. The preliminary results of votes cast for the appointment of auditors is 99.75% in favor of the appointment of Deloitte LLP as auditor of the company. I now declare this motion carried. Details of the final voting results will be available on SEDAR and the company's website. Imperial knows of no other matter to properly come before the meeting. Therefore, as Chair, I propose the following motion that the meeting be terminated. There being no questions received, I declare this motion carried. That concludes the formal part of this year's Annual General meeting. Thank you all for your attendance. I will now ask Brian Kynoch, President and Chief Executive Officer, to review the key highlights and developments over the past year, and we welcome your comments and questions following this presentation.

Good morning, and welcome to our 2020 Annual General Meeting. I'm going through a number of slides today to update you on the company's projects, with a focus on Red Chris, Mount Polley and Huckleberry. And you see this slide is a shot of Red Chris. The closest pit view is the East Zone and in the background there is the Main Zone up on the plateau. In 2019, we achieved our key goal for the year to strengthen our balance sheet by completing the Red Chris joint venture transaction with Newcrest Mining. With our 30% pooling in the joint venture, we will continue to participate with Newcrest in the exploration activities at Red Chris. Imperial is now in a much better position to create value and opportunities for its shareholders and stakeholders with a strengthened balance sheet and participating in exploration and development of a world-class Tier 1 ore body. We would go to the next slide. A warning here that some of the statements I make may be forward-looking. Would you go to the next one? So it's going to focus on Red Chris, Mount Polley and Huckleberry. And you can see that they're at the top of this pyramid. But I just wanted to -- I don't think everyone knows that our corporation for our size holds a very large and diverse portfolio of projects. As you can see, we have 28 projects that range from our interest in the Red Chris operating mine to grassroots projects, with several of these having defined resources -- drilled-off and defined resources. Since we completed the transaction with Newcrest, we've begun a review of all of these projects to prioritize them for future exploration. With the current gold price, we're putting extra attention on the projects that contain gold. But for this year, we plan to concentrate our efforts, as I said, on Red Chris, Mount Polley and Huckleberry. Specifically, one, to continue the exploration at Red Chris searching for additional zones of mineralization as well as expanding the existing zones. To define with additional drilling the high-grade pod, originally intersected by Imperial in RC09-350 and intersected again this year in RC611. Also follow-up on RC616, which appears to have confirmed another discrete high-grade pod of mineralization within the East Zone. Secondly, with Newcrest, began the excavation of an exploration decline to kickstart the transformation of Red Chris into a Tier 1 copper-gold mine. Thirdly, at Mount Polley and Huckleberry, work hard to minimize our holding costs, while we investigate process improvements that can strengthen the economics of these mines when we reopen them. One of the areas that we're really keen on now is looking at ore sorting. Sort the ore before close of the mill and see if we can improve the economics. And fourthly, conduct minesite exploration at both Mount Polley and Huckleberry, which have targets to warrant exploration. One of the things now that's really changed, I'd say, mining is the development of block cave mining, it become a mainstream mining technique, and this mining method has changed the economics of deeper deposits. We go to the next slide. Talk a bit about production at Red Chris. And what we have here is a table showing the annual production for the last 3 years and Q1 2020. So may, I'll just give you a few comments on the Q1 2020 results. So you'll see on there that the mill throughput is quite a bit lower than traditionally at Mount Polley, 21,585 tonnes a day versus 28,577 for the 2019 -- 2019 annual results. Newcrest did that so they could conserve water in the cold months. And one of the byproducts that's going at a slower rate is much finer grind. And with the much finer grind and newly installed donut launders, which I'm going to show you a picture of in a couple of minutes here. The roughing circuit work much better. And you can see there, recoveries increased with reaching almost 84% for copper and 55% for gold. The other thing to note is the higher grades. So you'll see the grades for that quarter were 0.618 for copper and almost 0.5 gram for gold. This is mineralization coming from the bottom of the Phase IV Main Zone pit of much higher grade. And so when you look at production at the end, 22 million -- over 22 million pounds for that quarter and over 17,000 ounces of gold, the grades and recovery more than made up for that lower tonnage rate. Maybe move on to the next slide. As I mentioned, the donut launder, this is one of them being installed. So these are installed on the roughing circuit, enable us to pull more mass in the roughing stage, more of the sulfides that contain copper and gold. And Newcrest expects -- I think it was at the end of April all 6. So there's 6 rougher cells. They were installed 2 at a time. By the end of April, all have been installed now. And Newcrest expects to get about 1.4% increase in copper recovery and about 0.7% increase in gold recovery from the installation of those launders. Let me note one other