Form F-7 IMPERIAL METALS CORP

May 20, 2022 6:55 AM EDT

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As filed with the Securities and Exchange Commission on May 19, 2022 Registration Statement No. 333-

 

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

FORM F-7

 


REGISTRATION STATEMENT

UNDER THE
Securities Act of 1933

 

 

 

Imperial Metals Corporation

(Exact name of Registrant as specified in its charter)

 

British Columbia
(Province or other jurisdiction of
incorporation or organization)
1040
(Primary Standard Industrial
Classification Code Number
(if applicable))
None
(I.R.S. Employer Identification
Number
(if applicable))

 

580 Hornby Street, Suite 200

Vancouver, British Columbia, Canada
V6C 3B6

(Address and telephone number of Registrant’s principal executive offices)

 

DL Services Inc.

701 Fifth Avenue, Suite 6100

Seattle, WA 98104

(206) 903-2372

(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)

 

Copies to:

 

Jason K. Brenkert
Dorsey & Whitney LLP
1400 Wewatta Street, Suite 400
Denver, Colorado 80202-5549
(303) 629-3400

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective.

 

This registration statement and any amendment thereto shall become effective upon filing with the Commission in accordance with Rule 467(a).

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction’s shelf prospectus offering procedures, check the following box.¨

 

CALCULATION OF REGISTRATION FEE

 

Title of each class of securities

to be registered

Amount to be
registered
Proposed
maximum offering
price per common share(1) (2)
Proposed
maximum aggregate offering price (1) (2)
Amount of
registration fee (1) (2)
Common Shares 17,674,492 U.S.$2.37 U.S.$41,888,546 U.S.$3,883.07

 

(1) Calculated in accordance with General Instruction II.F to Form F-7.

(2) Based on the Canadian offering price of Cdn$3.04 per share converted using the exchange rate of Cdn.$1.00 to U.S.$0.7788, the daily average rate as reported by the Bank of Canada on May 18, 2022.

 

If, as a result of stock splits, stock dividends or similar transactions, the number of securities purported to be registered on this registration statement changes, the provisions of Rule 416 under the Securities Act of 1933, as amended, shall apply to this registration statement.

 

 

 

 

PART I—INFORMATION REQUIRED TO BE SENT TO SHAREHOLDERS

 

Item 1. Home Jurisdiction Document

 

Rights Offering Circular and Notice of Rights Offering, attached hereto.

 

All references to CDN $ or $ in the Rights Offering Circular or Notice of Rights Offering refer to Canadian Dollars.

 

Item 2. Informational Legends

 

See outside front cover page of the Rights Offering Circular, attached hereto.

 

Item 3. Incorporation of Certain Information by Reference

 

None.

 

Item 4. List of Documents Filed with the Commission

 

The documents filed with the United States Securities and Exchange Commission as part of this registration statement are listed in the Rights Offering Circular under the caption "Documents Filed as Part of the Registration Statement".

 

 

IMPERIAL METALS CORPORATION

 

NOTICE OF RIGHTS OFFERING

 

Notice to security holders –May 19, 2022

 

The purpose of this notice is to advise holders of common shares (the "Common Shares") of Imperial Metals Corporation (the "Company") of an offering of rights (the "Rights") of the Company (the "Rights Offering").

 

References in this notice to we, our, us and similar terms mean to the Company. References in this notice to you, your and similar terms mean to the Company's shareholders.

 

1.Who can participate in the Rights Offering?

 

Rights will be issued to holders of Common Shares as at the close of business (5:00 p.m. Pacific Time) on May 31, 2022 (the "Record Date").

 

2.Who is eligible to receive Rights?

 

Rights will be issued to registered shareholders (the "Eligible Holders") in:

 

(a)each province and territory of Canada; and
(b)the United States, excluding the states of Arizona, Arkansas, California, Minnesota, Ohio, Utah and Wisconsin;
   
 (collectively, the "Eligible Jurisdictions").

 

You will be presumed to be resident in the place shown in our records as your registered address, unless the contrary is shown to our satisfaction.

 

This notice is not to be construed as an offering of the Rights, nor are the Common Shares issuable upon exercise of the Rights offered for sale, in any jurisdiction outside the Eligible Jurisdictions or to shareholders who are residents of any jurisdiction other than the Eligible Jurisdictions (the "Ineligible Holders").

 

Ineligible Holders will not receive a Rights DRS Advice (as described in No. 6 below), but will be sent a letter advising them that their Rights will be held by Computershare Investor Services Inc., who will hold such rights as agent for the benefit of all such Ineligible Holders. The letter will also describe how certain Ineligible Holders may participate in the Rights Offering.

 

3.How many Rights are we offering?

 

We expect to issue 141,395,941 Rights entitling their holders to subscribe for an aggregate of 17,674,492 Common Shares.

 

 

2

 

4.How many Rights will you receive?

 

Each Eligible Holder will receive one Right for each one Common Share of the Company held as at the Record Date.

 

5.What does one Right entitle you to receive?

 

One Right entitles an Eligible Holder to subscribe for 0.125 Common Shares at a subscription price of $3.04 per Common Share (the "Basic Subscription Privilege") until 2:00 p.m. (Pacific Time) on June 24, 2022 (the "Expiry Time"). No fractional Common Shares will be issued. Where the exercise of Rights would appear to entitle a holder of Rights to receive fractional Common Shares, the holder's entitlement will be reduced to the next lowest whole number of Common Shares.

 

Any Eligible Holder who exercises all of their Rights under the Basic Subscription Privilege will also have the additional privilege of subscribing, pro rata, for additional Common Shares at the subscription price (the "Additional Subscription Privilege"). The Common Shares available under the Additional Subscription Privilege will be those Common Shares issuable under the Rights Offering that have not been subscribed and paid for under the Basic Subscription Privilege by the Expiry Time.

 

Any Eligible Holder who exercises their Rights must enclose payment in Canadian funds by certified cheque, bank draft or money order payable to the order of Computershare Investor Services Inc.

 

6.How will you receive your Rights?

 

Registered Eligible Holders - If you are a registered Eligible Holder of Common Shares, a subscription form and a statement issued under the Depositary’s direct registration system (the "Rights DRS Advice") representing the total number of Rights which you are entitled to as at the Record Date is enclosed with this notice.

 

Beneficial Eligible Holders - You are a beneficial holder of Common Shares if you hold your shares through a securities broker or dealer, bank or trust company or other participant (a "Participant") in the book-based system administered by CDS Clearing and Depository Services Inc. ("CDS") or The Depository Trust Company ("DTC"). The total number of Rights to which all beneficial holders as at the Record Date are entitled will be issued to and deposited with CDS or DTC following the Record Date. If you are a beneficial Eligible Holder, we expect you will receive a confirmation of the number of Rights issued to you from the applicable Participant in accordance with the practices and procedures of that Participant. CDS or DTC will be responsible for establishing and maintaining book-entry accounts for Participants holding Rights.

 

7.When and how can you exercise your Rights?

 

If you are a registered Eligible Holder who receives a Rights DRS Advice, you must complete and deliver your Rights DRS Advice on or before the Expiry Time.

 

If you are a beneficial Eligible Holder, you must arrange exercises, transfers or purchases of Rights through your Participant on or before 2:00 p.m. (Pacific Time) on the Expiry Time or such earlier time as required by your Participant. We expect that each beneficial Eligible Holder will receive a customer confirmation of issuance or purchase, as applicable, from their Participant through which the Rights are issued in accordance with the practices and policies of such Participant.

 

 

3

 

8.What are the next steps?

 

This notice contains key information that you should know about the Company. You can find more details in our Rights Offering Circular, a copy of which can be obtained on the Company's profile at www.SEDAR.com or at www.imperialmetals.com or you can ask your dealer representative for a copy or contact Computershare Investor Services Inc. at 1-800-564-6253. You should read the Rights Offering Circular, along with the Company's continuous disclosure record, to make an informed decision.

 

 

DATED May 19, 2022.    
     
“Brian Kynoch”    
Brian Kynoch, P. Eng.    
President    
Imperial Metals Corporation    

 

 

 

 

PLEASE READ THIS MATERIAL CAREFULLY AS YOU ARE REQUIRED TO MAKE A DECISION PRIOR TO 2:00 P.M.
(PACIFIC DAYLIGHT TIME) ON June 24, 2022

 

This rights offering circular is prepared by management. No securities regulatory authority or regulator has assessed the merits of these securities or reviewed this circular. Any representation to the contrary is an offence.

 

This is the circular we referred to in the May 19, 2022 rights offering notice, which you should have already received. Your rights statement and relevant forms were enclosed with the rights offering notice. This circular should be read in conjunction with the rights offering notice and our continuous disclosure prior to making an investment decision.

 

The offer of these securities is made in all provinces of Canada, in each state of the United States, except Arizona, Arkansas, California, Minnesota, Ohio, Utah, and Wisconsin, and in all jurisdictions outside Canada and the United States excluding any jurisdiction that does not provide a prospectus exemption substantially similar to the exemption provided in Canada or that otherwise requires obtaining any approvals of a regulatory authority in the such jurisdiction or the filing of any document by the Company in the such jurisdiction in connection with this offering. In addition, the offering is not being made in jurisdictions where the Company is not eligible to make such offer.

 

Rights Offering Circular May 19, 2022

 

 

IMPERIAL METALS CORPORATION

 

OFFERING OF RIGHTS TO SUBSCRIBE FOR 17,674,492 COMMON SHARES AT A PRICE OF $3.04 PER SHARE

 

References in this circular to we, our, us and similar terms mean to Imperial Metals Corporation (the "Company"). References in this circular to you, your and similar terms mean to holders of the Company's common shares (the "Common Shares"). Unless otherwise indicated, references herein to "$" or "dollars" are to Canadian dollars.

 

This rights offering is made by a Canadian issuer that is permitted, under a multijurisdictional disclosure system adopted by the United States and Canada, to prepare this rights offering circular in accordance with the disclosure requirements of Canada. Prospective investors should be aware that those requirements are different from those of the United States. Financial statements included or incorporated herein have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and are subject to Canadian auditing and auditor independence standards, and thus may not be comparable to financial statements of United States companies.

 

Prospective investors should be aware that the acquisition of the securities described herein may have tax consequences both in the United States and in Canada. Such consequences for investors who are resident in, or citizens of, the United States may not be described fully herein.

 

The enforcement by investors of civil liabilities under U.S. federal securities laws may be affected adversely by the fact that the issuer is organized under the laws of British Columbia, Canada, that a majority of its directors and officers named in this Circular are residents of Canada, and that a substantial portion of the assets of the issuer and of said persons are located outside the United States.

 

THE SECURITIES OFFERED BY THIS RIGHTS OFFERING CIRCULAR HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (“SEC”) OR ANY STATE SECURITIES REGULATOR NOR HAS THE SEC OR ANY STATE SECURITIES REGULATOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

 

 

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SUMMARY OF THE RIGHTS OFFERING

 

Why are you reading this circular?   We are issuing transferable rights (the "Rights") to the holders of our outstanding Common Shares of record at the close of business on May 31, 2022 (the "Record Date"). The Rights entitle their holders to subscribe for Common Shares on the terms described in this circular. The purpose of this circular is to provide you with detailed information about your rights and obligations in respect of the offering of Rights (the "Offering"). This circular should be read in conjunction with the offering notice which you should have already received by mail.
     
What is being offered?   The Company will issue one Right for each one Common Share held.  
     
Who is eligible to receive and exercise rights?   The Rights will be issued only to shareholders (the "Eligible Holders") resident in a province or territory of Canada and, the United States (subject to restrictions in certain states as set forth in the following paragraph) (collectively, the "Eligible Jurisdictions"). All jurisdictions other than the Eligible Jurisdictions are referred to in this circular as "Ineligible Jurisdictions".
     
    This circular covers the offer and sale of the Common Shares issuable upon exercise of the Rights within the United States under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"). Notwithstanding registration under the U.S. Securities Act, the securities or blue sky laws of certain states (including Arizona, Arkansas, California, Minnesota, Ohio, Utah, and Wisconsin) may not permit the Company to offer Rights and/or Common Shares in such states, or to certain persons in those states, or may otherwise limit the Company's ability to do so, and as a result the Company will treat those states as Ineligible Jurisdictions under the Offering.  In these states, Rights may only be exercised by shareholders to which solicitations may be addressed without registration under the relevant state securities laws. ("Eligible U.S. Institutions"). Shareholders resident in, or that hold their securities for the account or benefit of any person in, any such jurisdiction that wish to determine if they are Eligible U.S. Institutions should contact the Company. Holders in, or that hold their securities for the account or benefit of any person in, such jurisdictions that are not Eligible U.S. Institutions will not be permitted to exercise their Rights ("Ineligible U.S. Holders") but may transfer the Rights outside of the United States in accordance with Regulation S under the U.S. Securities Act.
     
    Shareholders will be presumed to be resident in the place shown on their registered address, unless the contrary is shown to our satisfaction. Neither the offering notice nor this circular is to be construed as an offering of the Rights, nor are the Common Shares issuable upon exercise of the Rights offered for sale in any jurisdiction outside of Eligible Jurisdictions or to shareholders who are residents of any jurisdiction other than the Eligible Jurisdictions (the "Ineligible Holders"). Instead, Ineligible Holders will be sent a letter advising them that their Rights will be held by Computershare Investor Services Inc. (the "Depository"), located at 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 (the "Subscription Office"), who will hold such rights as agent for the benefit of all such Ineligible Holders. The letter will also describe the conditions that must be met, and the procedure that must be followed, in order for an Ineligible Holder to particulate in the Offering. Neither the rights offering notice nor this circular is to be constructed as an offering of the Common Shares issuable upon exercise of the Rights to any Ineligible U.S. Holder

 

 

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What does one right entitle you to receive?   You are entitled to subscribe for 0.125 Common Shares for every one Right held upon payment of the Subscription Price for each one Common Share (called the "Basic Subscription Privilege"). No fractional Common Shares will be issued. Where the exercise of Rights would appear to entitle a holder of Rights to receive fractional Common Shares, the holder's entitlement will be reduced to the next lowest whole number of Common Shares.
     
    If you exercise your Basic Subscription Privilege in full, you will also be entitled to subscribe pro rata for Common Shares (the "Additional Common Shares") not otherwise purchased, if any, pursuant to the Basic Subscription Privilege (called the "Additional Subscription Privilege").
     
What is the Subscription Price?   $3.04 per Common Share (the "Subscription Price").
     
When does the offer expire?   2:00 p.m. (Pacific Daylight Time) on June 24, 2022 (the "Expiry Time").
     
What are the significant attributes of the rights issued under the rights offering and the securities to be issued upon the exercise of the rights?  

The Rights are transferable securities within Canada that entitle their holders to subscribe for Common Shares on the terms described in this circular.

 

The Rights may not be transferred to any person within the United States. Holders of Common Shares in the United States who receive Rights may transfer or resell them only in transactions outside of the United States in accordance with Regulation S under the U.S. Securities Act, which generally will permit the resale of the Rights through the facilities of the Toronto Stock Exchange (the "TSX") provided that the offer is not made to a person in the United States, neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, and no “directed selling efforts”, as that term is defined in Regulation S under the US Securities Act, are conducted in the United States in connection with the resale. Certain additional conditions are applicable to the Corporation’s “affiliates”, as that term is defined under the U.S. Securities Act. In order to enforce this resale restriction, holders thereof will be required to execute a declaration certifying that such sale is being made outside the United States in accordance with Regulation S under the U.S. Securities Act. Any person within the United States that acquires the Rights through the facilities of the TSX or otherwise, other than pursuant to the initial distribution of Rights by the Company, may be unable to exercise such Rights in accordance with the U.S. Securities Act or applicable securities laws of any state of the United States. The Company reserves the right to reject any such exercise of the Rights by a person within the United States that subsequently acquires the Rights and the acquisition of the Rights by such person within the United States does not constitute an offer of the underlying Common Shares to such person.
         
    We are authorized to issue an unlimited number of Common Shares, of which 141,395,941 are issued and outstanding as at the date hereof. Holders of Common Shares are entitled to dividends if, as and when declared by our directors, to one vote per share at meetings of our shareholders and, upon liquidation, to receive such assets of the Company as are distributable to the holders of the Common Shares.

 

 

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What are the minimum and maximum number or amount of Common Shares that may be issued under the rights offering?   The Offering is not subject to a minimum subscription. The maximum number of Common Shares that may be issued pursuant to the Offering is 17,674,492 (the "Maximum Offering").
     
Where will the rights and the securities issuable upon the exercise of the rights be listed for trading?  

The Common Shares are listed on the TSX under the trading symbol "III".

 

The Rights will trade on the TSX under the trading symbol "III.RT.A" until 9:00 a.m. (Pacific Daylight Time) on June 24, 2022.

 

 

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FORWARD-LOOKING STATEMENTS

 

This circular contains "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking statements"). In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" , or variations or the negative of such words and phrases, or statements that certain actions, events or results "may" , " could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. Forward-looking statements in this circular include, without limitation, statements with respect to: the estimated costs of the Offering; the net proceeds to be available upon completion of the Offering; our working capital requirements over the next twelve months; and the use of proceeds from the Offering.

 

Forward-looking statements in this circular are subject to a number of risks and uncertainties that may cause the Company's actual results to differ materially from those discussed in the forward-looking statements and, even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Company. Risk factors that could cause actual results or events to differ materially from those expressed in the forward-looking statements include, among other things: uncertainties relating to the cost of completing the Offering; delays in obtaining or failure to obtain required approvals to complete the Offering; and risks that could cause the Company to allocate the proceeds of the Offering in a manner other than as disclosed in this circular, including all of the risks related to the Company's business, financial condition, results of operations and cash flows.

 

Please refer to our most recently filed Annual Information Form and management's discussion and analysis for the year ended December 31, 2021 and the three months ended March 31, 2022 in respect of material assumptions and risks related to our business financial condition, results of operations and cash flows.

