Imperial Metals Corporation (III) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of Imperial Metals Corp. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use of same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Computershare and the corporation that you first obtain all required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. [Operator Instructions] It is now my pleasure to turn today's meeting over to Pierre Lebel, Director and Chairman of Imperial Metals Corporation. Mr. Lebel, the floor is yours.

Well, thank you for the floor, and welcome, everyone, to this Annual General Meeting of Shareholders. As Director and Chairman of the company, I will chair the business of today's meeting. We're pleased to host the meeting through this virtual meeting platform accessible to all our shareholders regardless of physical location to participate, submit questions and vote. The polls will close after the vote has been called for the last motion, so we encourage you to vote now if you've not already done so. I am joined at this meeting by Brian Kynoch, Director, President and Chief Executive Officer; and also by Darb Dhillon, Chief Financial Officer. I will now proceed with the formal business of the meeting, which will be followed by a presentation by Brian Kynoch. I officially call the meeting to order and appoint Darb Dhillon to act as secretary of the meeting. I appoint Jenny Karim of Computershare Investor Services to act as scrutineer at the meeting. Only registered shareholders who held shares in their name as of April 1, 2022, the record date of this meeting, or their validly appointed proxy holders are entitled to vote at this meeting. [Operator Instructions] I would ask that you limit your questions to those matters directly relating to the specific matters being considered but will respond to any other questions at a later time. Note that after the formal portion of this meeting, there will be a further opportunity for questions. I've asked Darb Dhillon to monitor the meeting dashboard for questions and will be pausing from time to time to allow time for questions to be asked. I will now commence the formal portion of the meeting. As described in the Management Information Circular dated April 1, 2022, which accompanied the Notice of 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 one vote for each share 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 on Imperial Metals website. The notice calling this meeting and the other required materials were mailed to shareholders of the company on April 13, 2022. These documents and the proof of service will be retained with the records of this meeting. I have before me a preliminary scrutineers report indicating that 78 shareholders have voted 89,559,926 common shares of the company by proxy, representing approximately 63% of the issued and outstanding common shares of the company. Accordingly, I declare that a quorum of shareholders as required under the company's articles is present and that the meeting is regularly called and properly constituted for the transaction of business. The last Annual General Meeting of the company was held on May 26, 2021, and I direct that the reading of the minutes of that meeting be dispensed with and that the minutes be approved as if read. I will now pause a moment for questions. Darb, were there any questions?

No, none at this time.

Thank you. The next item of business is the presentation of the annual consolidated financial statements of the company as at December 31, 2021, together with the report of the auditors. The 2021 annual report, together with the related management's discussion and analysis, were mailed to shareholders who had requested a copy and are available on SEDAR and on Imperial's website. I will now pause another moment for any questions. Darb, were there any questions?

No, none at this time.

Thank you. I declare that the financial statements of the company for the financial year ended December 31, 2021, and the auditor's report thereon have been received. We will now proceed with the election of directors for the coming year. Carolyn Anglin, Brian Kynoch, Pierre Lebel, Larry Moeller, Janine North, James Patrick Veitch and Edward Yurkowski have been recommended by management as nominees for election as directors to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. 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. I will now pause for questions. Darb, were there any questions?

No, none at this time.

Thank you. As Chair, I propose the following motion. The 7 nominees to whom I have referred be elected as the 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 the office is earlier vacated. The next item of business is the appointment of auditors. 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, the 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. I will now pause for questions. Darb, are there any questions?

No, none at this time.

Thank you. The next item of business is to approve all unallocated stock options. As Chair, I propose the following motion. That all unallocated stock options under the amended and restated stock option plan of 2007 of the company be approved of the wording of which resolution is set out on Page 25 of the Management Information Circular dated April 1, 2022. I will now pause for questions. Darb, were there any questions?

No, none at this time.

Thank you. There being no questions, I declare the polls now closed for the approval of all matters before this meeting. Based on the interim scrutineer's report, I have been advised by the scrutineer that the majority of the proxies deposited for the meeting have been voted in favor of each of the foregoing motions. Accordingly, I declare each of these motions carried. I would ask that the scrutineer compile the final report regarding the results of voting on all business matters and results published by the company on SEDAR and by news release. I also direct that the results be included with the minutes of this meeting. 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. But before concluding the formal portion of this meeting, I will make a last call for further questions. Darb, were there any questions?