thing on that slide that there is engineering underway to look at providing more cleaner column capacity and further enhance the recoveries. Then move to the next slide. This slide is -- I think we actually showed it last year at some point. This one is the drilling that Newcrest plan to do after the completion of the transaction in August, they planned 16 holes in the East Zone and 19 holes exploring the main Gully/Far West areas, for gold of about 50,000 meters. So if we move to the next slide, we'll see the Newcrest drilling to date. They've drilled about almost 30,000 meters since then. So in the next couple of months, they probably will be a little bit behind their target of 50,000-plus meters by June. And I think it's largely due to -- it has been a little bit slower with COVID than they planned to do. Although right now, they have 4 drills going. They expect in the next couple 3 weeks to have -- be back up to 6, and then are going to try to get up to 8 within the next month. Since January, they've been mainly focused -- you can see on this plan that there is no drilling underneath the Main Zone. So the Main Zone is a highly prospective area, but they haven't got around to that. You'll see that there's a little bit of drilling out in the -- to the Far West to the very right-hand side of the slide. That's in the Gully zone and the Far West. And you'll just note 1 hole, there you can see pretty clearly that 608R get a bunch of mineralization outside the grade shell. So those red colored areas are the grade shell from the historic drilling. So quite a bit of mineralization in the Far West or in the Gully zone, but we still need work in that area to figure out the geometry of the mineralization. Newcrest plans to conduct about 75,000 meters from June '20 to June 2021. And they're planning to do a mineral resource statement update early next year. We move on to the next slide. So this is the plan map of the East Zone drilling. The drilling here has returned some of the best results within BC's Golden Triangle. And 2 of them I want to point out, you'll see kind of in the middle upper section, RC611. So 611 confirm the presence. The first angle hole, we have a vertical hole in the high-grade pod that we first discovered with 350. This is an angle hole across it. In 2009, we intersected 152 meters of 4% copper and 8 grams per tonne of gold in drill hole 350. This RC611, I'll show you some cross-sections in a minute, cuts across that zone and intercepted 74 meters of 3.8% copper and 9.1 grams per tonne gold. So confirm the presence of a pod in that area. The other thing you'll note in most of those intersections I've just described to you, the gold grade and grams per tonne is about double the copper grade and percent, and that is consistent with all the drilling in the BP zone, it's a high gold to copper ratio. Move to the next slide. To back up, that Slide 1 -- for just 1 second, please. So the other thing here is the other high-grade pod is that I'll show you a section of is RC616, and you can see it's about 300 meters to the west of the high-grade pod in 611. And I'll show you some slides on it, but I just want you to have in your mind about where the second high-grade pod. Okay. We'll move on now. So this is a section with a lot like a section kind of tied in to 350. So you can see 350 was a vertical hole and then RC611 cutting across it with those 2 high-grade intercepts. Yes, we can move on to the next one, which is another one, showing 350, this is kind of 350 with a lot of the drilling around it. Right now, Newcrest is working on planning an additional 10 holes in the vicinity of this very high-grade pod to further define it. Maybe move on to the next one. So this is the new high-grade pod. So as we just showed you on the plan map, this is about 300 meters to the west of the 350 pod, this one hit 80 meters of 1.7% copper and 3.4 grams per tonne gold. And this zone remains open to the west-southwest and has significant potential to be extended. And the historic drilling in this area is quite sparse. We didn't drill a lot in this area. We're moving now towards the Main Zone, where the density of drilling was much less than the East Zone when we drilled it. And again, Newcrest is looking to conduct more drilling here to further define this high-grade pod around 616. We move to the next slide. So this is a slide. It's a plan view and maybe I'll just orientate you a bit. You can see in the slide -- very beginning slide, you'll see that there's -- this line is parallel and just to the north of the East Zone pit, at the very left-hand side of the slide. And at the right-hand slide, you'll see a portal down near the tailings area. So this is a ramp, underground ramp down into to provide access parallel to the BP zone for drilling from underground. Now in the current underground mining study, they're actually looking and they're going to evaluate the idea of stoping those -- that high-grade pod around 350 or 316 once they've been further defined by drilling, kind of before we go even deeper. This ramp will probably only take halfway down where you're going to have to go to do a block cave mine. And Newcrest plans to have this ramp started by the end of this year and hopes to complete a pre-feasibility study on an underground mine at Red Chris by mid next year. Maybe move on to the next slide. So this slide shows a conceptual view in the vicinity of the Red Chris mill with 2 new conveyor systems that are bringing ore up from an underground mine. And this is -- I just want to confirm with you, Newcrest and our goal that we're going to turn Red Chris into a world-class Tier 1 mine. And just to give you kind of a feeling for what Newcrest says a Tier 1 mine