 

The material factors and assumptions used to develop the forward-looking statements in this circular include: management’s expectations regarding the cost of completing the Offering; that no unforeseen events will affect the Company’s existing working capital; that the Company’s working capital requirements over the next twelve months will be substantially as projected; and that current plans and expected metal prices and exchange rates will proceed in accordance with or remain within range of management's expectations.

 

Any forward-looking statements in this circular are stated as of the date of this document and the Company does not intend, and does not assume any obligation, to update such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events unless required to do so by applicable laws.

 

 

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USE OF AVAILABLE FUNDS

 

What will our available funds be upon the closing of the rights offering?

 

The Company estimates that it will have the following funds available after giving effect to the Offering:

 

      Assuming 15% of
the Offering
    Assuming 50% of
Offering
    Assuming 75% of
Offering
    Assuming 100% of
Offering
 
A Amount to be raised by this offering   $ 8,059,568     $ 26,865,228     $ 40,297,842     $ 53,730,456  
B Selling commissions and fees   $ Nil     $ Nil     $ Nil     $ Nil  
C Estimated offering costs (e.g., legal, accounting, audit)   $ 250,000     $ 250,000     $ 250,000     $ 250,000  
D Available funds   $ 7,809,568     $ 26,615,228     $ 40,047,842     $ 53,480,456  
E Additional sources of funding required   $ Nil     $ Nil     $ Nil     $ Nil  
F Working capital as of March 31, 2022   $ (44,107,000 )   $ (44,107,000 )   $ (44,107,000 )   $ (44,107,000 )
G Total     $ (36,297,432 )   $ (17,491,772 )   $ (4,059,158 )   $ 9,373,456  

 

The change in working capital of ($19,060,000) at December 31, 2021 to ($44,107,000) at March 31, 2022 was due to an additional increase in our credit facility of $50,000,000 and subsequent draw downs to fund the restart of the Mount Polley mine and to fund capital expenditures at the Red Chris mine.

 

How will we use the available funds?

 

The following table below provides a detailed breakdown of how the Company will use its available funds, including those received pursuant to the Offering.

 

Description of intended use
of available funds listed in
order of priority
  Assuming 15% of
the Offering
   Assuming 50% of
Offering
   Assuming 75% of
Offering
   Assuming 100% of
Offering
 
Capital expenditures  $Nil   $Nil   $Nil   $5,000,000 
General working capital purposes  $Nil   $Nil   $Nil   $4,373,456 
Total  $Nil   $Nil   $Nil   $9,373,456 

 

The Company intends to use all of the proceeds from the Rights Offering to pay down its existing credit facility and will make subsequent draw downs to fund capital expenditures at the Red Chris mine and for general working capital purposes. Included within the category “general working capital purposes” are general working capital requirements for all of the Company's business operations, general corporate and administrative activities and exploration activities. The funds currently drawn under the credit facility were used to fund the restart of the Mount Polley mine and to fund capital expenditures at Red Chris mine.

 

The allocation of the net proceeds of the Offering may be adjusted within the stated categories of expenditures above depending on, among other things, timing of availability of equipment and services, and general political and market conditions. Further, while the Corporation intends to spend the available funds as set forth above, there may be circumstances where, for sound business reasons, a reallocation of the available funds may be necessary. In any event, the available funds will be used by the Corporation in furtherance of its business. See "Forward-Looking Information" above.

 

We intend to spend the available funds as stated. We will reallocate funds only for sound business reasons.

 

 

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How long will the available funds last?

 

The Company believes that the combination of cash on hand, proceeds from the Offering, cash flow from current operations and funds from additional financing relating to the restart of Mount Polley will be sufficient to finance the Company’s cash requirements through the next 12 months. As disclosed above, a significant amount of the proceeds of the Offering are intended to be used for capital expenditures at the Red Chris mine and general working capital purposes. The period of time that available funds will last is highly dependent on copper and gold prices and production at both the Red Chris and Mount Polley mine.

 

See "Risk Factors" in the Company’s management's discussion and analysis for the audited consolidated annual financial statements for the year ended December 31, 2021 and "Risk Factors" in the Company’s management's discussion and analysis for the unaudited condensed consolidated interim financial statements for the three months ended March 31, 2022. See also "Forward-Looking Information" above.

 

INSIDER PARTICIPATION

 

Will insiders be participating?

 

To the extent known to the Company after reasonable enquiry, certain directors, officers and shareholders of the Company, have indicated an intention to exercise their rights.

 

Who are the holders of 10% or more of our securities before and after the rights offering?

 

To the knowledge of the directors and executive officers of the Company, there are no persons who currently hold 10% or more of the Common Shares or would own 10% or more upon completion of the Offering, except as set forth below:

 

   Common Shares Held before the
Offering
   Common Shares Held after the
Offering
 
Name of Shareholder  Number   %   Number   % 
Edwards and Edco Financial Holdings Ltd. (“Edco”)   59,622,910    42.17%   59,622,910    37.48%(1) 
Fairholme Capital Management, LLC (“Fairholme”)(2)    25,461,804    18.01%   25,461,804    16.01%(3) 

 

Notes:

 

1.Assumes no Rights are exercised by Edco but all Rights in the Offering are exercised.
2.Represents Common Shares held by funds and accounts managed by Fairholme on a discretionary basis, over which Fairholme has direction or control.
3.Assumes no Rights are exercised by Fairholme but all Rights in the Offering are exercised.

 

DILUTION

 

If you do not exercise your rights, by how much will your security holdings be diluted?

 

Assuming issuance of the maximum number of Common Shares under the Offering, your shareholdings will be diluted by approximately 12.50%.

 

MANAGING DEALER, SOLICITING DEALER AND UNDERWRITING CONFLICTS

 

Who is the managing dealer/soliciting dealer and what are its fees?

 

The Company has not retained any party to solicit subscriptions for Common Shares pursuant to the Offering.

 

 

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HOW TO EXERCISE THE RIGHTS

 

How does a security holder that is a registered holder participate in the rights offering?

 

If you are a registered holder of Common Shares (a "Registered Holder") in an Eligible Jurisdiction, a subscription form (the “Rights Subscription Form”) and statement issued under the Depositary’s direct registration system (the “Rights DRS Advice”) representing the total number of Rights to which you are entitled as at the Record Date has been mailed to you with a copy of the Offering notice. To exercise the Rights represented by the Rights DRS Advice, you must complete and deliver the Rights Subscription Form, together with the Rights DRS Advice and the Subscription Price for each Right exercised, in accordance with the instructions set out below. Rights not exercised at or prior to the Expiry Time will be void and of no value. The method of delivery is at the discretion and risk of the holder of the Rights DRS Advice and delivery to the Depository will only be effective when actually received by the Depository at its Subscription Office set forth below under "Appointment of Depository". Rights DRS Advices and payments received after the Expiry Time will not be accepted.

 

In order to exercise your rights you must:

 

1.Complete and sign Form 1 on the Rights Subscription Form. The maximum number of Rights that you may exercise under the Basic Subscription Privilege is shown on the first page of the Rights DRS Advice. If you complete Form 1 so as to exercise some but not all of the Rights evidenced by the Rights DRS Advice, you will be deemed to have surrendered the unexercised balance of such Rights, unless you otherwise specifically advise the Depository at the time the Rights DRS Advice is surrendered to the Depository.

 

2.Additional Subscription Privilege. Complete and sign Form 2 on the Rights Subscription Form only if you wish to also participate in the Additional Subscription Privilege. See "How to exercise the rights - What is the Additional Subscription Privilege and how can you exercise this privilege?" below.

 

3.Payment. Enclose payment in Canadian funds by certified cheque, bank draft or money order payable to the order of Computershare Investor Services Inc. To exercise the Rights, you must pay the Subscription Price per Common share. In addition to the amount payable for any Common Shares you wish to purchase under the Basic Subscription Privilege, you must also pay the amount required for all of the Common Shares you subscribe for under the Additional Subscription Privilege.

 

4.Delivery. You must deliver or mail the completed Rights Subscription Form and Rights DRS Advice and payment in the enclosed return envelope addressed to the Depository so that it is received by the Subscription Office of the Depository set forth below before the Expiry Time. If you are mailing your documents, registered mail is recommended. Please allow sufficient time to avoid late delivery.

 

The signature of the Registered Holder on Form 1 and, if applicable, Form 2 of the Rights Subscription Form must correspond to every particular with the name that appears on the face of the Rights DS Advice.

 

Signatures by a trustee, executor, administrator, guardian, attorney, officer of a corporation or any other person acting in a fiduciary or representative capacity should be accompanied by evidence of authority satisfactory to the Depository.

 

All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any exercise will be determined by the Company in its sole discretion, and any determination by the Company will be final and binding on the Company and its security holders. Any subscription for Common Shares will be irrevocable once submitted and subscribers will be unable to withdraw their subscriptions for Common Shares once submitted. The Company reserves the right to reject any subscription if it is not in proper form or if the acceptance thereof or the issuance of Common Shares pursuant thereto could be unlawful. The Company also reserves the right to waive any defect in respect of any particular subscription. Neither the Company nor the Depository is under any duty to give any notice of any defect or irregularity in any exercise, nor will they be liable for the failure to give any such notice.

 

 

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How does a security holder that is not a registered holder participate in the rights offering?

 

You are a beneficial Eligible Holder if you hold your Common Shares through a securities broker or dealer, bank or trust company or other participant (each, a "Participant") in the book-based system administered by CDS Clearing and Depository Services lnc. ("CDS") or The Depository Trust Company ("DTC"). The total number of Rights to which all beneficial Eligible Holders as at the Record Date are entitled will be issued to CDS or DTC and will be deposited with CDS or DTC following the Record Date. We expect that each beneficial Eligible Holder will receive a confirmation of the number of Rights issued to it from its Participant in accordance with the practices and procedures of that Participant. CDS or DTC will be responsible for establishing and maintaining book-entry accounts for Participants holding Rights.

 

Neither we nor the Depository will have any liability for (i) the records maintained by CDS or DTC or Participants relating to the rights or the book-entry accounts maintained by them, (ii) maintaining, supervising or reviewing any records relating to such rights, or (iii) any advice or representations made or given by CDS or DTC or Participants with respect to the rules and regulations of CDS or DTC or any action to be taken by CDS or DTC or Participants.

 

If you are a beneficial Eligible Holder:

 

1.to exercise your rights held through a Participant, you must instruct such Participant to exercise all or a specified number of such Rights, and forward to such Participant, the Subscription Price for each Common Share that you wish to subscribe for;

 

2.you may subscribe for Additional Common Shares pursuant to the Additional Subscription Privilege by instructing such Participant to exercise the Additional Subscription Privilege in respect of the number of Additional Common Shares you wish to subscribe for, and forwarding to such Participant the Subscription Price for such Additional Common Shares requested.

 

Any excess funds will be returned to the relevant Participant for the account of the beneficial holder, without interest or deduction.

 

Who is eligible to receive the rights?

 

Registered holders of Rights

 

The Rights are being offered to shareholders of the Company resident in Eligible Jurisdictions. Shareholders will be presumed to be resident in the place of their registered address, unless the contrary is shown to the satisfaction of the Company. This circular is not to be construed as an offering of the Rights, nor are the Common Shares issuable upon exercise of the Rights offered for sale, in any jurisdiction outside the Eligible Jurisdictions or to shareholders who are residents of any jurisdiction other than the Eligible Jurisdictions.

 

Ineligible Holders who are registered holders of their Common Shares will be sent a letter advising them that their Rights DRS Advices will be issued to, and held on their behalf by, the Depository and a form of representation letter (the "Representation Letter"). The Representation Letter will set out the conditions required to be met, and procedures that must be followed, in order for an Ineligible Holder to participate in the Offering.

 

Rights DRS Advices in respect of Rights issued to registered Ineligible Holders will be issued to and held by the Depository as agent for the benefit of Ineligible Holders. The Depository will hold the Rights until 5:00 p.m. (Pacific Time) on June 17, 2022 (the "Qualification Deadline") in order to provide Ineligible Holders an opportunity to claim a Rights DRS Advice by satisfying us that the issue of Common Shares pursuant to the exercise of Rights will not be in violation of the laws of the applicable jurisdiction. Following such date, the Depository, for the account of registered Ineligible Holders, will, prior to the Expiry Time, attempt to sell the Rights of such registered Ineligible Holders represented by Rights DRS Advices in the possession of the Depository on such date or dates and at such price or prices as the Depository determines in its sole discretion. No charge will be made for the sale of Rights by the Depository except for a proportionate share of any brokerage commissions incurred by the Depository and the costs of or incurred by the Depository in connection with the sale of the rights. Registered Ineligible Holders will not be entitled to instruct the Depository in respect of the price or the time at which the rights are to be sold. The Depository will endeavor to effect sales of Rights on the open market and any proceeds received by the Depository with respect to the sale of Rights net of brokerage fees and costs incurred and, if applicable, the Canadian tax required to be withheld, will be divided on a pro rata basis among such registered Ineligible Holders and delivered by mailing cheques (in Canadian funds) of the Depository therefor as soon as practicable to such registered Ineligible Holders at their addresses recorded on the Company's books. Amounts of less than $10.00 will not be remitted. The Depository will act in its capacity as agent of the registered Ineligible Holders on a best efforts basis only and we and the Depository do not accept responsibility for the price obtained on the sale of, or the inability to sell, the Rights on behalf of any registered Ineligible Holder.

 

 

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Beneficial holders of Rights

 

CDS Participants receiving Rights on behalf of Ineligible Holders will be instructed by CDS not to permit the exercise of such Rights unless the holder has completed a Representation Letter. After the Qualification Deadline, CDS Participants should attempt to sell the Rights of Ineligible Holders for the accounts of such holders and should deliver any proceeds of sale to such holders.

 

Beneficial owners of Common Shares registered in the name of a resident of an Ineligible Jurisdiction, who are not themselves resident in an Ineligible Jurisdiction, who wish to receive Rights and who believe that their Rights DRS Advices may have been delivered to the Depository, should contact their broker at the earliest opportunity to request to have their Rights DRS Advices mailed to them.

 

The Rights and the Common Shares issuable on the exercise of the Rights have not been qualified for distribution in any Ineligible Jurisdiction and, accordingly, may only be offered, sold, acquired, exercised or transferred in transactions not prohibited by applicable laws in Ineligible Jurisdictions. Notwithstanding the foregoing, persons located in certain Ineligible Jurisdictions may be able to exercise the Rights and purchase Common Shares provided that they furnish the Representation Letter satisfactory to the Company on or before the Qualification Deadline. The form of Representation Letter will be available from the Company or the Depository upon request. Beneficial owners of Rights or Common Shares should contact their broker to obtain the Representation Letter. A holder of Rights in an Ineligible Jurisdiction holding on behalf of a person resident in an Eligible Jurisdiction may be able to exercise the Rights provided the holder certifies in the Representation Letter that the beneficial purchaser is resident in an Eligible Jurisdiction and satisfies the Company that such subscription is lawful and in compliance with all securities and other applicable laws.

 

U.S. Shareholders

 

The Company has filed with the SEC in the United States a Registration Statement on Form F-7 under the U.S. Securities Act (the “Registration Statement”) so that the Common Shares issuable upon the exercise of the Rights will not be subject to transfer restrictions. Notwithstanding registration under the U.S. Securities Act, the securities or blue sky laws of certain states (including Arizona, Arkansas, California, Minnesota, Ohio, Utah and Wisconsin) may restrict exercise of the Rights. In those states, Rights may only be exercised by shareholders to which solicitations may be addressed without registration under the relevant state securities laws ("Eligible U.S. Institutions"). Shareholders resident in, or that hold their securities for the account or benefit of any person in, any such jurisdiction any such jurisdiction that wish to determine if they are Eligible U.S. Institutions should contact the Company, Attention Darb Dhillon, telephone 604-488-2658. Holders in, or that hold their securities for the account or benefit of any person in, any such jurisdiction that are not Eligible U.S. Institutions will not be permitted to exercise their Rights but may transfer the Rights outside of the United Sates in accordance with Regulation S under the U.S. Securities Act as described below

 

The Rights may not be transferred to a person within the United States and may be transferred only in transactions outside of the United States in accordance with Regulation S under the U.S. Securities Act, which will permit the resale of the Rights by persons through the facilities of the TSX, provided that the offer is not made to a person in the United States, neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, and no "directed selling efforts", as that term is defined in Regulation S under the U.S. Securities Act, are conducted in the United States in connection with the resale. Certain additional conditions are applicable to the Company's "affiliates", as that term is defined under the U.S. Securities Act. In order to enforce this resale restriction, holders thereof will be required to execute a declaration certifying that such sale is being made outside the United States in accordance with Regulation S under the U.S. Securities Act, which is included as part of Form 3. Any person within the United States that acquires the Rights through the facilities of the TSX or otherwise, other than pursuant to the initial distribution of Rights by the Company, may be unable to exercise such Rights in accordance with the U.S. Securities Act or applicable securities laws of any state of the United States. The Company reserves the right to reject any such exercise of the Rights by a person within the United States that subsequently acquires the Rights and the acquisition of the Rights by such person within the United States does not constitute an offer of the underlying Common Shares to such person.

 

 

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What is the Additional Subscription Privilege and how can you exercise this privilege?

 

Registered holders of Rights

 

If you exercise all of your Rights under the Basic Subscription Privilege, you may subscribe for additional Common Shares that have not been subscribed and paid for pursuant to the Basic Subscription Privilege (the "Additional Common Shares") pursuant to the Additional Subscription Privilege. If you wish to exercise the Additional Subscription Privilege, you must first exercise your Basic Subscription Right in full by completing Form 1 on the Rights Subscription Form for the maximum number of Common Shares that you may subscribe for and also complete Form 2 on the Rights Subscription Form, specifying the number of Additional Common Shares desired. Send the purchase price for the Additional Common Shares under the Additional Subscription Privilege with your Rights Subscription Form and Rights DRS Advice to the Depository. The purchase price is payable in Canadian funds by certified cheque, bank draft or money order payable to the order of Computershare Investor Services Inc. These funds will be placed in a segregated account pending allocation of the Additional Common Shares, with any excess funds being returned by mail without interest or deduction. Interest, if any, earned on such funds will be for our benefit.