No, none at this time.

Thank you. There being no questions received, I declare the motion carried. Thank you for your attendance to the formal portion of this meeting, and I will now turn the meeting over to Brian Kynoch, President and Chief Executive Officer, for his presentation.

Okay. Thank you so much, Pierre, and good afternoon to everyone. Thank you for attending our Annual General Meeting. And now that the formal part of the meeting is complete, I'll take this opportunity to update you on some of our key projects. First, before we get there though, just a warning that some of what I say may include forward-looking statements. And then the slide here showing a drill actually up on the south end of the Springer pit doing some pioneering work earlier this year. So closed since May of 2019, we're reopening the Mount Polley mine. The mining activity has been going on up there since November on pre-stripping of the Springer pit that's required for us to access or provide mill feed for the restart of processing operations. Of note, we've renegotiated our community investment agreement with the Williams Lake First Nation, are working on renewing a similar agreement with our other First Nation partner, the Xatsull First Nation. Aside, Mount Polley was the first brownfield project -- mining project to enter agreements with First Nations in BC. When in 2012, we signed the first participation agreement with the Williams Lake First Nation. On this next slide here is a shot of Mount Polley from the south as well. You see the plant site in the Springer pit. The vast majority of our ore is going to come from the Springer pit in its next life, and you can see that pointed out. You can also see a ridge between -- in the later pictures, you're going to see it even better, but there's a ridge between the Springer and Cariboo pits, and that's where the mining has been going on now. We need to take that ridge down. And in the end, the Springer and Cariboo pits basically become one. The mine plan that we have right now provides for about 9 years of feed and averages about 44,000 ounces of gold and 32 million pounds of copper a year. Kind of the profile of going through it is year 2 and year 3, like the first year from now until the end of the year, we're beginning 4 from that ridge between the pit. So it's lower-grade material. But year 2 and year 3 are [ stuff ] from the bottom of Phase 4, and I'll show you some slides later so you'll know where Phase 4 is. And that's good ore in -- It's a similar ore that we milled in 2013, about 0.3% copper and about 0.25 grams per tonne gold. And actually in 2013 with similar ore, we were making copper for about USD 1 a pound. Now the cost structure is quite a bit different between then and now, but it was good Mount Polley ore. We should have good profitability with that ore. Then we have [ 40 years ] of kind of medium-grade ore while we get into Phase 5 and do pre-stripping of Phase 6. So the middle year, [ 40 year ] 7 is about 0.25 and 0.25. Then we have 2 strong years at the end when we're down in the bottom of Phase 6 in WX. And again, I'm going to point out where these are on some slides later. But then you're getting more -- almost 0.4 copper and 0.37 grams per tonne gold. And in the last year, 0.28 copper, about 0.4 grams per tonne gold. So when we're in the WX pit, it's basically a gold mine, then it is the majority of the value. On this slide, it's a little closer in the Springer and the Cariboo. I'm not sure if you guys can see my cursor, but there's a ridge right between the Cariboo pit and the Springer pit. That's where our mining activity is going on right now. You'll see that there's tailings in the Springer pit. We did store about a year's worth of tailings in the Springer and some water in the Cariboo. And 2 lines on here cross sections -- a cross-section and a long section, and that's where I'm going to show you the cross-sections of the pit in the various phases and where we are now. So this is the cross-section, the east-west cross-section, 3,300 north. And you can see the portion that we're going to mine in Springer Phase 4 there, which, as I said, is between the Cariboo on the right-hand side and the Springer on the left. You'll see the tailings that's left in the Springer pit. Both to put a dash line on there, indicating about where we are. We've mined about 3 benches off that ridge between the 2 pits. And then you'll still see on this for -- you'll only see a little bit of 5, and I'm going to show you a long section in a few minutes here. The North Sea. You don't see it on an East well section on and the Springer Phase 6. This next slide, I'm going to show you a couple of pictures of kind of where we -- what we've been doing in the last few months. So that first one on the left-hand side is right at the beginning. You'll see that, that ridge was pretty narrow on the talk a little saddle between the Cariboo and the Springer pit. We've got a drill walking on there in December. And then that second picture there of -- I think we're probably a couple of benches down there and you see a shovel in April 2022. And we -- by the end of April, we mined about 6.8 million tons off that Ridge. And we're -- our goal was