is. It's a mine that can produce over 300,000 ounces of gold a year. It would have a mine life greater than 15 years. And have an all-in sustaining cost of less than $800 an ounce. So we're on the way to turning Red Chris into one of those. I'm going to move on to the next slide. As I said, the other focus is go have a look around our existing mines, Mount Polley and Huckleberry. So in the next few slides, I'm going to discuss the excellent opportunities we have at Mount Polley and Huckleberry to find some more stuff around the mine. It's a truism that the best place to find mineralization is where it's already been found. And one of the points is at both mines, exploration and depth is lacking. As I said, with block cave becoming a mainstream mining method, the economics of deeper deposits have changed. And deeper drilling, like we did at Red Chris should be considered. And at Mount Polley, the other focus at Mount Polley is the focus on gold. With the current gold price, it changes the economics. And Mount Polley is often -- often has been during its history a majority gold mine or 50-50 gold and copper in revenues. So there's a lot of gold at Mount Polley. The other thing we've got going at Mount Polley is we've acquired ground to the north and east of us that we've never had before. And so that's more greenfields exploration. But in the next few slides, I'll show you why we think we have a lot of potential there as well. If we move on. So on this slide, we're showing you the -- not sure what color that's. The ground -- what color would you say this, it's a little bit darker like color. The tan color. So if you see the tan color on this, this is the new ground that we've never had. And you'll see it's a block of claims mainly to the north, but also a block right to the east of our minesite. So we have an option to earn 100% interest in these mineral claims adjacent to the mine. And next few slides, I'll show you some of the work we've been doing out there already. We'll go to the next one. As I said, both at Huckleberry and Mount Polley and block cave mining has changed. So we want to change the economics of deep. This is an example of what you might see. So historically at Mount Polley and Huckleberry you drill to a maximum of around 300 meters. And that, I would say, absolutely true at Huckleberry and at Mount Polley, except for in a few places, the major one of that being deep in the Springer pit, it would follow that. But there's been a little bit of drilling at Mount Polley deeper than the 300 meters. So we've been using magnetometers and now a deep IP survey over the ground to the Northwest to look for concealed copper and gold deposits. So if we move to the next one. So this is the airborne magnetic map at Mount Polley. And you'll see the biggest oblong there, circle, that's the area between the 2 Lakes, Bootjack and Polley Lake, where all of the existing deposits are held at Mount Polley. And that's the reason Mount Polley was found. 1964, the Canadian government did an airborne mag survey and Mount Polley, that area between the 2 lakes, the oblong there was the highest magnetic anomaly on the map sheet. And you'll see that up to the northwest there, you've got untested stock. So part of this ground is -- would have been commander ground and part of it would have historically been ours. It's largely untested. So if we go to the next slide. So this is a deep looking 3D IP survey that we did late last year. And you'll see out to the very left-hand part of the slide, which -- this is a deep IP anomaly, actually, there is no anomaly at the surface. I think this starts about 100 meters down and goes to around 400 meters. So this is an anomaly coincident with that MAG anomaly that you saw in the top. So a very good place to go look and hopefully, we found one of those concealed copper or gold deposits. And you see the workings at the mine just to the bottom. So we're just to the north of the existing workings. We'll go to the next one. So actually, this survey is going to get ready on -- ready to get going on Friday. So it attaches to the north of the survey you saw in the previous slide. And we're now going to go do the same deep looking 3D IP down underneath all the areas we've mined and go see if that will help us look for a concealed deposit between the lakes. Go to the next one. This is a cross-section through the Cariboo and Springer pits at Mount Polley. You'll see if you go kind of to the right-hand side of the screen, that's the Cariboo pit. And you'll notice there the drilling is relatively shallow. So a couple 300 meetings -- 300 meters with the historic drilling. And then you'll see, as I mentioned, the one place where we have done some fairly deep drilling is deep beneath the Springer. And you'll see that we've actually got some good results deep beneath the Springer. You've got 1 hole highlighted there. Springer [ D 04 16 ], 90 meters of 1.1 gram and over 1% copper. So it's another good place to go look. And you'll also see there's a fairly big area between the Springer and the Cariboo with no drilling and a couple angle holes and a vertical hole, looking to go check that area out. We go to the next one. So in this review we were doing, this is one of the things that came out of it, I would say, in particular, the one here that you'll see that south of Cariboo high-grade gold target. So in a plan map, you'd see that both these zones are kind of south of the -- [indiscernible] south of the -- on the left-hand side, Springer pit, and on the right-hand side of that fall, the Cariboo pit. And if you look at that hole south of Cariboo that's highlighted there, [ C 11 97 ], 55 meters of 2 grams of gold and over 1% copper. Those are the