 

If the aggregate number of Additional Common Shares subscribed for by those who exercise their Additional Subscription Privilege is less than the number of available Additional Common Shares, each such holder of rights will be allotted the number of Additional Common Shares subscribed for under the Additional Subscription Privilege.

 

If the aggregate number of Additional Common Shares subscribed for by those who exercise their Additional Subscription Privilege exceeds the number of available Additional Common Shares, each such holder of rights will be entitled to receive the number of Additional Common Shares equal to the lesser of:

 

1.the number of Additional Common Shares subscribed for by the holder under the Additional Subscription Privilege; and

 

2.the product (disregarding fractions) obtained by multiplying the aggregate number of Additional Common Shares available through unexercised rights by a fraction, the numerator of which is the number of rights previously exercised by the holder and the denominator of which is the aggregate number of rights previously exercised by all holders of rights who have subscribed for Additional Common Shares under the Additional Subscription Privilege.

 

As soon as practicable after the Expiry Time, the Depository will mail to each holder of rights who completed Form 2 on the Rights Subscription Form, a statement for the Additional Common Shares which that holder has purchased and shall return to the holder any excess funds paid for the subscription of Additional Common Shares by such holder under the Additional Subscription Privilege, without interest or deduction.

 

Beneficial holders of Rights

 

If you are a beneficial holder of rights through a Participant in CDS and you wish to exercise your Additional Subscription Privilege, you must deliver your payment and instructions to the Participant sufficiently in advance of the Expiry Time to allow the Participant to properly exercise the Additional Subscription Privilege on your behalf.

 

 

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How does a rights holder sell or transfer rights?

 

Registered Holders of Rights

 

The rights will trade on the TSX under the trading symbol "III.RT.A" until 9:00 a.m. (Pacific Daylight Time) on June 24, 2022. Holders of Rights DRS Advices not wishing to exercise their rights may sell or transfer them directly or through their securities broker or dealer at the shareholder’s expense, subject to any applicable resale restrictions. Rights DRS Advices will not be issued and forwarded to Ineligible Shareholders. Holders of Rights DRS Advices may elect to exercise only a part of their rights and dispose of the remainder, or dispose of all of their rights. Any commission or other fee payable in connection with the exercise or any trade of rights is the responsibility of the holder of such rights. Depending on the number of rights a holder may wish to sell, the commission payable in connection with a sale of rights could exceed the proceeds received from such sale.

 

If you wish to transfer your rights, a Stock Power of Attorney form (the "Transfer Form") will need to be obtained from the Depositary and completed, have the signature guaranteed by an "eligible institution" to the satisfaction of the Depository and deliver the Rights DRS Advice and Transfer Form to the transferee. For this purpose, eligible institution means a Canadian Schedule 1 chartered bank, a major trust company in Canada, a member of the Securities Transfer Agents Medallion Program, or a member of the Stock Exchange Medallion Program. Members of these programs are usually members of a recognized stock exchange in Canada or members of the Investment Industry Regulatory Organization of Canada.

 

It is not necessary for a transferee to obtain a new Rights DRS Advice to exercise the rights or the Additional Subscription Privilege, but the signature of the transferee on Forms 1 and 2 must correspond in every particular with the name of the transferee shown on the Transfer Form. If the Transfer Form is properly completed, the Company and the Depository will treat the transferee as the absolute owner of the Rights DRS Advice for all purposes and will not be affected by notice to the contrary. A Rights DRS Advice so completed should be delivered to the appropriate person in ample time for the transferee to use it before the expiration of the rights.

 

Beneficial holders of Rights

 

If you hold Common Shares through a Participant, you must arrange for the exercise, transfer or purchase of rights through that Participant.

 

U.S. Restriction

 

The Rights may not be transferred to a person within the United States and may be transferred only in transactions outside of the United States in accordance with Regulation S under the U.S. Securities Act, which will permit the resale of the Rights by a Rights holder through the facilities of the TSX, provided that the offer is not made to a person in the United States, neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, and no "directed selling efforts", as that term is defined in Regulation S under the U.S. Securities Act, are conducted in the United States in connection with the resale. Certain additional conditions are applicable to the Company's "affiliates", as that term is defined under the U.S. Securities Act. In order to enforce this resale restriction, a Rights holder thereof will be required to execute a declaration certifying that such sale is being made through the facilities of the TSX in accordance with Regulation S under the U.S. Securities Act.

 

When can you trade securities issuable upon the exercise of your rights?

 

The Common Shares are listed on the TSX under the trading symbol "III" and will be available for trading as soon as practicable after June 27, 2022.

 

Are there restrictions on the resale of securities?

 

Rights offered to holders in Canada and the Common Shares issuable on exercise of such Rights may be resold without hold period restrictions under the applicable Canadian securities laws, including through the facilities of the TSX, by such holders provided that: (i) the sale is not by a “control person” of the Company; (ii) no unusual effort is made to prepare the market or create a demand for the securities being resold; (iii) no extraordinary commission or consideration is paid to a person or company in respect of the resale; and (iv) if the selling security holder is an insider or officer of the Company, the selling security holder has no reasonable grounds to believe that the Company is in default of securities legislation.

 

 

- 13 -

 

The Company has filed with the SEC in the United States the Registration Statement so that the Common Shares issuable upon the exercise of the Rights will not be subject to transfer restrictions in the United States. However, the Rights may be transferred only in transactions outside of the United States in accordance with Regulation S under the U.S. Securities Act. See "How does a rights holder sell or transfer rights? – U.S. Restriction" above.

 

Each holder is urged to consult their professional advisor to determine the exact conditions and restrictions applicable to the right to trade in securities.

 

Will we issue fractional underlying securities upon exercise of the rights?

 

No. Where the exercise of Rights would appear to entitle the holder of rights to fractional Common Shares, the holder's entitlement will be reduced to the next lowest whole number of Common Shares, and no cash or other consideration will be paid in lieu thereof.

 

APPOINTMENT OF DEPOSITORY

 

Who is the Depository?

 

Computershare Investor Services Inc. is the Depository for the Offering. The Depository has been appointed to receive subscriptions and payments from holders of Rights and to perform the services relating to the exercise and transfer of Rights.

 

ADDITIONAL INFORMATION

 

Where can you find more information about us?

 

You can access our continuous disclosure documents filed with the Canadian securities regulators under our issuer profile at www.sedar.com.

 

MATERIAL FACTS AND MATERIAL CHANGES

 

There is no material fact or material change about the Company that has not been generally disclosed.

 

DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT

 

The following documents have been filed with the SEC as part of the Registration Statement of which this Circular forms a part: (i) the Company’s Annual Information Form for the year ended December 31, 2021; (ii) the Company’s audited consolidated annual financial statements as at and for the years ended December 31, 2021 and 2020; (iii) the Company’s management's discussion and analysis for the audited consolidated annual financial statements for the year ended December 31, 2021; (iv) the unaudited condensed consolidated interim financial statements for the three months ended March 31, 2022 and the corresponding management’s discussion and analysis; (v) the management information circular dated April 1, 2022 (vi) the consent of Deloitte LLP; (v) the consent of certain technical experts; (vi) the press release dated May 19, 2022 relating to the Rights; and (vii) powers of attorney. Shareholders in the U.S. are encouraged to read the Registration Statement, including exhibits, carefully and in their entirety prior to making any investment decision.

 

 

 

 

PART II—INFORMATION NOT REQUIRED TO BE SENT TO SHAREHOLDERS

 

The exhibits to this registration statement are:

 

Exhibit   Description
99.1   Annual Information Form dated March 25, 2022 for the year ended December 31, 2021
     
99.2   Audited Consolidated Annual Financial Statements as at and for the years ended December 31, 2021 and 2020
     
99.3   Management’s Discussion and Analysis for the year ended December 31, 2021
     
99.4   Unaudited Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2022 and 2021
     
99.5   Management's Discussion and Analysis for the three months ended March 31, 2022
     
99.6   Management Information Circular dated April 1, 2021
     
99.7   Consent of Deloitte LLP
     
99.8   Consent of Ryan Brown
     
99.9   Consent of Gary Roste
     
99.10   Consent of Janice Baron
     
99.11   Consent of Chris Rees
     
99.12   Consent of Rob Stewart
     
99.13   Consent of Brett Swanson
     
99.14   Consent of Michael Sykes
     
99.15   Consent of Laurie Reemeyer
     
99.16   Consent of Bing Wang
     
99.17   Consent of Philip Stephenson
     
99.18   Powers of Attorney (contained on the signature pages of this registration statement)
     
99.19   Press Release dated May 19, 2022 regarding the Rights Offering

 

 

PART III—CONSENT TO SERVICE OF PROCESS

 

Not applicable.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-7 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Vancouver, British Columbia, Canada, on May 19, 2022.

 

  Imperial Metals Corporation
     
  By: /s/ J. Brian Kynoch
    Name: J. Brian Kynoch
    Title:   President

 

 

Signatures and POWER OF ATTORNEY

 

The Registrant and each person whose signature appears below constitutes and appoints each of Brian Kynoch and Darb Dhillon as his or her true and lawful attorney-in-fact and agent with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement and registration statements filed pursuant to Rule 429 under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ J. Brian Kynoch          
J. Brian Kynoch   President and Director
(Principal Executive Officer)
  May 19, 2022
         
/s/ Darb Dhillon          
Darb Dhillon   Chief Financial Officer (Principal Financial and Accounting Officer)   May 19, 2022
         
/s/ Pierre Lebel        
Pierre Lebel   Chairman   May 19, 2022
         
/s/ Larry G. Moeller        
Larry G. Moeller   Lead Director   May 19, 2022
         
/s/ Theodore W. Muraro        
Theodore W. Muraro   Director   May 19, 2022
         
/s/ Janine North        
Janine North   Director   May 19, 2022
         
/s/ Edward A. Yurkowski        
Edward A. Yurkowski   Director   May 19, 2022
         
/s/ James P. Veitch        
James P. Veitch   Director   May 19, 2022

 

 

AUTHORIZED REPRESENTATIVE

 

Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, the undersigned has signed this Registration Statement, solely in its capacity as the duly authorized representative of Imperial Metals Corporation in the United States, on May 19, 2022.

 

  STERLING GOLD MINING CORPORATION
     
  By: /s/ J. Brian Kynoch
    Name: J. Brian Kynoch
    Title:   President

 

 

INDEX TO EXHIBITS

 

Exhibit   Description
99.1   Annual Information Form dated March 25, 2022 for the year ended December 31, 2021
     
99.2   Audited Consolidated Annual Financial Statements as at and for the years ended December 31, 2021 and 2020
     
99.3   Management’s Discussion and Analysis for the year ended December 31, 2021
     
99.4   Unaudited Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2022 and 2021
     
99.5   Management's Discussion and Analysis for the three months ended March 31, 2022
     
99.6   Management Information Circular dated April 1, 2021
     
99.7   Consent of Deloitte LLP
     
99.8   Consent of Ryan Brown
     
99.9   Consent of Gary Roste
     
99.10   Consent of Janice Baron
     
99.11   Consent of Chris Rees
     
99.12   Consent of Rob Stewart
     
99.13   Consent of Brett Swanson
     
99.14   Consent of Michael Sykes
     
99.15   Consent of Laurie Reemeyer
     
99.16   Consent of Bing Wang
     
99.17   Consent of Philip Stephenson
     
99.18   Powers of Attorney (contained on the signature pages of this registration statement)
     
99.19   Press Release dated May 19, 2022 regarding the Rights Offering

 

 

 

Exhibit 99.1

 

 

 

Imperial Metals Corporation

 

Annual Information Form

 

For the Year Ended December 31, 2021

 

March 25, 2022

 

Imperial Metals Corporation | 2021 Annual Information Form

 

 

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Imperial Metals Corporation | 2021 Annual Information Form

 

 

Table of Contents  
   
Content Information P 1
   
Company Business & Corporate Structure P 6
   
General Development & Outlook P 8
   
Mineral Property | Red Chris Mine P 14
   
Mineral Property | Mount Polley Mine P 30
   
Other Properties P 42
   
Capital Structure P 43
   
Market for Securities P 43
   
Directors & Executive Officers P 44
   
Corporate Cease Trade Orders or Bankruptcies P 47
   
Conflicts of Interest P 47
   
Interest of Management & Others in Material Transactions P 47
   
Material Contracts P 47
   
Legal Proceedings P 48
   
Transfer Agent & Registrar P 48
   
Interests of Experts P 48
   
Additional Information P 48

 

Imperial Metals Corporation | 2021 Annual Information Form

 

 

[ intentionally left blank ]

 

Imperial Metals Corporation | 2021 Annual Information Form

P 1

 

Content Information

 

All references in this Annual Information Form (“AIF”) to “Imperial”, “Company”, “we” and “our” apply collectively to Imperial Metals Corporation and its subsidiaries.

 

Cautionary Note Regarding Forward-Looking Information

 

This AIF provides material information about Imperial Metals Corporation and its business, operations and developments for the year ended December 31, 2021, and plans for the future based on facts and circumstances as at March 25, 2022.

 

Except for statements of historical fact relating to the Company, certain information contained herein constitutes forward-looking information which are prospective in nature and reflect the current views and/or expectations of Imperial. Often, but not always, forward-looking information can be identified by the use of statements such as "plans", "expects" or "does not expect", "is expected", "scheduled", "estimates", "forecasts", "projects", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such information includes, without limitation, statements regarding: future impacts of the COVID-19 pandemic; the ability to continue operations in lieu of the COVID-19 pandemic; the effectiveness of preventative actions put in place by the Company to respond to the COVID-19 pandemic; mine plans; plans and timing of current and proposed exploration, drilling and development; production and marketing; capital expenditures; expectations regarding the care, maintenance and rehabilitation activities at Mount Polley mine; expectations regarding updates to the mine restart plans and timelines for milling operations at Mount Polley mine; the Company’s ability to secure financing to fund the restart of Mount Polley mine; anticipated benefits and proceeds of the joint venture partnership with Newcrest Mining Limited (“Newcrest”) including expectations that it will enable the Company to unlock significant value at Red Chris by leveraging Newcrest’s unique technical expertise in block caving operations; plans to construct a portal site and exploration decline into the deep East Zone; expectations and timing regarding an ore reserve estimate; expectations and timing regarding a pre-feasibility study initiated by the Operator on the development of an underground block cave mining operation at Red Chris; expectations and timing regarding the initiation of a feasibility study at Red Chris; expectations regarding the potential cost and length of life mine of Red Chris; adequacy of funds for projects and liabilities, including the payment of fees related to the guarantee of the Company’s Credit Facility; expectations relating to the receipt of necessary regulatory permits, approvals or other consents; the Company’s belief in the merit of and expectations regarding the allegations of a securities class action claim; outcome and impact of litigation; cash flow; working capital requirements; expectations relating to the requirement for additional capital; expectations relating to results of operations, production, revenue, margins and earnings; future prices of copper and gold; future foreign currency exchange rates and impact; future accounting changes; future prices for marketable securities; expectations with respect to declaring cash dividends or distributions on securities; and expectations regarding opportunities and standing with respect to greenfield exploration properties.

 

Imperial Metals Corporation | 2021 Annual Information Form

P 2

 

Forward-looking information is not based on historical facts, but rather on then current expectations, beliefs, assumptions, estimates and forecasts about the business and the industry and markets in which the Company operates, including, but not limited to, assumptions that: the scope and duration of the COVID-19 pandemic and its impact on our business will not be significant and the Company’s operations will be able to return to normal after the COVID-19 pandemic has subsided; the Company will have access to capital as required and will be able to fulfill its funding obligations as the Red Chris minority joint venture partner; there are risks related to holding non-majority investment interest in the Red Chris mine; the Company will be able to advance and complete remaining planned rehabilitation activities within expected timeframes; there will be no significant delay or other material impact on the expected timeframes or costs for completion of rehabilitation of the Mount Polley mine and implementation of the Mount Polley long term water management plan; the Company’s initial rehabilitation activities at Mount Polley will be successful in the long term; all required permits, approvals and arrangements to proceed with planned rehabilitation and the Mount Polley long term water management plan will be obtained in a timely manner; the Company’s belief that the appeals with respect to decisions in favour of the Company are without merit; there will be no material operational delays at the Red Chris mine; equipment will operate as expected; there will not be significant power outages; there will be no material adverse change in the market price of commodities and exchange rates; and the Red Chris mine will achieve expected production outcomes (including with respect to mined grades and mill recoveries and access to water as needed). Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. We can give no assurance that the forward-looking information will prove to be accurate. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause Imperial’s actual results, revenues, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements constituting forward-looking information. Important risks that could cause Imperial’s actual results, revenues, performance or achievements to differ materially from Imperial’s expectations include, among other things: the risk that the Company’s beneficial interest of the Red Chris mine may be diluted over time should it not have access to capital as required and will not be able to meet its funding obligations as the Red Chris minority joint venture partner; additional financing that may be required may not be available to Imperial on terms acceptable to Imperial or at all; uncertainty regarding the outcome of sample testing and analysis being conducted on the area affected by the Mount Polley Breach; risks relating to the timely receipt of necessary approvals and consents to proceed with the rehabilitation plan and the Mount Polley long term water management plan; risks relating to the remaining costs and liabilities and any unforeseen longer-term environmental consequences arising from the Mount Polley Breach; uncertainty as to actual timing of completion of rehabilitation activities and the implementation of the Mount Polley long term water management plan; risks relating to the impact of the Mount Polley Breach on Imperial’s reputation; risks relating to mining operations; uncertainty regarding general economic conditions; uncertainty regarding the short-term and long-term impact of the COVID-19 pandemic on the Company’s operations and investments and on the global economy and metals prices generally; risks associated with competition within the mining industry; the Company’s dependency on third party smelters; risks relating to trade barriers; the quantum of claims, fines and penalties that may become payable by Imperial and the risk that current sources of funds are insufficient to fund liabilities; risks that Imperial will be unsuccessful in defending against any legal claims or potential litigation; risks of protesting activity and other civil disobedience restricting access to the Company’s properties; failure of plant, equipment or processes to operate in accordance with specifications or expectations; cost escalation, unavailability of materials and equipment, labour unrest, power outages, and natural phenomena such as weather conditions and water shortages negatively impacting the operation of the Red Chris mine; changes in commodity and power prices; changes in market demand for our concentrate; risks that the COVID-19 pandemic may adversely affect copper prices, impact our ability to transport or market our concentrate, cause disruptions in our supply chains and create volatility in commodity prices and demand; inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources); uncertainty relating to mineral resource and mineral reserve estimates; uncertainty relating to production estimates; risks associated with mineral exploration and project development; fluctuations in exchange rates and interest rates; risks associated with permitting and government regulations; environmental and health and safety matters; risks relating to joint venture projects; risks relating to foreign operations; dependence on key management personnel; taxation risk; conflicts of interest; cyber threats; risks relating to the use of derivative contracts and other hazards and risks disclosed within the Management’s Discussion & Analysis for the year ended December 31, 2021 and other public filings which are available under the Company’s profile on sedar.com. For the reasons set forth above, investors should not place undue reliance on forward-looking information. Imperial does not undertake to update any forward- looking information, except in accordance with applicable securities laws.