to get about 1 million tons of high and low-grade ore on the ground before we saw the start of the mill. I think we're right about just over 800,000 right now. And the mining is progressing well now. Just another shot -- another arrow shot. This one is from the north. So you see the Springer pit is the closest, the Cariboo in the background, and you can actually see some of the plant site behind that. As I said, we've mined about 800,000 tonnes of ore. And as we're going down, we're getting -- and again, I can't -- I don't know whether you can see my cursor, but on this part of this bench, this widening of the bench and that saddle, we're getting quite large sections of ore on those benches as we proceed down. You'll see this is -- picture was probably taken less than a week ago. You'll see there's water in both the pits -- now both the water in both those pits meets the guidelines for us to be able to discharge and where we actually have room in the white pit store. We've just come through spring runoff, and we've collected a fair amount of water in sight. So we're busy discharging that water with our permanent discharge, and we're on schedule to get the water out of the Springer and the Cariboo on time to allow us to continue to mine to depth. Okay. Now this is the long section I was talking about. So this is north-south. As I said, Springer Phase 5 pushes out to the north, and that's why you couldn't see us. That other cross-section was kind of through here. So you can't see it. And then you'll see the WX zone, which is the highest gold-to-copper ratio. As I said, this one is basically the gold is the dominant value in this pit -- and this is the grinding circuit at Mount Polley. We have, as noted on there, with the 3-stage grinding circuit with 2 rod mills, 3 ball mills and 3 pebble mills. The refurbishing activities are virtually complete in this area. They are complete in the crusher and I guess, yesterday when I talked to the mine, they crushed 10,000 tons low grade and are getting ready, getting out ready to commission the mill. As I said, the grinding circuit now has had water run through it, we should be able to run it fairly soon. We're now busy running water through the flotation and dewatering surface. As soon as we get that done, then we'll get the mill commissioned and be it some more. That's a little bit of the history of the production at Mount Polley. I think compared to some of the other mines that I've been around, this one can be quite different in what it makes us. As you can see in its first life, '97 to 2001, it was making, I don't know, upwards of 80,000 to 100,000 ounces of gold a year. That's the table on the left and down, under 35 million pounds of copper. So it was kind of a -- the revenues were gold-dominant during that period. You can see restarting in 2005, especially if you look at 2006, '07 and '08, you can see making up to 60 million pounds of copper. That was the impact of the white pit. So much higher grade gold and lower -- much higher grade copper with lower grade gold. So clearly a copper mine. And then I've also pointed out to you the years 2012 and 2013. They were years where the majority of the feed was from the Springer pit or the majority of our feed in the next life coming from. So that gives a good indication of what we're going to be feeding the mill. And I think 2012, 2013, it was about 0.295% copper and about 0.25 grams per tonne gold. In 2013, we produced 38 million pounds of copper and 44,000 ounces of gold. So we're in line in that, as I said, in years 2 and 3 at Mount Polley to be producing about that much. By contrast, the WX is about 0.44 grams per tonne gold and 0.25% copper. So quite a bit more gold in the WX. And this is a general arrangement of conceptual block cave. So when we -- the pit that's outlined on here is the Phase 6. So that's what we're planning to mine. So that's all that we're planning to mine. You can see that block cave laid out beneath the Springer pit. So there's a lot more material beneath the Springer pit that we can look at, mining possibly by underground. And I'm going to show you on the next slide, there's even a chance that we could, with some drilling to be able to define some more open pitable work. But I think with some more drilling and to expand the size of the block cave, it would be a good idea to look at this as a means to extend the life of the mine. And one of the neat aspects of this, you can see there's underground access to this. It was designed so that the ore would be conveyed out of the mine right directly to the mill. It's not very far to the mill. So we would eliminate the need for the diesel-powered trucks and reduce our carbon footprint at Mount Polley. On this slide here, a little bit about what I was just talking about, the exploration potential. Two of them -- 2 areas that we've known them for a long time and really want to drill and we'll probably drill -- you can see the one area right beneath the saddle that we're mining right now. And there's very little drilling between the Springer pit and the Polley fault labeled on there. And historically, especially in the '60s and '70s when this was originally explored, people didn't drill kind of in the