kind of grades you could think of mining underground. Within that, I know that there's up to 6-gram gold in some of that material there. So -- and you see it's not -- especially on the Cariboo side, very little drilling at depth in that zone. And similar good results on the -- to south with gold. It appears as you move south from both of those pits, you get into material that has high gold to copper ratios, where the gold in gram per tonne exceeds the copper in percent versus in the Springer pit, in particular, usually, the copper is slightly higher than the gold in gram per tonne. If we move to the next slide. So now this is -- we moved on to Huckleberry now, and this is kind of the concept of checking out at depth. If you look at the left-hand side of the screen here, the 2 slides compare Huckleberry in 2020 and Red Chris in 2006. And in both cases, it's maybe a bit of an anomaly because both the -- both called the East Zone. So the East Zone at Huckleberry, when we mined it, we got about 0.7% copper -- around about 0.7% is the average grade in East Zone. The overall average grade at Huckleberry is about 0.35 from the Main Zone area, where we were -- this was mined near the beginning of the mine life. But you'll see virtually all of the drilling at Huckleberry and the East Zone only went down a couple of hundred meters. And then you look at Red Chris. At Red Chris, before we bought it, all the drilling went down about 300 -- the maximum was about 300 meters. But you'll see in both cases, the pit designs, mine, virtually all of the drilling. And then when we bought Red Chris, we decided we were going to go and check out the roots, seeing what was beneath the near-surface deposit in the East Zone. And if you look across there on the right-hand side, you'll see what our drilling show that the deposit -- the best part of the deposit was actually beneath the 400-meter level. And Newcrest is busy right now, making it even bigger and better than this. So we think it's a really good idea just to go check out the roots. If you look at the corner of the slide in the upper left-hand side, do some drilling underneath, and let's check out the roots of the high-grade portion at Huckleberry. We'll move to the next slide. So this is a plan map now and you got the satellite view of the Huckleberry mine. And the little box is over top of the East Zone and the layout of some of the drilling that we are planning there. Just going to move -- on the right-hand side there, we've got a slide, a cross-section showing a proposed hole and also showing the kind of intercept that you were getting in the East Zone at Huckleberry. So you see hole [ 94 1 7 1 ] there, 269 meters. Virtually, its hole length once it pass through the overburden, the covered deposit in mineralization at -- 269 meters at 0.64. You move to the next slide. So one of the other -- kind of probably a bit more grassroots target is hole [ 98 45 ] which is -- [ 2 45 ], what you see on the cross-section on the left-hand side was a hole -- probably the most northerly drilled hole on the site or nearly, certainly the most northerly drilled hole in the vicinity of East Zone. And you can see it hit 81 meters of 0.27 near the -- near its bottom up on the hillside above the east pit. So here's a hole, again, going to check out what happens at depth, go down underneath that hole and see if we -- what happens beneath it. Now this one would be like a new zone that we discovered because there's no drilling to the north of [ 98 2 45 ] on this one. So we'll move to the next slide. So we also have 1 hole on the south west corner of the Main Zone. So that red box on this slide in the Main Zone area, see where the water is, that's the bottom of the Main Zone optimization pit. And you'll see that one called [ Justin B ] on the lower left-hand side of the box. So in the Main Zone, the majority of the mineralization is in periphery of the stock. So there's an intrusive stock into the volcanic rocks around the periphery is where the good mineralization is. And this is a hole out in an area of fairly sparse drilling to follow-up on a fairly good one in [ 98 2 45 ], we drilled 110 meters of almost 0.5% copper. There's not a lot of -- again, remember, all the drilling in the vicinity goes down about 200 meters. This is a hole to go down and check what's going on beneath that hole. Move on to the next slide now. And then just -- just in conclusion, one of the -- one of the very beginning slide, I mentioned, we have a large number of projects. We actually have 14 royalties as well. And just to highlight probably the royalty that's in the most active area. So this is down in BV, just outside of BV, Nevada in the vicinity of our Sterling mine. We've kept a royalty 2% NSR in the majority of the claims that we sold. And you'll see on the left-hand side, the area that we have -- we still have a royalty on. And if you focus your stuff on the top, you'll see the upper portion surrounds the Mother Lode project that Corvus is currently drilling on and has 1, 2, 3, 4, 5, five deposits that Cornel (sic) [ Corvus ] owns and is planning to explore. And then if you look on the right-hand side, AngloGold has had a big program, I think, now for 3 years, just to the northeast of us. At any rate, the Sterling royalty is one of the ones -- one of our royalties that's likely to have some value soon if we continue to have the amount of exploration that's happening down there near our project. We just go to the last one. I'll -- that will conclude my presentation, and I'll take some questions if we have some. Yes. Well, I don't see any questions. So thanks, everyone, for participating. We appreciate it, and look forward to a great 2020. Thanks, everyone.