 

Date of Information

 

Unless otherwise stated, the information within this AIF is for Imperial’s financial year ended December 31, 2021.

 

Currency

 

The reporting currency of the Company is the Canadian (“CDN”) Dollar, unless otherwise indicated.

 

Imperial Metals Corporation | 2021 Annual Information Form

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Reference for Select Abbreviations

 

The following abbreviations may be used in this document:
mm = millimetre   oz = ounces
cm = centimetre   lbs = pounds
m = metre   kg = kilogram
Masl = metres above sea level   g = gram
m3 = cubic metre   g/t = grams per tonne
km = kilometre   t/d = tonnes per day
ha = hectare   kV = kilovolt
M = million   kW = kilowatt
MT = million tonnes   hp = horsepower
ppm = parts per million   SAG = semi autogenous
NAG = non acid generating   QA/QC = Quality Assurance/Quality Control
PAG = potentially acid generating   mRL = metres Relative Level
     
Provincial BC Ministries:    
  MFLNRORD = Ministry of Forest, Lands, Natural Resource Operations and Rural Development
  MECCS = Ministry of Environment and Climate Change Strategy
  MEMLCI = Ministry of Energy, Mines and Low Carbon Innovation

 


Reference for Conversions

 

Imperial Measure Conversion to Metric Unit   Metric Unit Conversion to Imperial Measure
  2.470 acres = 1 hectare   0.4047 hectare = 1 acre
  3.280 feet = 1 metre   0.3048 m = 1 foot
  0.620 miles = 1 kilometre   1.6093 kilometre = 1 mile
  2.205 pounds = 1 kilogram   0.4540 kilograms = 1 pound
  1.102 (short) tons = 1 tonne   0.9072 tonnes = 1 ton

 

Imperial Metals Corporation | 2021 Annual Information Form

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Definitions for Mineral Resource & Mineral Reserve Estimates

 

Resource and Reserve Classifications

 

This AIF adheres to the resource/reserve definitions and classification criteria developed by the Canadian Institute of Mining and Metallurgy (“CIM”). The CIM Definition Standards on Mineral Resources and Reserves (“CIM Definition Standards”) establish definitions and guidance on the definitions for mineral resources, mineral reserves, and mining studies used in Canada. The Mineral Resource, Mineral Reserve, and Mining Study definitions are incorporated by reference into National Instrument 43-101–Standards of Disclosure for Mineral Projects (“NI 43-101”). The CIM Definition Standards are summarized below. For additional information refer to cim.org.

 

Mineral Resource

 

Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource but has a lower level of confidence than a Measured Mineral Resource.

 

A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.

 

Inferred Mineral Resource

 

An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

 

Indicated Mineral Resource

 

An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.

 

Measured Mineral Resource

 

A Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of modifying factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation.

 

A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.

 

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Mineral Reserve

 

Mineral Reserves are sub-divided in order of increasing confidence into Probable Mineral Reserves and Proven Mineral Reserves. A Probable Mineral Reserve has a lower level of confidence than a Proven Mineral Reserve.

 

A Mineral Reserve is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of modifying factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified.

 

The reference point at which Mineral Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.

 

Probable Mineral Reserve

 

A Probable Mineral Reserve is the economically mineable part of an Indicated Mineral Reserve, and in some circumstances, a Measured Mineral Resource. The confidence in the modifying factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.

 

The Qualified Person (as defined in NI 43-101) may elect, to convert Measured Mineral Resources to Probable Mineral Reserves if the confidence in the modifying factors is lower than that applied to a Proven Mineral Reserve. Probable Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study.

 

Proven Mineral Reserve

 

A Proven Mineral Reserve is the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the modifying factors.

 

Application of the Proven Mineral Reserve category implies the Qualified Person (as defined in NI 43-101) has the highest degree of confidence in the estimate with the consequent expectation in the minds of the readers of the report. The term should be restricted to that part of the deposit where production planning is taking place and for which any variation in the estimate would not significantly affect the potential economic viability of the deposit. Proven Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study. Within the CIM Definition standards the term Proved Mineral Reserve is an equivalent term to a Proven Mineral Reserve.

 

Mineral Resource & Mineral Reserve Classification

 

The CIM Definition Standards provide for a direct relationship between Indicated Mineral Resources and Probable Mineral Reserves and between Measured Mineral Resources and Proven Mineral Reserves. In other words, the level of geoscientific confidence for Probable Mineral Reserves is the same as that required for the in situ determination of Indicated Mineral Resources and for Proven Mineral Reserves is the same as that required for the in situ determination of Measured Mineral Resources.

 

Imperial Metals Corporation | 2021 Annual Information Form

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Company Business & Corporate Structure

 

Imperial is a Vancouver based mining company active in the acquisition, exploration, development, mining and production of base and precious metals.

 

The Company’s registered and records office address is Suite 200, 580 Hornby Street, Vancouver, British Columbia, Canada V6C 3B6. Imperial was incorporated under the British Columbia Company Act, which was superseded by the British Columbia Business Corporations Act, on December 6, 2001 under the name IMI Imperial Metals Inc. Imperial changed its name to Imperial Metals Corporation on April 10, 2002.

 

Principal Properties  Metals Mined  Mining Method  Location
Mount Polley(1)  copper/gold  open pit & underground  British Columbia
Red Chris(2)  copper/gold  open pit  British Columbia

 

(1) Mine on care & maintenance status. Operations suspended May 31, 2019.

(2) Imperial holds 30% interest. Newcrest Mining Limited holds 70% interest and is the project operator

 

Principal Subsidiaries  Ownership   Jurisdiction of Incorporation
Red Chris Development Company Ltd.   100%(1) British Columbia
Mount Polley Mining Corporation   100%  British Columbia
CAT-Gold Corporation   100%(1) Canada

 

(1) Imperial owns 100% of CAT-Gold Corporation, which in turn owns 100% of Red Chris Development Company Ltd.

 

A list of Imperial subsidiaries is provided in Note 16 of the December 31, 2021 financial statements.

 

Employees

 

At December 31, 2021, Imperial and its subsidiaries had 49 employees. Mount Polley is on care and maintenance status, but when operating, the mine employs approximately 300-350 workers. The Red Chris mine had approximately 678 employees at year end.

 

Principal Markets & Distribution

 

Copper concentrate produced at the Red Chris mine is trucked to and shipped from the Port of Stewart. When in operation, copper concentrate from the Mount Polley mine is trucked to and shipped from the Port of Vancouver.

 

The primary market for copper concentrate is Asia.

 

Revenue by Product (000’s)  2021   2020 
Copper  $94,950   $93,921 
Gold  $36,098   $51,313 
Silver  $1,570   $1,058 

 

Imperial Metals Corporation | 2021 Annual Information Form

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Competitive Conditions and Cycles

 

The Company’s business is to produce and sell metal concentrates at prices determined by world markets over which we have no influence or control. These markets are cyclical. Our competitive position is determined by our costs compared to those of other producers throughout the world, and by our ability to maintain our financial capacity through metal price cycles and currency fluctuations. Costs are governed principally by the location, grade and nature of mineral deposits, labour, costs of equipment, fuel, power and other inputs, as well as by operating and management skill. Over the long term, our competitive position will be determined by our ability to locate, acquire and develop economic mineral deposits and replace current production, as well as by our ability to hire and retain skilled employees. In this regard, we also compete with other mining companies for employees, mineral properties, joint venture agreements, capital and the acquisition of investments in other mining companies.

 

Environmental Protection

 

Our current and future operations, including development activities and production on our properties or areas in which we have an interest, are subject to laws and regulations governing protection and remediation of the environment, site reclamation, management of toxic substances and similar matters. Compliance with these laws and regulations can affect the planning, designing, operating, closing and remediating of our mines.

 

We work to apply technically proven and economically feasible measures to protect the environment throughout exploration, construction, mining, processing and closure. Although we believe that our operations and facilities are currently in substantial compliance in all material respects with all existing laws, regulations and permits, there can be no assurance that additional significant costs will not be incurred to comply with current or future regulations or that liabilities associated with non-compliance will not be incurred.

 

The total liability for reclamation and closure cost obligations, which represent the Company’s estimate of the present value of future cash outflows required to settle estimated reclamation obligations at the end of a mine’s life associated with the Mount Polley, Red Chris, Huckleberry and Ruddock Creek properties, as calculated for financial disclosure purposes as at December 31, 2021, was $147.6 million (2020-$127.8 million). The estimated future cash flows were then inflated using inflation rates between 1.5% and 2.0% (December 31, 2020-1%). The total provision for closure and decommissioning costs is calculated using discount rates between 1.76% to 3.76% (December 31, 2020-2.24% to 3.24%). Changes in any of these factors can result in a change to future site reclamation liabilities and the related accretion of future site reclamation provisions. At December 31, 2021, the Company had a provision of $0.5 million (2020-$1.1 million) for future rehabilitation activities related to the August  4, 2014 tailings dam breach (“Mount Polley Breach”).

 

Specialized Skill and Knowledge

 

The nature of the Company’s business requires specialized skills and knowledge. Such skills and knowledge include the areas of permitting, geology, implementation of exploration programs, operations, treasury and accounting. To date, Imperial has been successful in locating and retaining employees and consultants with such skills and knowledge and believes it will continue to be able to do so.

 

There are material risks that could cause actual results to differ materially from our current expectations. The risks associated with our business, include those related to, but are not limited to: risks associated with the rehabilitation activities from the Mount Polley Breach; risks inherent in the mining and metals business; commodity price fluctuations and the effects of hedging; general economic conditions; competition for mining properties; sale of products and future market access; risks resulting from the global COVID-19 pandemic; availability and cost of key inputs; reliance on third parties; risks associated with trade barriers; mineral reserves and resource estimates; production estimates; exploration and development; currency fluctuations; interest rate risks; exchange rate risks; financing risks; the risk that further advances may not be available under credit facilities; risks associated with maintaining substantial levels of indebtedness, including potential financial constraints on operations; regulatory and permitting risks; environmental risks; joint venture risks; foreign activity risks; legal proceedings; infrastructure risks; dependence on key management personnel; taxation risks; conflicts of interest; reclamation risks; accounting risks and other risks and uncertainties. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of these events actually occur our business, prospects, financial condition, cash flows and operating results could be materially harmed. Full disclosure of the Company’s Risk Factors is provided in the December 31, 2021 Management’s Discussion & Analysis available under Imperial’s profile on sedar.com or on the Imperial website imperialmetals.com.

 

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General Development & Outlook

 

Corporate General

 

On January 7, 2019, the Company announced that, due to declining copper prices, the operations at the Mount Polley mine will be suspended. Mount Polley mine was placed on care and maintenance status effective May 30, 2019.

 

On January 17, 2019, the Company issued 3,542,814 common shares in payment of $4.3 million of interest due on the Convertible Debentures.

 

On February 15, 2019, the Company issued 2,785,080 common shares in payment of $3.8 million of interest due on September 30, 2018 and December 31, 2018 for the Junior Credit Facility.

 

In mid-February and early March, the Company extended the maturity dates on several of its credit facilities to mature on March 15, 2019.

 

On March 10, 2019, the Company entered into an agreement to sell a 70% interest in the Red Chris mine to Newcrest for US$804.4 million, subject to debt and working capital adjustments. The Company would retain a 30% interest in the mine.

 

On March 14, 2019, the Company extended the maturity dates on the following credit facilities:

 

the Senior Credit Facility extended from March 15, 2019 to September 5, 2019

the Second Lien Credit Facility extended from March 15, 2019 to September 9, 2019

the Junior Credit Facility from March 15, 2019 to September 12, 2019

the Bridge Loan extended from March 15, 2019 to September 11, 2019

 

On March 15, 2019, the Company refinanced US$98.4 million of its US$325.0 million Senior Unsecured Notes due March 15, 2019 (the “Senior Notes”). Edco Capital Corporation (“Edco”) subscribed for US$98.4 million of additional Senior Notes on the same terms and conditions as the existing Senior Notes. Such funding enabled the Company to repay an equal dollar amount of the principal of the Senior Notes that were payable in full on March 15, 2019, being US$98.4 million. The remaining existing holders of Senior Notes in the principal amount of US$226.6 million agreed, as did Edco in respect to the additional Senior Notes, to extend the maturity date of the Senior Notes until September 15, 2019.

 

On July 9, 2019, the Company issued 1,379,695 common shares in payment of $3.4 million of interest due on the 2014 Convertible Debentures.

 

On August 15, 2019, the Company completed the sale of a 70% interest in its Red Chris copper and gold mine to Newcrest for a final purchase price of US$804.4 million, subject to debt and working capital adjustments. A joint venture was formed between the Company and Newcrest for the operation of Red Chris mine, with Newcrest acting as operator. Upon receipt of the sale proceeds, the Company repaid substantially all its debt totalling US$775 million, as follows:

 

Senior secured revolving credit facility of $200.0 million

Second lien secured revolving credit facility of $50.0 million

Secured bridge loan of $26.0 million

Unsecured junior credit facility of $75.0 million

Unsecured convertible debentures (2014) of $115.0 million

Unsecured convertible debentures (2015) of $30.0 million

Unsecured line of credit of $10.0 million

Certain equipment loans of about $1.7 million

Senior unsecured notes of US$325.0 million

 

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The Company’s remaining obligations are related to letters of credit, which are supported by a $50.0 million credit facility for future reclamation liabilities entered into in October 2019, and a 30% share of Red Chris Joint Venture equipment loans and obligations related to the Northwest Transmission Line.

 

The $50.0 million credit facility was due in October 2020 but was extended into October 2021. The facility is secured by shares of all material subsidiaries and a floating charge on certain assets of the Company.

 

With the exception of the advent of the COVID-19 pandemic in early 2020, there were no significant developments during 2020 which had an influence on the Company’s general business.

 

Mining was declared an essential service in British Columbia in early 2020, and the Company implemented measures to reduce and mitigate the risk to employees, operations and projects. The continuing impact of COVID-19 to travel and other operating restrictions established to curb the spread of COVID-19, could materially and adversely impact the Company’s current plans by causing a temporary closure of the Red Chris mine, suspending planned exploration work, causing an economic slowdown resulting in a decrease in the demand for copper and gold, negatively impacting copper and gold prices, impacting the Company’s ability to transport or market the Company’s concentrate or causing disruptions in the Company’s supply chains.

 

On February 10, 2021, the Company reported that construction had commenced on the portal site for an exploration decline into the deep East zone at Red Chris mine. The Red Chris Joint Venture approved $135.0 million (on a 100% basis) of funding for the construction of the exploration decline and associated infrastructure and permitting costs.

 

On March 10, 2021, the Company entered into a $10.0 million promissory note financing (“Note”) with an affiliate of its major shareholder. The Note matures on April 1, 2022 and bears interest of 8.0% per annum. The Note was fully repaid on June 28, 2021, prior to its maturity date.

 

On March 15, 2021, the Company acquired a 30% interest in the GJ Property for a payment of $3.0 million to Newcrest Red Chris Mining Limited.

 

On March 30, 2021, the Red Chris Mineral Resource update was released, and it is a key input into the Pre-Feasibility Study (“PFS”) which had been initiated on the development of a high margin underground block cave mine at Red Chris. An ore reserve estimate which for the first time will include a block cave operation at Red Chris is expected to be released within the same timeframe as the PFS.

 

On April 27, 2021, the Company announced a Normal Course Issuer Bid to provide for purchases of its common shares to satisfy its obligations under the Non-Management Directors’ Plan and the Share Purchase Plan.

 

On June 25, 2021, the Company completed a Rights Offering pursuant to which it issued a total of 12,853,267 common shares at a price $4.70 per common shares for gross proceeds of approximately $60.4 million. The Company issued a total of 10,992,281 common shares under basic subscription privileges in the Rights Offering and a total of 1,860,986 common shares under additional subscription privileges.

 

On July 2, 2021, the Red Chris Joint Venture received a Notice of Proposed Transfer and Right of First Refusal Offer regarding the sale of an existing 1% Net Smelter Returns Royalty in consideration of US$165.0 million. The Right of First Refusal was not exercised by the Red Chris Joint Venture.

 

On July 8, 2021, the Company acquired 100% interest in the Ruddock Creek high grade zinc-lead project by purchasing the remaining 54.72% interest held by its previous joint venture partners.

 

On July 15, 2021, the Company’s subsidiary, Huckleberry Mines Ltd., purchased five mineral tenures from ArcWest Exploration Inc. (“ArcWest”). The claims cover 2,526 hectares and are located north of the Huckleberry Mine mining lease. Consideration payable was $50,000 cash and the granting to ArcWest a 1% Net Smelter Returns Royalty.