shadow of the Polley bulk. You had the Cariboo ore body on the right-hand side, the Springer on that one. And the Cariboo that the Polley fault area, there is no ore in the fault. So anyways, they didn't drill in that area. And you can see that 1 hole on there. There is some material between the 2 pits that's ore grade. So in that area with a bit of drilling, maybe we could make it so the pit could get bigger and go maybe a little bit deeper and get some across there. You can see the stripping ratio wouldn't be bad because we're kind of mining towards the Cariboo pit side, where we've already moved that material. And then the second place is, as I said, make a bigger block cave go directly beneath the Springer mineralization. It's one of the places on the site. You see that one really deep hole continue to hit copper and gold mineralization. I think that one is the longest one on the site in about a kilometer long, but we never left the potential ore body at depth. So there's -- and you can see that other angle hole. We drilled that in 2020. Sandy's got some good results in that, SD-20-162. So in addition to these, I would say right near the Springer pit drilling, we did -- we've done some more geophysical work on the site, and we have a number of targets on the site. So Mount Polley, once we get it going, be good to go do some exploration and extend its mine life. And then just this last slide, kind of the timing, the world -- I don't know maybe if we're all going to have electric cars, there's probably not enough copper in the world for that to happen. So we're going to need a lot of copper if we're going to decarbonize economies. And it should be -- electrifying the world economy bodes well for copper prices. That's a shot on both of our Shovel 2 trucks on that ridge between the pit. I'm going to move to Red Chris, with this plan of the Red Chris site. And I think over the last couple of years, one of the most exciting things that Red Chris, is the discovery of the East Ridge zone. So for the first time at Red Chris, there has been high-grade material hit on the south side of the southbound re-fault. You see the long blue color across there. That's the South boundary fault. Historically, all -- virtually all the drilling was on the north side of that fault, and all the drilling that hit high grade was on the north side. And you can see now the drilling in the east ridge on the south side. And we think that's a bolted off extension of the East zone. And on the next slide, I'll show you a cross-section of what the drilling has been discovering there. Let's go back for 1 second. So I got a dashed yellow line on that slide. That's where the section is that we're going to be looking at. So this is a cross-section through the east ridge. You see there the holes are drilled at an angle from the north side that pass through the Springer fault and then in a lot of cases pass immediately into mineralization. And a good -- this is near vertical. So it's kind of set up for more block cave or underground mining. It's near vertical, and there are wide intercepts and higher-grade intercepts within those longer lower-grade intercepts. And a good example is that RC 739, it hit 390 meters of 0.63 grams a tonne gold and 0.48% copper. And within that interval, there were 2 higher-grade zones, one of 22 meters grading 2.6 grams per tonne gold, 0.7% copper and a second of 44 meters of 2 grams a tonne gold and 1.35% copper. The other thing I'll note on this slide, the slide I'm looking at right now is very tiny, but there is a -- and you can't see my cursor. But if you look -- it's on the north side of the Springer fault or the right-hand side, probably a quarter of the way down the slide. You'll see that the exploration decline that being excavated now goes right -- it's about 200 meters from the fault. So we're providing underground access to this area. It's close proximity to the exploration decline, which on the next long-section yield, you'll be able to see it. So this is a long section of the entire Red Chris mine or Red Chris deposit. This -- what we're showing on here is the drilling that has been done by the Red Chris joint venture. So this is the drilling done since Newcrest got involved in the project at the end of -- until the end of 2021. And you can see in the background there, coming off from the right-hand side, the exploration decline. So it goes down to near the top of the deep east zone, and there's a platform there for more drilling from underground for the deep east zone. And I think fairly soon, it will be considered to even do more drilling in the East Ridge from that ramp. It reduced the length of the hole and reduced the need to drill to construct surface drill paths. You can see we've got, I don't know, over 4 kilometers of strike length along the deposit now. A couple of shots showing the exploration decline. It's a relatively big decline. It's 6 by 6 meters. It was colored at the end of June 2021, and it's now advanced to more than 1,300 meters. It's about 2 kilometers down to the top of the east zone, so getting close. And as I said, goes right parallel to the east ridge zone. So it provides a good platform for drilling -- deeper drilling in the East