 

On July 26, 2021, the Company granted PJX Resources Inc. (“PJX”) a five-year option to acquire 100% interest in the Estella Property located northeast of Cranbrook, B.C. The property consists of 14 Crown granted mineral claims covering approximately 224 hectares. Consideration payable to Imperial are staged payments totalling $250,000 and the granting to PJX of a 2% Net Smelter Returns Royalty.

 

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On October 11, 2021, the Company reported highlights of the Red Chris Block Cave Pre-Feasibility Study (“PFS”). With the completion of the PFS, the Operator has approved preparation of a Feasibility Study which is expected to be completed in the first half 2023. On November 29, 2021, the NI 43-101 Technical Report for Red Chris was filed.

 

On October 20, 2021, the Company received notice that the binding arbitration of the claim from a contractor filed in the June 2020 period was completed. The arbitrator’s partial final award dismissed all of the contractor’s claims and found the contractor liable for numerous misrepresentations and for overbilling. Damages payable by the contractor will be determined in the next phase of arbitration.

 

On October 29, 2021, the existing Credit Facility was increased from $50.0 million to $75.0 million maturing October 9, 2022. The increase of $25.0 million in the facility is guaranteed by an affiliate of the Company’s major shareholder, to which the Company will pay certain fees for providing the guarantee.

 

On December 7, 2021, the Company acquired four mineral claims totalling 6,834.47 hectares from Freeport-McMoRan Mineral Properties Canada Inc. for the consideration of claim assessment work expenditures and a 0.5% Net Smelter Return Royalty.

 

Subsequent to December 31, 2021, the Company reported the following:

 

On January 19, 2022, the Company reached an agreement with the Province of British Columbia for the surrender of Giant Copper mineral claims located 37 km east of Hope, BC, Canada. The Company received $24.0 million as consideration that covers all prior investments in the Giant Copper claim area.

 

On February 28, 2022, the Company increased its existing Credit Facility from $75.0 million to $100.0 million. This additional increase of $25.0 million in the facility is guaranteed by a related party.

 

Outlook

 

The Company’s plans for 2022 and beyond could continue to be impacted by the effects of the COVID-19 pandemic.

 

The Operator provided metals production guidance (100%) for Red Chris mine, for the period July 1, 2021, to June 30, 2022 (period conforms to the Operator’s June 30 annual year end), in the range of 50.7 to 55.1 million pounds copper and 40 to 42 thousand ounces gold.

 

Exploration for 2022 will be focused on Red Chris, with 100,000 metres of drilling planned and continuing development of the exploration decline to provide access for underground exploration planned at Red Chris.

 

The work on the restart of Mount Polley is underway and milling operations are targeted to start in the second quarter of 2022.

 

The Company will need to conclude further financing arrangements to fund its share of cost of the ongoing development of a block cave mine at Red Chris and to fund the reopening of the Mount Polley mine.

 

Imperial maintains a large portfolio of greenfield exploration properties in British Columbia. These properties have defined areas of mineralization and exploration potential. Management continues to evaluate various opportunities to advance many of these properties.

 

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Operations | Red Chris Mine

 

The Company owns a 30% interest in the Red Chris copper/gold property in northwest British Columbia through its unincorporated joint venture with Newcrest, finalized in August, 2019. The Red Chris property was originally acquired in April 2007 by Red Chris Development Company Ltd. (“RCDC”), a wholly owned subsidiary of the Company.

 

RCDC conducted exploration from 2007 through May 2012. Construction of the 30,000 tonne per day mill processing plant began in mid-2012 and was completed in early 2015. The mine achieved commercial production in July 2015. RCDC was operator of the Red Chris mine.

 

RCDC initiated preliminary engineering studies to determine the optimum method to mine the deep resource below the designed pits. Based on this work, the block cave method was selected for advancement. A drill program was designed to provide information required to further advance block cave studies. Golder Associates were engaged to develop a plan to mine the deep resource using block cave methods. A preliminary economic assessment of the block cave mining potential, incorporating geotechnical data gathered from earlier diamond drill hole programs, was completed by the end of 2018.

 

During 2018, MillSlicer system components were installed on the SAG mill to improve overall control of the mill. This vibration-based signal is in addition to the bearing pressure and mill power sensors used in controlling mill fill level. The addition of this new control system improved production and mill liner life.

 

The metallurgical response of the high clay ore in the mineralized faults present in the Main and East Zones were diagnosed, with results integrated into operational recovery models in advance of the 2019 production plan. Segregation of faulted material for plant-scale batch processing of fault material commenced in late 2018, with the first planned plant-scale ‘baseline’ run in January 2019.

 

During 2019, a production plan was developed following an in-depth review of historic data, with key assumptions being identified and validated against past performance. The plan reflected a lower mining rate as compared to 2018 (105,000 tonnes per day versus 130,000 tonnes per day). The metal production for 2019 was estimated by a similar application of historic data for incorporation of mill availability, throughput (tonnes per operating hour) and recovery. Mine teams followed the plan with the intent of targeting higher grades using an internal GeoMet process which focused on daily reviews by the on-site teams relating to geological and metallurgical performance. The maintenance teams focused on both scheduled and unscheduled downtimes in the plant which included formal measures as part of the business KPI system. These initiatives proved to be successful.

 

On August 15, 2019, Newcrest Red Chris Mining Ltd. (“NRCML”), a subsidiary of Newcrest, acquired a 70% interest in the Red Chris mine. RCDC and NRCML formed Newcrest Red Chris joint venture (“NRCJV”), with NRCML acting as the operator of the mine. The NRCJV is expected to bring significant value by leveraging Newcrest’s unique technical expertise in block caving operations.

 

In late 2019, two drill programs were initiated by NRCML. The East Zone Resource Definition Program, designed to obtain geological, geotechnical, and metallurgical data to support future studies for underground block cave mining, and the Brownfields Exploration Program to search for additional zones of higher-grade mineralization within the Red Chris porphyry corridor. On the operation side, NRCML commenced mine and processing plant optimization.

 

In early 2020 with the advent of the COVID-19 pandemic, mining was declared an essential service in British Columbia. NRCML implemented measures that met or exceeded Canadian and provincial requirements. The Tahltan Central Government, Iskut First Nation and Tahltan Band agreed with NRCML’s implementation of measures which proactively protect and support communities and enable Tahltan members to support their families and communities, helping Red Chris to continue to operate during the COVID-19 pandemic. Measures included changing the employee roster to provide for longer on/off-site periods to decrease the amount of travel required and enable First Nation employees increased time to self-isolate before returning to their local communities. Most of the measures were maintained through 2021 to reduce and mitigate risks.

 

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Several initiatives were implemented by NRCML in 2020 to improve efficiencies across the site, including optimization of haul road conditions and dumping locations to reduce truck cycle times, introduction of just in time fueling to increase operating time, installation of a dispatch system in the mine, and the fitting of lighter weight boxes on CAT 793 haul trucks to increase capacity. Six new launders were installed in the mill in 2020, designed to increase the mass pull in the rougher circuit and lead to increased recovery of copper and gold. The installation of additional cleaner flotation capacity was begun to further increase metal recoveries.

 

In the first quarter of 2021, mill output was temporarily impacted by a major power outage during an extreme winter weather event in February. Metallurgical test work completed in 2021 confirmed that a conventional processing flowsheet incorporating crushing, grinding, flotation and concentrate dewatering was suitable for ore from the planned block cave. In the mine concentrator, an additional cleaner column cell was commissioned in June with early results showing improved gold recovery.

 

Construction of a portal site for an exploration decline into the deep East Zone commenced in early 2021, with completion of the box cut in June and the subsequent start of underground development on June 25. By the end of the calendar year the decline had advanced 652 metres. The exploration decline will be constructed to accommodate access for underground drilling to provide more detailed geological and geotechnical information on the initial block cave design. Options are being studied to extract one of the higher-grade pods in the East Zone using another mining method to increase cash flow prior to the start of block cave mining.

 

In October 2021, NRCML released the positive results of the PFS, which began in June 2020, confirming Red Chris as a Tier 1 asset with the potential to become a long life, low cost mine, and approving progression of the Block Cave project to the Feasibility Stage (first phase of Feasibility Study [MB1] expected completion 2023(1H)). This was followed in November 2021 by the release of a NI 43-101 technical report with updated reserve and resource calculations for Red Chris (excluding the East Ridge resource which is still being explored). A final, positive decision to develop a block cave mine is still subject to the successful completion of the exploration program, further studies, and favorable market and operating conditions.

 

Operations | Mount Polley Mine

 

Mount Polley Mining Corporation (“MPMC”) is owner/operator of the Mount Polley copper-gold mine in south-central British Columbia. In January 2019, following a lengthy sustained period of declining copper prices, the Company announced operations would be suspended. The mine was placed on care and maintenance status at the end of May 2019.

 

Legal action for damages arising from the August 2014 Mount Polley Breach were settled among all parties to the action in November 2018, in consideration of net payments to the Company totaling approximately $108 million. The settlement represents compromises of disputed claims and does not constitute an admission of liability on the part of any party to the action.

 

On September 12, 2019, Pollution Abatement Order 107461 (“PAO”) issued by the Ministry of Environment, now the Ministry of Environment and Climate Change Strategy (“MECCS”), dated August 5, 2014 under Section 83 of the BC Environmental Management Act was cancelled when MECCS deemed all PAO requirements had been complied with, including MECCS’s acceptance of the final remediation plan.

 

Rehabilitation of terrestrial and aquatic zones informed by ongoing detailed site investigation, risk assessments and environmental monitoring, is ongoing and in cooperation with regulatory authorities, First Nations and the local communities.

 

During 2019, an exploration program was conducted. The Frypan/Morehead is a largely till covered magnetic high which has a similar magnetic response to that obtained over the Mount Polley mine host rock of monzonite and hydrothermally altered monzonite breccia pipes. The area is located west and north of the mine and is approximately 3x3 km in size. There were 948 soil samples collected and analyzed using the Mobile Metal Ion (MMI) technique. SJ Geophysics also completed an 80.7 line km Volterra-3D Induced Polarization (IP) survey covering the same grid area. Numerous, high priority targets were outlined for future testing.

 

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In 2020, MPMC acquired an option to earn a 100% interest in seven mineral claims (3,331 ha) adjacent to the mine. Three target settings occur within the optioned claims and adjacent Mount Polley claims, including a potential northern projection of the high-grade Quarry zone beneath a post-mineral conglomerate unit, a partially tested glacial till covered area where regional magnetics suggests a faulted offset of the Mount Polley Intrusive complex, which hosts the Mount Polley orebodies, is present and a till covered prospective area immediately east of the Southeast Zone. A deep looking IP survey, along with a soil sampling program, was completed over the optioned claims. A similar IP survey was conducted over the Mount Polley mine site to identify the geophysical response of the known mineralization to aid in prioritizing targets on the Frypan/Morehead area. The survey consisted of 81.5 line km and was successful in delineating the known mineralization, as well as outlining several new un-tested areas in the vicinity of the mine.

 

Drill programs were planned to test the targets outlined on the optioned claims and to expand the copper and gold resource near historic deposits, with a focus on gold rich zones. The drill program set out to improve drill hole data density of mineralization near the historic mining areas where the use of underground mining is being considered, and to drill new geophysical and geochemical anomalies outlined by recent surveys in the Trio Creek area located north and northwest of the mine. Six drill holes totalling 3,792 metres were completed.

 

The WX Zone is the most recent major discovery (2009) at Mount Polley. Located south of the Springer Pit, it is noted for its high gold grades and high gold/copper ratio mineralization. Drill hole WX-20-78 was designed test and confirm the continuity of the mineralization in an area of proposed underground mining. Drilled down the plunge, this hole served to confirm the continuity of this modelled higher grade target within the WX Zone.

 

The C2 Zone is located south of the Cariboo Pit. Two holes were drilled to test a zone of higher gold grade along the Polley fault at depth. Historic drilling in this zone yielded an intercept of 55 metres grading 2.14 g/t gold and 1.19% copper in drill hole C2-11-97. Both holes were successful in extending this lower gold zone.

 

Drill hole SD-20-162 was designed to fill a gap in drilling on the eastern side of the target area beneath the Springer Pit. The Springer Zone contains most of the reserves in the current open pit mine plan. Historic drilling beneath the currently planned Springer Pit confirmed the mineralization continues for at least 250 metres below the pit bottom.

 

The Trio Creek target area is located north and northwest of the mine. This area is covered by glacial till with limited bedrock exposure. Using new geophysical and geochemical anomalies outlined by recent surveys, the goal was to gain an understanding of the geological system. Drill holes TC-20-01 and TC-20-02 were designed to test new anomalies north and west of the mine. The targeted areas feature favorable geophysics that match the geophysical fingerprint of the Mount Polley mineralized host rock. Drill holes TC-20-01 and TC-20-02 have defined a clear extension to the north of similar geology and associated hydrothermal alteration zones to that which hosts the mineralization at Mount Polley. Additional exploration is planned to further define the targets located in this area.

 

The 2021 exploration program included the acquisition of high density ground magnetic data over top of high priority areas within the mine site and areas immediately to the north. This ground magnetic survey was successful in providing high resolution magnetic data overtop of high priority targets located north of the Junction Zone, north of the old Bell Pit, west of the Wight Pit, adjacent to Polley Lake and south of the South East Rock Dump. The ground magnetic data has highlighted many magnetic anomalies around the property that have a similar geophysical signature as the known mineralization found at Mount Polley. Several more magnetic surveys have been planned to cover areas where data and exploration is limited. Additional exploration is planned to further define the anomalies derived from the ground magnetic surveys.

 

Through 2019 into 2021, site personnel continued to maintain access, fire watch, manage collection, treatment and discharge of site contact water, and actively monitor the tailings storage facility. In the fourth quarter of 2021, MPMC took the initial steps towards recommencement of operations at the Mount Polley mine. Stripping operations began to enable milling operations to restart in 2022. Mechanical and electrical contractors began on refurbishing the plant, including work on the tailings slurry and reclaim water pipelines and pumps, crushers, conveyors, screens, grinding mills, flotation and plant water systems. The crushing plant was commissioned by year end providing crush material for winter road maintenance.

 

Outlook for 2022 includes continued stripping of Springer Pit, building of an ore stockpile and a plant restart targeted for second quarter 2022.

 

COVID-19 has impacted mine restart scenarios with some absenteeism, delays and deliveries of key items.

 

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Material Properties

 

For the purposes of this AIF, the Company has identified the Red Chris Mine and the Mount Polley Mine as material properties.

 

Mineral Property | Red Chris Mine

 

The RED CHRIS OPERATIONS, BRITISH COLUMBIA, CANADA NI 43-101 Technical Report, (“2021 Red Chris Report”) with an effective date of June 30, 2021, was filed November 29, 2021 on sedar.com.

 

Description, Location & Access

 

Red Chris mine is located in northwest British Columbia, 18 km southeast of Iskut and 80 km south of Dease Lake. Road access to the property from Highway 37 is via an 18 km gravel road. Power is accessed via a 16 km 287 kV power line from the Tatogga substation. Mining and milling operations proceed year-round. Elevations range from 1,100 masl to 1,550 masl.

 

The Town of Smithers and the City of Terrace are the closest supply centres. Commercial aircraft service the Dease Lake airport located 118 km north by road from the mine site along Highway 37. Stewart is the nearest port with ship loading facilities a distance of 320 km (by road) from the Red Chris property.

 

The mine operates as a fly-in/fly-out site with the majority of employees on a two-week rotation. Chartered aircraft fly employees to the Dease Lake airstrip from where they are transported by bus to the mine site.

 

RCDC owns a 30% beneficial interest in the Red Chris mine, following the August 15, 2019 sale of a 70% interest to NRCML. RCDC and NRCML have formed a joint venture for the operation of Red Chris, with NRCML acting as operator (“the Operator”).

 

The Red Chris property comprises the Red Chris Main claim group and the Red Chris South group, and consists of 77 mineral tenures that cover a total area of 23,142 ha. All mineral tenures are issued in accordance with the Mineral Tenure Act of British Columbia and are 100% owned by NRCML. The Red Chris Main claim group consists of 50 mineral tenures covering 17,046 ha, five of which are 30-year mining leases valid until June 20, 2042 that cover 5,141 ha in addition to 45 mineral claims (eight valid until October 31, 2022, 35 to October 31, 2026, one valid to April 8, 2022 and one valid to July 18, 2022) encompassing 11,905 ha.

 

The five mining leases and 31 mineral claims at the property are subject to a net smelter return royalty held by the Tahltan Central Government. Annual advance royalty payments commenced in October 2016. All or portions of four of the mining leases and 19 mineral claims are also subject to a 1.0% net smelter return royalty held by International Royalty Corporation, who acquired the royalty from Glencore Canada Corporation in August 2021. A right of first refusal is retained by NRCML on any further disposition of the net smelter royalty by International Royalty Corporation. The Red Chris South claim group comprises 27 mineral tenures (one valid to March 12, 2027 and 26 valid until November 11, 2027) covering 6,097 ha. It was subject to a 1.5% net smelter return royalty held by Canada Carbon Inc.; however, in August 2020 the royalty was acquired by NRCML on behalf of the NRCJV and extinguished.

 

On March 15, 2021, Imperial acquired from NRCML a 30% interest in the GJ Property located approximately 30 km west-southwest of the Red Chris Mine. The property has been incorporated into the NRCJV and consists of 87 mineral tenures (one valid to November 15, 2022, one valid to December 13, 2022 and 85 valid to March 17, 2026) covering 39,432 ha. The claims are subject to net smelter return royalties in favour of Teck Resources Limited amounting to 0.51% on 14 claims and 1.02% on 66 claims; and in favour of TF R&S Canada Ltd. amounting to 0.49% on 14 claims and 0.98% on 66 claims.

 

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Permitting & Environment Management

 

All phases of mining and reclamation are authorized and/or regulated by the Province of British Columbia and the Federal Government of Canada. Mine operations are primarily authorized and regulated under the British Columbia Environmental Management Act (“EMA”) and the Mines Act, both as administered by the MECCS and the Ministry of Energy, Mines and Low Carbon Innovation (“MEMLCI”), respectively.

 

Mine operations and supplementary activities are also authorized and/or regulated under legislation such as the British Columbia Water Sustainability Act, implemented by the Ministry of Forest, Lands, Natural Resource Operations and Rural Development (“MFLNRORD”). A summary of key Red Chris mine permits under these regulations is provided below.

 

Ministry  Authorization  Purpose  Permit  First Issued  Comment
MEMLCI  Permit Approving
Mining & Reclamation Program
  Mining activities  M-240  May 2012  Last amended August 2017
MECCS  Effluent Discharge Permit  Tailings Impoundment Area, North Reclaim Dam & sediment pond discharges  105017  September 2013  Last amended June 2018 to reflect changes to monitoring program and add detail to scope of permit conditions
MECCS  Waste Water Discharge Registration  Waste water under the Municipal Wastewater Regulation  106004  August 2012  Operation of camp and office facilities
MECCS  Air Discharge Permit  Incinerator & controlled open burning & fugitive dust  106668  June 2013  Last amended November 2017
MFLNRORD  Road Use Permit  Mine access road  S25481  June 2012  Construction & maintenance of roads & bridges

 


In 2016, the Red Chris mine received approval to amend the EMA Permit 105017 and Mines Act Permit M-240 to authorize construction and operation of the South Reclaim Dam and South Dam for the TIA. Red Chris received permission to build the South Reclaim Dam in July 2016, and permission to build the South Dam in August 2016; construction of both dams began mid-2016. The Mines Act Permit M-240 amendment approving the operation of the raised Temporary Saddle Dam was received in January 2017; the South Dam operation amendment was issued in February 2017, and the PAG Tailings Deposition in South Basin was approved in August 2017.

 

Federal authorizations for the installation of a bridge on Highway 37 at Snapper Creek were received in July 2016.

 

Schedule 2 Amendment under the federal Fisheries Act (“Fisheries Act”), and

Department of Fisheries and Oceans Canada – Fisheries Act 35(2)(b) Authorization.

 

The bridge at Snapper Creek creates fish habitat by removal of culverts that were access barriers to fish. This project is to offset impacts to fish and fish habitat resulting from the construction of the South Dam. The Snapper Creek Bridge installation was completed in 2017, and the bridge has been in use since mid-October 2017. Monitoring of the remediated fish habitat is ongoing according to the offsetting commitments.

 

The BC Environmental Assessment Certificate was amended in 2016 to accommodate design changes to the South Dam recommended by the Engineer of Record for the TIA after extensive hydrogeology and geotechnical investigations. The design changes included an upstream geomembrane liner, sand and gravel construction and downstream buttress. This BC Environmental Assessment Certificate process is aligned with the regulatory permitting through the Mine Development Review Committee.

 

Environmental monitoring programs at the Red Chris mine continue as required under authorizations from the MECCS and the MEMLCI. Such programs include monitoring of surface water (streams, lakes, and diversions), groundwater, seepage and hydrometric data. RCDC is committed to the future reclamation of the site and has been stockpiling soil recovered from the plant site, mine, rock storage areas and TIA.

 

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The Red Chris Monitoring Committee (“RCMC”) is a requirement of Mines Act Permit M-240. The RCMC is chaired by representatives from RCDC and the Tahltan Nation. The committee includes members from the MECCS, the MEMLCI and the MFLNRORD.

 

In conjunction with the RCMC, the Environmental Oversight Committee has been established under the Red Chris Impact Benefit and Co-Management Agreement. The Environmental Oversight Committee is a forum for dialogue between RCDC, the Tahltan Central Government and Tahltan Nation representatives, and the committee’s terms of reference lay out environmental management mechanisms for the committee relating to:

 

the Environmental Management System,

Red Chris project’s environmental compliance, monitoring and performance,

all Red Chris project-related environmental information and recommendations concerning environmental matters,

Federal and Provincial Permit applications, and

environmental monitoring programs.

 

Red Chris History

 

The first recorded exploration on the property now known as Red Chris was in 1956 when Conwest Exploration Limited examined copper showings on the Todagin plateau. In 1968 Great Plains Development Co. of Canada staked the Chris and Money claims and subsequently completed geological, geochemical and geophysical surveys. In 1970 Silver Standard Mines Ltd. staked the Red and Sus claims to the north and east of the Chris claim group, and followed up in 1971 with mapping, soil surveys and trenching. In 1973 Ecstall Mining Limited (which later became Texasgulf Canada Limited (“Texasgulf”)) optioned the Silver Standard claims and drilled 14 percussion holes, intersecting low grade copper mineralization. In 1974 Texasgulf acquired an option on 60% of the combined Red and Chris groups of claims and initiated a major program from 1974-1976 comprising 67 diamond drill holes and 30 percussion holes. From 1978 to 1980, Texasgulf drilled seven holes and completed property-wide geological, geochemical and geophysical surveys, resulting in the delineation of the Red stock and within it the Main and East Zones of quartz-stockwork hosted mineralization.

 

No exploration was conducted from 1981 to 1994.

 

In 1994, a series of corporate takeovers and reorganizations resulted in the ownership of the property divided amongst Falconbridge (60%), Norcen Energy (20%), and Teck Corporation (20%). American Bullion Minerals Ltd. (ABML) acquired an 80% interest in early 1994, with Teck Corporation retaining their 20%. In 1994 and 1995, ABML completed mineral claim staking, comprehensive geochemical and geophysical surveys, and diamond drilling totaling 58,187 m over 170 holes. Significant near-surface copper-gold mineralization was also discovered in the Gully and Far West Zones.

 

In 2003, Red Chris was under the control of bcMetals Corporation (“bcMetals”). bcMetals drilled 49 holes over 16,591 m and updated the measured, indicated, and inferred resources early in 2004 (ref: NI 43-101 Technical Report on the Red Chris Copper-Gold Project, filed by bcMetals December 16, 2004). Subsequent infill drilling of 25 holes over 6,927 m resulted in the re-modelling of the Main and East Zones as a single unit, incorporated into the feasibility study completed by AMEC Americas Ltd. Exploration in 2006 consisted of 14 drill holes (4,679 m) over the reserve and in the Gully Zone, and additional drilling required under the terms of a joint venture agreement between bcMetals and Global International Jiangxi Copper Company Ltd., which had previously been announced for the development of Red Chris.

 

In mid-2006, the Company launched a takeover bid for Red Chris which was successfully completed in the acquisition of bcMetals in April 2007 at a cost of $68.6 million, which was funded from cash on hand and a $40 million short term loan facility.

 

Historical exploration at Red Chris by previous operators focused on establishing open-pit mineable reserves above a depth of approximately 400 m. The Company’s strategy now was to explore for mineral potential below the planned pit for longer term mine planning. Beginning in 2007, the Company established the vertical extent and strength of the system with deep drilling exploration programs (total approximately 102,000 metres drilled over 91 holes through 2018) primarily in the East and Main Zones, leading to a redesigned block model and a new reserve calculation in 2012. Several geophysical surveys were undertaken during the period for regional assessment. Camp and road infrastructure were upgraded. Exploration was suspended in May 2012 to allow for mine construction, which was completed in early 2015. Commercial production was achieved in July, with RCDC as operator. A 2016 review by Golder Associates of the potential for utilizing block cave methods to mine the deep East Zone resource led to preliminary engineering studies and geotechnical and metallurgical assessments through 2016-2018, which supported block cave mining as the optimal method.

 

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Effective August 15, 2019, Red Chris mine operations were under NRCML, with the Company holding a 30% interest through RCDC, and NRCML holding a 70% interest. Subsequently in 2019, NRCML initiated two drill programs. The East Zone Resource Definition Program was designed to obtain geological, geotechnical and metallurgical data to support future studies for underground block cave mining, and the Brownfields Exploration Program which was designed to search for additional zones of higher grade mineralization within the Red Chris porphyry corridor. By late 2019, six diamond drill rigs were deployed; approximately 17,000 metres were drilled in 20 holes completed or partially completed at year end.

 

During 2020, exploration continued to focus on the expansion of the Brownfields Exploration program with drilling across the East Zone, Main Zone and Gully Zone, following up on historic drilling information along a 3-km trend of copper-gold mineralization which could expand the mining potential. Results from the East Zone continued to confirm the footprint of the western high-grade pod. Drilling showed the potential for additional high-grade mineralization south of the South Boundary Fault, which historically had been assumed to define the southern extent of mineralization. Drilling between the Main Zone and the Gully Zone intersected a new zone of higher grade mineralization approximately 100 m west of the Main Zone Pit. Late in the year, deep drilling several hundred metres east of the East Zone Pit and south of the South Boundary fault confirmed mineralization found by Imperial in 2011 in an isolated drill hole. Named the East Ridge Zone, this became the focus of exploration drilling through 2021.

 

Geophysics programs in 2020 included a property wide airborne electro-magnetic and gravity survey, and a high resolution airborne magnetics survey conducted over a portion of the property to provide complete coverage. These programs aim to generate drill targets across the entire claim package.

 

Geological Setting, Mineralization & Deposit Types

 

Red Chris is a porphyry copper deposit in the northern Intermontane Belt of the Canadian Cordillera. It is situated in the accreted geological terrane of Stikinia, which is dominated by island arc volcanic, sedimentary, and plutonic rocks of the Middle to Late Triassic Stuhini Group, and the Early to Middle Jurassic Hazelton Group. Stikinia hosts many important mineral deposits in the region, known as the Golden Triangle, ranging from active mine operations to early stage exploration projects.

 

Red Chris is in the Iskut district, on the northern edge of the Skeena Mountains. Most of the property is situated on the Todagin Upland plateau. The Red Chris deposit on the southern edge of the plateau is hosted by the Red stock, which was emplaced in the very Late Triassic into deformed Stuhini Group sedimentary and volcanic rocks. Lower Hazelton Group volcanic and sub-volcanic rocks, possibly comagmatic with the Red stock, dominate the western part of the Todagin plateau, unconformably overlying tilted Stuhini Group. Post-mineralization erosion during the Early Jurassic was followed by deposition of mainly sedimentary upper Hazelton Group rocks, and the succeeding Bowser Lake Group in the Middle Jurassic; these units originally covered the partly eroded Red stock and Stuhini Group, but they are now preserved only along the southern margin of the plateau due to southeastward tilting in the Late Cretaceous.

 

The Red stock is an ENE-elongate intrusive complex up to 8 km long by 1.5 km wide at surface. It consists of a series of porphyries beginning with pre-mineral leucodiorite, which forms the bulk of the complex. This was intruded by quartz monzonite porphyries which were coincident with potassic alteration and quartz vein-hosted copper-gold mineralization. Finally, late and post-mineralization porphyries and dikes were intruded. The current Red Chris reserve, where open pit mining is ongoing, consists of the East Zone and the Main Zone each of which contain pods or clusters of copper-gold ore centred on the mineralizing porphyries. At surface, combined East Zone and Main Zone mineralization extends about 2,000 m along the stock’s east-northeast axis; in width, it ranges from at least 100 m in the East Zone to 650 m in the Main Zone. The depth of significant mineralization is over 1,200 m in the East Zone and about 1,000 m in the centre of the Main Zone. A further 1.5 km to the west of the open pit are the Gully and Far West exploration Zones, which have similar geological characteristics to the East and Main Zones. The Gully Zone footprint is approximately 400-500 m across, east-west. The Far West Zone has a smaller footprint and has seen less drilling than the other zones. The new East Ridge Zone several hundred metres east of the East Zone extends the known mineralized corridor at Red Chris to approximately 4 kilometres.

 

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Mineralization consists of thin wavy or thicker planar quartz veins and stockworks containing chalcopyrite, bornite and magnetite; these minerals are also disseminated outside the veins. In the upper part of the deposit, where the present open pit reserve lies, potassic alteration is rarely preserved and the rocks are dominated by sericite-pyrite and clay-carbonate-hematite overprinting alterations; here, chalcopyrite and pyrite are the dominant sulfides, with bornite best preserved in the core of the East Zone. Gold occurs as microscopic inclusions in the copper sulfides. Molybdenite occurs locally in quartz veins, especially deeper and outside the high-grade core. The Red Chris deposit has been modified by syn-to post-mineralization faulting, including the Late Cretaceous South Boundary fault.

 

Red Chris is a typical porphyry copper deposit based on the composition of its host rocks, its alteration pattern and sequence, and its ore mineralogy. It may be classified as belonging to the high-potassium calc-alkalic type of porphyry system, which includes several world-class deposits such as Bingham (Utah).

 

Exploration

 

Drilling in 2021 was very successful, with up to 8 diamond drill rigs operating (total 98,522 metres drilled over 96 holes, exploration and geotechnical). In the Brownfields Exploration program (total 77,371 metres over 65 holes) the new East Ridge Zone was confirmed in the first hole RC678 with the discovery of a high-grade gold-copper centre which intersected 198 metres grading 0.89 g/t gold and 0.83% copper from 800 metres, including 76 metres grading 1.8 g/t gold and 1.5% copper from 908 metres. Later in the year drill hole RC700 returned 366 metres of 1.1 g/t gold and 0.93% copper from a depth of 738 metres, including 146 metres grading 2.1 g/t gold and 1.6% copper from 780 metres. A step-out hole, RC701, drilled 700 metres east of RC678 intersected lower grades of gold (0.2 g/t) and copper (0.49%) over 206 metres from 1,816 metres, but this was encouraging for the persistence of East Ridge mineralization in an east-west direction, and also extended the known mineralized corridor at Red Chris. The East Ridge Zone is being explored systematically from west to east with angle holes to delineate the vertical height and width of the mineralized porphyries as well as to trace continuity along the trend. The East Ridge Zone (>0.4 g/t gold and >0.4% copper) now measures over 800 metres long, up to 800 metres high and 125 metres wide, with higher grade (>0.8 g/t gold and >0.8% copper) in several smaller pods over a volume 500 metres high, 400 metres long and 100 metres wide. The East Ridge is outside Newcrest’s current Mineral Resource estimate; its addition would increase the resource base and potentially provide another mining front proximate to the planned East Zone block cave, possibly utilizing different underground methods.

 

The exploration program in 2021 also included infill drilling in the East Zone (4,441 metres over 3 holes) for improved definition of deep high-grade mineralization in the planned block cave. Geotechnical drilling continued as part of the East Zone Resource Definition Program (20,369 metres over 19 holes) aimed at improving grade and geological controls in high-grade pods for feasibility.

 

Exploration in the Main Zone in 2021 (11,687 metres over 13 holes) followed up on historic results southwest of the Main Zone Pit. Drilling confirmed the potential to outline additional copper-gold zones beyond the limits of the presently designed open pit. Drill hole RC-679 returned 456 metres grading 0.37 g/t gold and 0.42% copper from 418 metres, including 98 metres grading 0.71 g/t gold and 1.0% copper.

 

A soil survey covering an area approximately 1 square km was conducted over the centre of the East Ridge Zone to help characterize its surface expression. Most of the results were muted in copper and gold, with a few sites with elevated values.

 

Sampling, Analysis & Data Verification

 

During the period from 2007 to August 2019, exploration at Red Chris was conducted by RCDC and followed standard practices and security measures involving the handling, geological and geotechnical logging, processing, and sampling of drill core, and quality controls to assure consistency and reliable results. Assays were obtained from accredited analytical laboratories. Since August 2019, sampling, analysis and data verification at Red Chris has been conducted by the Operator. The following account and comparison with previous procedures is summarized from NRCML.

 

In the historic drill programs, core was split and sampled at nominal 3 m intervals. During the RCDC exploration programs, samples were taken at maximum 2.5 min intervals from sawn, halved-core. NRCML took nominal 2 m samples from sawn, halved-core. Core samples are organised into shipments and the primary laboratory takes possession of the samples at site and transports them to the laboratory location.

 

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All geological logging of core is completed at the Red Chris mine. Geological logging records qualitative descriptions of lithology, alteration, mineralization, veining and structure, including orientation of key geological features. Geotechnical measurements are recorded including Rock Quality Designation (RQD) fracture frequency, solid core recovery and qualitative rock strength measurements. Magnetic susceptibility measurements are recorded every metre. All drill core is photographed, prior to cutting and/or sampling the core.

 

Third-party, independent analytical and sample preparation laboratories have included Min-En Laboratories in Smithers, BC; Chemex Laboratories Ltd. in North Vancouver, BC; International Plasma Laboratory Ltd. in Vancouver BC; ALS Chemex in Vancouver, BC (successor to Chemex); Acme Laboratories in Vancouver BC; and Bureau Veritas Commodities Canada Ltd. in Vancouver, BC. Imperial used the Mount Polley and Red Chris mine laboratories, which are not independent, for check assaying and grade control, respectively.

 

Sample preparation and analytical methods varied over time. Initially copper assays were performed using AAS on a three- or four-acid digest. Later, copper and iron were analysed by ICP atomic emission spectroscopy (“AES”) with an aqua-regia digestion. During early programs, gold was assayed using fire assay on a 30 g or one assay ton sample weight. Later programs used a 30 g sample by fire assay with an ICP–AES finish. Selected samples were analysed using a 30-, 31-, 36- or 48-element suite via ICP. Carbon and sulphur were determined by Leco.

 

QA/QC procedures were in place for the RCDC and NRCML drill programs. The process generally involved submission and analysis of standard reference materials, blanks, and duplicates. The Operator conducted a detailed QA/QC review of the data in the database as at end-February 2021. Drilling reviewed was primarily from the RCDC (2007–2018) and the Operator (2019–2021) campaigns. Overall, the dataset is acceptable for use in preparing a Mineral Resource estimate for copper and gold.

 

Over 90% of the RCDC assay data were electronically loaded into acQuire from the original laboratory assay files. Historical assay data prior to RCDC’s Project interest were imported and validated as part of verification in support of technical reports prepared under NI 43-101.