Ridge. Last year, Newcrest Red Chris joint venture released a pre-feasibility study. And I'm going to show you the summary of the outcome of that on the next slide. The joint venture plans to release the feasibility study in the first half of 2023. And if -- based on the schedule in the pre-feasibility study, the first ore from the underground block cave would be in the first half of 2026. A summary of the results of the block cave prefeasibility study. So ore production of 406 million tonnes and producing 4.9 million ounces of gold and 1.5 million tonnes of copper. The life of mine average annual production of 158,000 ounces of gold and 48,000 tonnes of copper, the peak production for 5 years of 316,000 ounces of gold a year and 80,000 tons of copper. The all-in sustaining costs of $180 an ounce. Total estimated capital, 2.6 billion for macroblocks 1, 2 and 3 an internal rate of return of 17%, payback of 3 years with those high grades in the beginning, 31-year mine life, and a net present value of 2.3 billion discounted at 4.5%. Next slide gives you kind of the layout of what needs to be done to get those -- get the block cave going. You can see on there Macroblock 1 and 3 and Macroblock 2 is in behind, both of them basically down underneath the East zone. You see the exploration decline and then the conveyor decline that will be required and the development at the bottom. One of the other aspects that we're hoping will be included in the feasibility study is potential for early mining of high-grade pods in the East Zone. This could help us by generating cash flows prior to the -- higher cash flows prior to the completion of the block cave construction. So this pod is in the vicinity. This is that -- you can see it's relatively close to the exploration decline. It's in the vicinity of drill hole RC09-350 that was drilled in 2009, and that hole hit 432 meters of 2% copper and 3.8 grams a tonne gold. So there are high grades in that area. So we're looking to have that study to see if we can bring production forward by doing more conventional mining earlier before the block cave is finished. A couple of slides on Huckleberry. As a mine site with exploration targets, our plan is we get Mount Polley up and running and running well. We can change our focus and look at getting Huckleberry going again. As I said, with the electrification of the world's economies, copper is going to be required, and we have a resource there and a milling facility there. There are kind of life of mine that we have would last about 7 years at that site. And a lot of targets around it. It's another one where we should come do some drilling probably and maybe get a longer mine life at there before we start. At Huckleberry, the key is waste rock. So the waste rock there is tagged. It needs to be disposed of underwater, so it won't generate assets in the future. So when we talk about a tailings facility at Huckleberry, it's really a tailings and waste rock facility, and they tend to get filled up really quickly when you're hauling waste. The other thing it does, it makes the site very compact because you need to be able to haul the waste to the tailings facility. So it needs to be in close proximity to keep the cost down. At any rate, a combination of exploration and work on how we can dispose of the tailings and waste rock in a safe manner would make a big difference at Huckleberry. One of the other things we actually just finished last year was a -- it's called a ZTEM survey. This is an airborne survey over the entire -- probably the first of any geological surveys that have been done over the entire claim holdings at Huckleberry Whiting Creek that are held by Imperial. And this means the search for targets at depth and 2 in particular -- well, actually, one is very exciting. You'll see that -- you'll see down in the -- near the bottom between the one that says under [ TMF 2 and 3 KE ], the anomaly there is actually the current open pit. Anyway, that [ 3KE1 ] looks very similar to the -- within the response to the existing deposits. In addition to that, we have a diverse portfolio. I think we still have -- we have 27 different properties. You can see on this slide here, I had the same slide last year. We're about to move Mount Polley from being mine on care and maintenance up to an operating mine. Anyway, a lot more opportunity. There's -- we also have 14 royalty interests, and the Sterling royalty is undergoing active exploration. We actually have 2 of our guys looking at some of the results that are being obtained in Sterling to bring ourselves up to date with what's happening down there. Anyway for this year, the focus is on getting Mount Polley up and running and running well and continue to fund our share of the exciting exploration and development that's going on up at Red Chris. Thank you so much for your time, and we'll open up the floor for questions or watch questions. I'll try and answer questions if you folks have any. Well, if there's no questions, feel -- for those of you that have dialed in, feel free to get you on a call. I'm happy to talk with anyone who has some questions. And thanks again for joining in our AGM.

This concludes the meeting. You may now disconnect.