 

The Operator includes both internal verification processes and independent third-parties in the data verification steps:

 

·internal verification: laboratory inspections; review of geological procedures, resource models and drill plans; sampling protocols, flow sheets and data storage; specific gravity data; logging consistency, down hole survey, collar coordinate and assay QA/QC data; geology and mineralization interpretation; and

 

·external verification: a number of data verification programs were conducted in support of technical reports from 2004–2021. These indicated that at the time each database iteration was reviewed, there were no significant issues that would have precluded Mineral Resource estimation or imposed confidence classification limits on certain data support.

 

The Operator has implemented a steering committee, the Resources & Reserves Steering Committee (“RRSC”), to ensure appropriate governance of development and management of resource and reserve estimates, and the public release of those estimates. This is achieved by ensuring regular RRSC review meetings, and internal and external reviews.

 

No material issues with the database including sampling protocols, flowsheets, check analysis programs or data storage have been identified to date from the checks performed. The database is acceptable for use in Mineral Resource and Mineral Reserve estimation.

 

Mineral Resource Estimate

 

Updated Mineral Reserve/Resource estimates were reported by Newcrest on February 17, 2022, with an effective date of December 31, 2021. They were reported with the Reserve being inclusive within the Mineral Resources. Proven and Probable Mineral Resources become Mineral Reserves when they demonstrated economic viability at current assumptions and conditions.

 

Factors that may affect the Mineral Resource estimate include changes in local interpretations of mineralization geometry and continuity of mineralized zones; changes to geological and grade shape and geological and grade continuity assumptions; changes to metallurgical recovery assumptions; changes to the input assumptions used to derive the conceptual open pit used to constrain the estimate; changes to the input assumptions for assumed block caving operations; changes to the NSR cut-offs applied to the estimates; variations in geotechnical, hydrogeological and mining assumptions; forecast dilution; and changes to environmental, permitting and social license assumptions.

 

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These Resources were estimated using a constraining open pit and block cave underground volume solids, along with preliminary mining assumptions. These constraints and assumptions are laid out in detail in the current 43-101 report produced by Newcrest, (effective date of June 30, 2021, available on SEDAR and the Company’s website).

 

Mineral Resources reported in the table are quoted at 100%, and were prepared by Newcrest.

 

31 December 2021 Measured and Indicated Mineral Resources

 

          Grade   Contained Metal 
Resource
Classification
  Assumed Mining Method  Tonnes
(Mt)
   Au
(g/t)
   Cu
(%)
   Au
(Moz)
   Cu
(Mt)
 
Measured  Open pit and stockpiles   10    0.17    0.24    0.062    0.025 
Indicated      290    0.28    0.34    2.6    0.97 
Measured  Underground                    
Indicated      670    0.46    0.40    10    2.7 
Total Measured and Indicated   Open pit and underground   970    0.41    0.38    13    3.7 

 

31 December 2021 Inferred Mineral Resources

 

          Grade   Contained Metal 
Resource
Classification
  Assumed Mining Method  Tonnes
(Mt)
   Au
(g/t)
   Cu
(%)
   Au
(Moz)
   Cu
(Mt)
 
Inferred  Open pit and stockpiles   11    0.23    0.27    0.082    0.030 
Inferred  Underground   180    0.32    0.30    1.8    0.54 
Total Inferred  Open pit and underground   190    0.31    0.30    1.9    0.57 

 

Notes to Accompany Red Chris Mineral Resource Tables:

 

1.Mineral Resources are reported with an effective date of December 31, 2021, using the 2014 CIM Definition Standards. Assumptions and methodology can be found in the 43-101 report titled The RED CHRIS OPERATIONS, BRITISH COLUMBIA, CANADA NI 43-101 Technical Report, (“2021 Red Chris Report”) with an effective date of June 30, 2021 (filed November 29, 2021 on sedar.com, found on SEDAR and the Company’s website).

 

2.Mineral Resources are reported on a 100% basis. Imperial holds a 30% interest.

 

3.Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

 

4.Mineral Resources that are potentially amenable to open pit mining methods are constrained within a conceptual open pit shell that uses the following input assumptions: metal prices of US$3.40/lb Cu, US$1,400/oz Au; mining costs of C$2.27/t mined, and process and general and administrative (G&A) costs of C$12.20/t processed; a conventional sulphide flotation producing a gold-bearing copper concentrate; metallurgical recoveries that average 50–61% for gold and 81–83% for copper; a relative level restriction of 1,112 mRL to define the open pit to underground interface; and overall pit slope angles that range from 34–46º. Mineral Resources are reported above a net smelter return of C$12.20/t.

 

5.Mineral Resources that are potentially amenable to underground mass mining methods are constrained within a conceptual cave footprint, and reported using the following assumptions: metal prices of US$3.40/lb Cu, US$1,400/oz Au; mining costs of C$6.56/t mined, and process and general and administrative (G&A) costs of C$14.38/t processed; a conventional sulphide flotation producing a gold bearing copper concentrate; metallurgical recoveries that average 50–61% for gold and 81–83% for copper; below the open pit to underground interface; and an underground footprint based on a minimum approximate footprint of 160 x 160 m area with vertical walls and variable height of draw. Mineral Resources are reported above a net smelter return of C$21.00/t.

 

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6.Tonnages are metric tonnes. Gold ounces are estimates of metal contained in tonnages and do not include allowances for processing losses. Copper tonnes are estimates of metal contained in tonnages and do not include allowances for processing losses.

 

7.Rounding as required by reporting guidelines may result in apparent differences between tonnes, grade and contained metal content. Rounding is to two significant figures.

 

8.Dilution was assumed to be fully accounted for in the resource block model. No ore loss or dilution was applied to the Mineral Reserves.

 

These Mineral Reserves reported in the table below were prepared by Newcrest.

 

31 December 2021 Mineral Reserves

 

          Grade   Contained Metal 
Reserve
Classification
  Mining Method  Tonnes
(Mt)
   Au
(g/t)
   Cu
(%)
   Au
(Moz)
   Cu
(Mt)
 
Proven                  
Probable (Open pit)  Open pit   60    0.39    0.45    0.74    0.27 
Probable (O/P stockpiles)      10    0.16    0.24    0.053    0.025 
Proven  Underground                    
Probable      410    0.55    0.45    7.2    1.8 
Total Proven and Probable  Open pit and underground   480    0.53    0.45    8.0    2.1 

 

Notes to Accompany Red Chris Mineral Reserves Table:

 

1.Mineral Reserves are reported with an effective date of 31 December, 2021, using the 2014 CIM Definition Standards. Assumptions and methodology can be found in the current 43-101 report titled The RED CHRIS OPERATIONS, BRITISH COLUMBIA, CANADA NI 43-101 Technical Report, (“2021 Red Chris Report”) with an effective date of June 30, 2021 (filed November 29, 2021 on sedar.com, found on SEDAR and the Company’s website).

 

2.Mineral Reserves are reported on a 100% basis. Imperial holds a 30% interest.

 

3.Mineral Reserves that will be mined using open pit mining methods are constrained within a pit design that uses the following input assumptions: metal prices of US$3.00/lb Cu, US$1,300/oz Au; metallurgical recoveries that average 79% for copper and 51% for gold; mining costs of C$3.2/t mined, and process and general and administrative (G&A) costs of C$12.5/t processed; and pit slope angles that range from 34–46º. Mineral Reserves are reported above a net smelter return of >C$15.5/t. Full mine recovery is assumed, and Mineral Reserves do not have additional dilution over that incorporated in the resource block model.

 

4.Mineral Resources that will be mined using underground mass mining methods are constrained within a block cave design that uses the following input parameters: metal price of US$3.00/lb Cu, US$1,300/oz Au; CA$:US$ exchange rate of 0.8; metallurgical recoveries that range from 81–86% for copper and 60–75% for gold; a life-of-mine operating cost of C$20.34/t milled; and shut- off values of MB1: C$22.00/t, MB2 and MB3: C$22.80/t, resulting in an approximate dilution of 5%.

 

5.Tonnages are metric tonnes. Gold ounces and copper tonnes are estimates of in-situ metal and do not include allowances for processing losses.

 

6.Rounding as required by reporting guidelines may result in apparent differences between tonnes, grade and contained metal content. Rounding is to two significant figures.

 

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Production

 

Red Chris metals production for the year ended December 31, 2021 was 65.4 million pounds copper, 60,160 ounces gold, and 171,045 ounces silver. Imperial’s 30% portion of Red Chris production for 2021 was 19.6 million pounds copper and 18,048 ounces gold.

 

The Operator has provided production guidance in the range of 50.7 to 55.1 million pounds copper and 40 to 42 thousand ounces gold for the period July 1, 2021 to June 30, 2022 from the open pit mining operation.

 

Table represents 100% of annual production.

 

Year Ended December 31  2021   2020   2019 
Ore milled - tonnes   9,324,304    9,381,881    10,430,762 
Ore milled per calendar day - tonnes   25,546    25,634    28,577 
Grade %  - copper   0.403    0.529    0.412 
Grade g/t  - gold   0.358    0.451    0.244 
Recovery %  - copper   79.1    80.7    76.0 
Recovery %  - gold   56.0    54.2    44.5 
Copper – lbs   65,426,160    88,343,342    71,880,182 
Gold – oz   60,160    73,787    36,471 
Silver – oz   171,045    176,376    133,879 

 

Block Cave Project

 

The proposed mine plan uses technology conventional to block cave operations, including mine design and equipment. The planned mining equipment is conventional to block cave operations. The 2021 PFS envisages that the tonnage profile transitions from a predominantly open pit feed in FY26 to an exclusively underground mill feed in FY30 when the nameplate capacity of 13.6 Mt/a is scheduled to be reached. The projected underground mine life is from FY2026 to FY2057.

 

The ground conditions at Red Chris are interpreted to be “very good”, based on data collected from 2018–2020. Six geotechnical domains were assessed for the proposed underground development and cave extents. Cave fragmentation analyses concluded that orebody pre-conditioning via high undercut, blast, and hydraulic means will be required due to the rock quality. All pre-conditioning works will extend from the extraction level of the macroblocks to within 75 m of the ultimate floor of the open pit (580 m above the underground footprint). Modelled cave subsidence shows no major risks with respect to surface mining infrastructure or surface features such as Kluea Lake. Camp Creek may be impacted, and further study is required in terms of in-situ stress measurements and rock mass characterisation. The crater limit will be at the end of the Life of Mine (“LOM”), at year 34, and the crater depth will be 350–400 m below the bottom of the final pit.

 

The main source of water that will present to the underground was determined to come from direct precipitation (rain and snowmelt) flowing through the caved mass. The planned water management capacity will range from 200–1,500 m3/hr over the LOM plan.

 

Each macroblock footprint will consist of an extraction level, undercut level, and infrastructure development. A single crusher and tipple arrangement will be used for all macroblocks. A perimeter drive on the extraction and undercut level will provide extraction and drill drive access and ventilation to the working areas. The footprint will be ventilated via the access decline and a return air raise. A series of internal ventilation raises will provide exhaust ventilation for the crusher, conveyor, and tipple areas. Access to the mine will be via two declines: the exploration/access and conveyor declines. The mine layout includes declines, ventilation infrastructure, footprint access, crusher location, and footprint layout. Primary ventilation will be achieved through three fresh air intakes, and two exhaust raises. Heating will be employed.

 

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Extraction levels for all macroblocks are based on the standard extraction level layout using an El Teniente layout. The planned mining sequence is based on a combination of grade and geotechnical considerations. MB1, which hosts the high-grade portion of the Mineral Reserve will be the first to be mined. MB2 will be a southern extension of MB1, and with cave rules and stress orientation dictating that MB3 is opened from southeast to northwest, MB2 must be opened prior to MB3.

 

Infrastructure required to support the block cave will include primary crushers, five-way tipple arrangements, ROM and crushed ore bins, and conveyor systems. Equipment requirements include primary development, cave development, and production equipment. A secondary production fleet will support this equipment. These equipment types will be conventional to block cave mining operations. Underground workshops, offices, and refuge stations will support the underground operations.

 

Processing and Recovery Operations

 

Current Plant

 

Plant design for treating open pit ores was based on metallurgical testwork, and was a standard porphyry copper flowsheet employing SAG and ball milling, flotation, regrinding, thickening and filtering to produce a copper concentrate at a moisture content of 8% for export. Subsequent to the initial construction, the plant has undergone the following changes: installation of a pebble bypass system on the SAG mill, installation of an additional rougher flotation cell to increase rougher flotation residence time, and installation of a third flotation column to increase capacity of the cleaner circuit.

 

The plant as at May 2021 consisted of a SAG mill–ball mill–pebble crushing (SABC) comminution circuit housed in a single process building. The target grind size was a P80 of 150 μm, with throughput taking precedence over grind size, resulting in typical grind sizes closer to 170–180 μm. The flotation circuit was configured to produce a copper concentrate with a grade of 23–24% Cu. Originally configured as a two-stage cleaning circuit, the plant was often operated with only a single stage of cleaning due to insufficient capacity in the cleaner columns; this was addressed by installation of the third flotation column.

 

Block Cave Project Plant

 

The 2021 PFS evaluated two process options:

 

a Central Case, that would treat 13.6 Mt/a of underground ore through the existing SABC circuit plus a new single-stage SAG circuit; this concept was within the current maximum permitted throughput of 38,000 t/d average, 13.87 Mt/a; and

 

an Upside Case, that would treat 15 Mt/a of underground ore through the existing SABC circuit plus a new single-stage SAG circuit, with SAG mill discharge configurations modified to allow coarsening of grind size, and addition of a HydroFloat coarse particle flotation circuit.

 

In both cases, flotation and concentrate dewatering upgrades were included to allow processing of higher head grade underground ore. The Central Case was selected as the basis for the 2021 PFS.

 

The Central Case expansion will largely keep the existing process operation, adds an additional grinding line and expands some unit operations to suit block cave ore. Upgrades will include a new coarse ore stockpile, single-stage SAG mill, pre-rougher StackCells, new regrind circuit and expansion of the concentrate dewatering circuit. The ore properties of underground ore are expected to be sufficiently favourable to discontinue sulphide scavenger flotation, which is required for most open pit ores. The existing regrind ball mill would be removed to create space for an expanded cleaner flotation circuit. The expansion scenario considered that the ongoing process improvement projects would be online prior to the block cave expansion, including Cleaner Column 3, Phase 1 pre-rougher StackCells (treating cyclone overflow from the existing SABC circuit), and NAG tailings thickening.

 

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Infrastructure, Permitting, and Compliance Activities

 

Infrastructure

 

The existing mine infrastructure includes an open pit, divided between the East and Main Zones; two stockpiles (low-grade, coarse ore); one WRSF; the tailings impoundment area (TIA) complex; non-contact water diversion structures; power supply; process plant, process facilities; exploration facilities; medical and ambulance facilities administrative and warehouse facilities; maintenance facilities; water treatment facilities; waste treatment facilities; and accommodations camp.

 

The transition to block cave mining and associated changes to processing will be supported by existing infrastructure as well as infrastructure upgrades. Infrastructure upgrades are required in the following areas: new mobile equipment maintenance and workshop facility; pumping upgrade from the north reclaim dam to the booster station; seepage mitigation modifications for the TIA; new cyclone sand plants and tailings thickener for dewatering NAG tailings cyclone overflow; associated modifications to tailings pipelines for the cyclone sand plants, thickeners. and short term tailings deposition; dust cover for the coarse ore stockpile; and accommodations camp upgrades.

 

New infrastructure requirements for the block cave project envisaged in the 2021 PFS include: operations accommodation complex, site asset operation centre, mine dry, concrete/shotcrete batch plant; expansion of existing North dam and South dam, new Northeast dam, relocated North Reclaim dam and South Reclaim dam, new Northeast Reclaim dam. North Valley pumping wells, North Valley seepage wells, make-up water booster pumps and pipelines for fresh and reclaim water, potable water treatment plant, fire water supply to operations accommodation complex, decline conveyor; propane, diesel storage and distribution; air compressors to supply compressed to underground utility stations; sewage treatment plant, septic field; ditches around the operations accommodation complex; expansions to switchgear and substations, mine substation, site-wide reticulation; communications backbone feeding surface and underground facilities; surface haul roads, access to conveyor portal, ventilation raises, process plant, TIA dam access roads; laydown areas, construction offices, warehouse, maintenance shops, water utility supply pump/pipeline from south reclaim pond; and stockpile pads, TIA reclaim dam diversion ditches, Camp Creek diversion, and Beaver Creek diversion.

 

Road access to the mine site is constructed, and operational. There will be new haul roads and site roads as envisaged in the 2021 PFS to allow access to the various locations, including the TIA, conveyor portal area, exploration portal, ventilation pads and reclaim dams at the TIA.

 

Concentrate is transported 320 km from the mine south to the Stewart Bulk Terminals at the Port of Stewart. Concentrate is stored in sheds at the bulk terminal until there is a sufficient stockpile to ship load. The current philosophy of shipping concentrate through the Stewart Bulk Terminals is assumed to be maintained for the block cave project.

 

Current Environmental, Permitting and Social Status

 

Extensive environmental baseline data collection and monitoring of the area has occurred since 2003. Site-specific baseline studies were completed to support the 2004 Environmental Assessment Application and subsequent 2010 Joint Mines Act and Environmental Act Permit Application, as well as associated addendums to permit applications.

 

Following receipt of the EA certificate (M05-02), Mines Act permit (M-240), and EMA permit (105017), approvals for mine construction commencement (2012) and operational authorization (June 2015), the Red Chris Operations have continued to collect comprehensive environmental monitoring data to support effective environmental management.

 

Baseline characterization studies included data collection on dust, noise and vibration, potential visual impacts, air quality and meteorology, groundwater and surface water quality and quantity, hydrogeology, aquatic resources and fisheries, terrestrial ecosystems including vegetation and wildlife, and cultural heritage and archaeological studies. The 2021 PFS noted that additional information would need to be collected in the areas of dust, noise, and air quality in support of future block cave operations.

 

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Environmental Considerations

 

There is an environmental management system (“EMS”) in place for the open pit operations, which includes associated plans, procedures, policies, guidelines, auditing, and compliance. The EMS and environmental management plans (“EMPs”) will be updated to incorporate the block cave project. Key mitigation measures that have been identified for impacts assessed during the 2021 PFS will inform the updates to the EMPs.

 

Stockpiles, Waste Rock Storage Facilities, and Tailings Storage Facilities

 

The Red Chris Operations use a grade binning ore control system based on NSR value of mineralized material. High- and medium-grade ore is generally fed to the crusher directly with low-grade ore stockpiled for later use as required. A mineralized waste stockpile has been retained as a potential buffer for the mill in the event of production interruptions from the mine, should low-grade ore stockpiles become depleted. Mineralized waste treatment would be contingent on sufficiently high metal spot prices to make processing the material economically viable. The stockpile is not included in the Mineral Reserves but is based on a cut-off that pays for processing, general and administration plus stockpile rehandle costs.

 

Sufficient WRSF space was designed to store 150 Mt of NAG and PAG waste. The open pit schedule requires 120 Mt of waste be stored. The block cave mine will produce about 2.9 Mt of PAG waste, which will be stored on the existing permitted facilities. NAG material will be used for site construction, including the TIA.

 

The TIA is currently permitted for 302 Mt of tailings, the containment of which is provided by a single impoundment with natural topography, and the LOM design incorporates three dams, the North, South, and Northeast dams. To support the proposed block cave operation, the TIA will be expanded to a capacity of about 550 Mt. The design assumes raises on the North, South and Northeast dams above that which is currently permitted, and relocation of certain of the reclaim dams and associated seepage interception systems.

 

Water Supply and Water Management

 

The main source of water for the process plant is reclaim from the main pond at the TIA and, when constructed, will be from the planned thickener and cyclone sand plant. Groundwater pumping from a deep aquifer is the main source of makeup water when needed to meet process water demands.

 

The TIA will be the main water management reservoir for the Red Chris Mine. Inputs to the TIA will include water from the tailings, runoff from the TIA catchment area, direct precipitation, and pump-back from the reclaim dams. Collected water from the pit and WRSFs, including the low-grade ore stockpile, will be initially routed through the mill for process use before reporting to the TIA with the tailings. Diversion ditches around the TIA will divert non-contact runoff water to the north and south of the TIA as much as practicable.

 

Closure and Reclamation Planning

 

A closure plan was developed for the 2021 PFS for the closure of the proposed block cave operation in its entirety, including works associated with the existing open pit operations. Under the British Columbia EMA the Mines Act, maintenance of a five-year mine plan and a closure plan are required for mines operating in British Columbia. The closure plan currently approved is for the closure of the existing facilities to support the open pit mine at Red Chris. A reclamation bond is required to be updated according to the disturbance areas and facilities associated with the M-240 permit.

 

Permitting Considerations

 

The Red Chris Operations are fully permitted for open pit mining.

 

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The BC Reviewable Projects Regulation sets out the criteria for determining which projects are required to undergo an EA; however, it is understood that the block cave project does not meet or exceed the thresholds defined in the Reviewable Projects Regulation; therefore, except in the event that the Project is designated by the Ministry of Environment and Climate Change Strategy, British Columbia (“ENV”), the Project will not require a new EA certificate. However, amendments to the EA certificate will be required in connection with certain phases of the block cave project (such as underground mining) where the activities to be undertaken during such phases are not authorized by the existing EA certificate. The permitting strategy will follow a phased approach. Permitting for development of the exploration decline (Phases 1 and 2) is complete and the decline is under construction. MB1 is expected to be able to be permitted at the provincial level, through an EA certificate amendment and amendments to the Mines Act and EMA permits. The application for an EA certificate amendment in terms of the Environmental Assessment Act may be subject to the agreement yet to be concluded between the Tahltan Central Government and the Province under Section 7 of the Declaration on the Rights of Indigenous Peoples Act. Mines Act and EMA permit amendment applications are expected to be submitted and reviewed concurrently during the EA certificate amendment process.

 

Extension of the mine’s operating life beyond 2040 through the mining of MB2 and MB3 may trigger the need for environmental review at the federal level under the Impact Assessment Act and additional permitting under the Fisheries Act. These permitting activities are estimated to be initiated after 2035.

 

Social Considerations

 

The mining operations are located entirely within the Tahltan Nation’s territory. The proposed block cave project requires an approach that aligns with the Tahltan Nation and leadership and with provincial governments. Since initiating discussions on exploration activities and Red Chris Mine activities, representatives continued to meet regularly with Tahltan Central Government representatives, Tahltan leadership, and the Tahltan Nation. While feedback has been largely positive, a range of concerns and interests have been raised.

 

Outlook

 

Exploration for 2022 will be focused on Red Chris, with 100,000 metres of drilling planned and continuing development of the exploration decline to provide access for underground exploration planned at Red Chris.

 

Work is underway on the Feasibility Study of a block cave mine and it is expected to be completed in the second half of 2023.

 

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Mineral Property | Mount Polley Mine

 

The NI 43-101 Technical Report for the Mount Polley Mine, Cariboo Mining Division, British Columbia, (“2016 Mount Polley Report”) dated May 20, 2016, was filed on May 26, 2016 and is available on sedar.com.

 

Description, Location & Access

 

The Mount Polley copper-gold mine commenced operations in 1997. The mine site is located in south-central British Columbia, eight km southwest of Likely and 56 km northeast of Williams Lake. The property lies near the eastern edge of the Fraser Plateau physiographic sub-division, which is characterized by rolling topography and moderate relief. Elevations range from 920 masl at Polley Lake to 1,266 masl at the summit of Mount Polley. Road access from Williams Lake to the Mount Polley property is 15 km southeast on Highway 97 to 150 Mile House, 76 km north on Likely Road past Morehead Lake, and then 14 km south on the unpaved Bootjack Forest Access Road. The mine is connected to the BC Hydro power grid. Mining and milling operations proceed year-round. When in operation, the mine has between 300-350 employees, the majority of whom commute from Williams Lake and the smaller communities in the region.

 

The property consists of 58 mineral tenures covering 24,077 ha and comprises seven mining leases (valid to August  22, 2026, September 29, 2034, December 19, 2035, September 21, 2037, January 9, 2038, and November 28, 2036) totaling 2,007 ha and 51 mineral claims (one valid to January 27, 2023, 48 valid to June 1, 2026 and two valid to November 1, 2029) encompassing 22,070 ha. All mineral tenures are issued in accordance with the Mineral Tenure Act of British Columbia and are owned by MPMC.

 

In October 2019, MPMC optioned seven adjacent mineral tenures (3,331 hectares) from Commander Resources Ltd. These are included in the aggregate figures above. Upon the exercising of the option on or before December 31, 2022, these claims will be subject to a production royalty of $1.25 per tonne payable on ore mined from the claims and milled in the Mount Polley processing plant. Mining lease 933970 is subject to a production royalty held by Commander Resources Ltd. of $2.50 per tonne on the first 400,000 tonnes of ore mined and milled and $1.25 per tonne on any additional ore mined and milled, a rate that may be reduced to $0.62 per tonne by payment of $1 million. No production was undertaken from mining lease 933970 during 2019-2021.

 

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Permitting & Environmental Management

 

All phases of mining and reclamation are authorized and/or regulated by the Province of British Columbia and the Federal Government of Canada. Mine operations are primarily authorized and regulated under the EMA and the Mines Act, both as administered by respective ministries of the Province of British Columbia. Mine operations and supplementary activities are also authorized and/or regulated under legislation such as the Water Act and that implemented by the MFLNRORD.

 

Ministry   Authorization   Purpose   Permit #   Date Issued   Comment
MEMLCI   Permit Approving
Mining and
Reclamation Program
  Mining
activities
  M-200   August 1995   many amendments; most recent 2020
MECCS   Effluent Discharge
Permit
  Effluent discharge for tailings and site contact water   11678   May 1997   many amendments; most recent
2020
MECCS   Conditional Water
License
  use of water for dust suppression and industrial processes.   111741   December 1996    
MECCS   Conditional Water
License
  diversion of
water from
Polley Lake for use in processing
  101763   December 1996   amended 1997, 2002
MECCS   Waste Discharge
Permit
  Landfill   14590   March 1997   amended 2019
MECCS   Waste Generator
Registration
  Special Waste
Regulation
  01559   July 1997   amended 2012
MECCS   Effluent Discharge
(Biosolids) Permit
  Store and
apply biosolids for use in reclamation
  15968   December 1999   amended 2007, 2014
MECCS   Air Discharge Permit   air contaminants from mill and crusher   15087   August 1997   amended 2007
MFLNRORD   Road Use Permit   Mine access   01-5654-96   June 1996   Morehead – Bootjack FSR
MFLNRORD   Conditional Water
License
  Storage of water in Polley Lake   C132360   August 2015   for rehabilitation purposes below Polley Lake

 

Federal regulation of the activities at the Mount Polley mine is primarily through the Fisheries Act, which aims to protect fish habitat by prohibiting the entry of deleterious substances into fish-bearing waters, as well as the disruption or disturbance of fish habitat without the necessary approvals. Protection of fish habitat also includes the Metal Mining Effluent Regulations (annexed under the Fisheries Act) which regulate deposition of mining effluent into fish-bearing waters.

 

The Mount Polley Breach resulted in the release of tailings and TSF supernatant into the adjacent environment. As a result, MPMC was issued a Pollution Abatement Order pursuant to the EMA and an Engineer’s Order pursuant to the Water Act (the “Orders”). Both Orders set out a number of requirements for environmental investigation and remediation of the affected area. MPMC carried out the investigations, monitoring and remediation planning requirements of the Pollution Abatement Order and the Order was cancelled by MECCS in 2019. Remediation work of terrestrial and fish habitat is continuing under the guidance of the Engineer’s Order. In doing so, MPMC is working with local First Nations and with the applicable government agencies to ensure that it complies with the MECCS approved Conceptual Remediation Plan. Investigation of the Mount Polley Breach by Fisheries and Oceans Canada, Environment and Climate Change Canada, and the BC Conservation Officer Service is ongoing.

 

The Comprehensive Environmental Monitoring Program at the Mount Polley mine continues as required under authorizations from the MECCS and the MEMLCI. Such programs include monitoring of groundwater, surface water (streams, lakes, and mine contact water collection sites), weather, and hydrological conditions. MPMC submits an annual Environmental and Reclamation Report to the MECCS and MEMLCI. That report outlines all current and planned mining and reclamation activities, as well as environmental monitoring activities and results.

 

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MPMC is committed to the progressive on-site reclamation of disturbed areas during the mine-life cycle and has been actively completing such work since 1998. Reclamation work since 2014 has been limited, as efforts have been focused on remediation activities in the areas affected by the Mount Polley Breach. The total on-site area reclaimed to date is 72.15 ha. On-site Mine contact water is collected, treated with a Veloia Actiflo® water treatment plant then discharged via a pipeline at depth into Quesnel Lake.

 

MPMC is actively engaged in research projects with academic partners to refine site reclamation and closure methods, as well as to contribute to improving industry best practices. In 2016, MPMC completed a second three-year term of partnership with Genome BC. The major component completed under this partnership, the Anaerobic Biological Reactor (“ABR”), continued operation until 2014, but was put into care and maintenance on account of the Mount Polley Breach and has since been decommissioned as part of the buttressing works around the TSF. The ABR was a fully contained passive water treatment pilot project that was developed in conjunction with Genome BC and a research group consisting of mining industry partners and the University of British Columbia. Additionally, at the time of the Mount Polley Breach, MPMC was in the first year of a partnership with Thompson Rivers University to develop a wetland passive treatment research project at the ABR outflow. After the Mount Polley Breach, MPMC and Thompson Rivers University leveraged existing grants from the Natural Sciences and Engineering Research Council of Canada and non-profit, national research organization, Mitacs, to obtain additional funding from Genome BC and Genome Canada in order to adapt the research project and use metagenomics to study passive remediation of disturbed areas and tailings material downstream of the Mount Polley Breach. The initial phase of this project was completed in 2017, although longer-term research potential exists using the baseline data that were collected and the bio-augmentation plots that were installed. In 2016, a new partnership was initiated with the University of British Columbia, with support from the Natural Sciences and Engineering Research Council of Canada, to support Mount Polley Breach rehabilitation works. Specifically, PhD research is being conducted into methods for rehabilitating soil biological communities in order to improve nutrient cycling and build soil, with the objective of improving revegetation success.

 

In 2017, a separate research project was initiated at the University of British Columbia, with support from the Natural Sciences and Engineering Research Council Engage program to investigate progressive remediation in waste rock piles and implications for water quality on the mine site. Lab and field research on passive water treatment approaches through consultants is ongoing and continues into 2021.

 

A pilot scale Constructed Wetland Treatment System was constructed on the west drainage of the mine operating from June 2019 to December 2020. The laboratory data will be used to refine the potential full-scale design and implementation of an on-site demonstration project.

 

Environment monitoring is ongoing during the current care and maintenance period.

 

History

 

Ownership history and early exploration of the Mount Polley property is provided in the 43-101 Technical Report for Mount Polley Mine Feasibility Study filed August 5, 2004 on sedar.com. That report contains information on the period from Mount Polley’s formal discovery in 1964, through to the formation of MPMC and subsequent mine construction in 1996. Mount Polley mine operated from 1997 through to the fall of 2001, at which time operations were suspended, and the mine placed on care and maintenance, due to a sustained period of low commodity prices. At that time, the originally designed Cariboo Pit had been completed, while the Bell Pit was in process of being mined.

 

In late 2003, following discovery of the high-grade Northeast Zone, exploration resumed at Mount Polley and preparations for the restart of mining and milling began. In 2004, Imperial conducted a new feasibility study which incorporated the Northeast Zone, as well as the Springer and Bell Zones. In March 2005, mining began in the new Wight Pit (Northeast Zone) and resumed in the Bell Pit. In subsequent years, drilling exploration was carried out in a number of other areas focused on expanding or deepening known deposits or testing new targets revealed by trenching, mapping and sampling programs, or by geophysical anomalies. As a result, significant copper-gold resources were delineated in the Southeast Zone (mined 2008-2010), the Pond Zone (mined 2009-2010), the C2 Zone (now incorporated in the Cariboo Zone), the WX Zone, and the Boundary Zone. Mining was completed in the Bell Pit in 2008, and in the Wight Pit in 2009. Mining in the Springer Zone, which contains the majority of the remaining reserves at Mount Polley, began in 2008. Deep drilling since late 2003 has resulted in a substantial increase in Springer resources.

 

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The first underground exploration development at Mount Polley began in 2010 in the deep Boundary Zone, which was mined between 2013 and early 2017. Substantial resources also exist in the deep Northeast Zone beneath the Wight Pit, known as the Martel Zone. The underground workings were extended from the Boundary Zone for a program of delineation drilling in the Martel in winter 2016-2017 (see below).

 

Operations were suspended on August 4, 2014 following the Mount Polley Breach. Rehabilitation work was immediately initiated at the TSF and the affected areas downstream.

 

An Independent Expert Engineering and Investigation Review Panel, commissioned by the MEMLCI, investigated the Mount Polley Breach and released its report on January 30, 2015. The report concluded that the breach was sudden and without warning and was due to the fact the independent engineering firms retained by MPMC to design the TSF did not take into account the strength of the glaciolacustrine layer approximately 8 m below the foundation of the embankment in the area of the breach.

 

On July 9, 2015 MPMC received regulatory approvals authorizing restart of mine operations under a modified operating plan. With the TSF not authorized for continued mill process tailings deposition at the time, the modified operating plan included use of the Springer Pit for tailings deposition. Operations resumed on August 5, 2015, with mill processing on a one-week-on/one-week-off schedule, and ore feed sourced from the Cariboo Pit and the Boundary Zone underground operation. In late November 2015, due to the complexity of operating the mill under winter conditions and considering weakened commodity prices, the mill transitioned into operating on a continuous basis.

 

On December 17, 2015, the Chief Inspector of Mines for the Province of British Columbia released his report on the Mount Polley Breach. The report concluded, as had the Independent Expert Engineering and Investigation Review Panel report, that the root cause of the Mount Polley Breach was associated with an engineering design that had not properly characterized the strength of a clay (glaciolacustrine) unit in the native soil foundation.

 

In Spring 2016, a diamond drill program was completed in the Cariboo Zone (six holes, 819 m) and WX Zone (five holes, 1,010 m) to assist in mine planning. On June 23, 2016 MPMC received regulatory approvals authorizing the mine to return to full operations and for use of the repaired TSF for tailings deposition.

 

In late 2016 and into early 2017, exploration of the deep Northeast Zone known as the Martel Zone, continued with an underground drilling program. The Martel Zone is about 400 m east of the Boundary Zone and vertically below the Wight Pit. Wide spaced drilling from surface, mainly in 2004, had defined a measured and indicated below-pit resource of approximately 6.27 MT grading approximately 1.12% copper, 0.40 g/t gold and 7.38 g/t silver. The objective of the 2016-2017 drilling was to define a high-grade portion within the Martel Zone for future underground mining. Access for the drilling was by a ramp and drift driven in 2016 to within about 100 m of the Martel mineralization. Holes were drilled on azimuths ranging from 070° to 090° at shallow to moderate angles from four drill stations at 25 metre intervals along the drift. Four holes (1,421 m) were completed before yearend 2016 and the remaining 21 holes in the 6,680 metre program were completed in February 2017.

 

Drill results and geological details were given in news releases dated February 28, 2017 and April 10, 2017. The Martel Zone consists of strongly mineralized breccia and measures approximately 130 metre long, 170 metre high, and 140 metre wide; the southernmost hole in the program indicates the zone is thinning in this direction but is still open. Along its northeastern fringe, the Martel breccia gives way to monzonitic wall rock and dikes, in between which are discontinuous lenses of distinct and very high-grade, bornite-rich mineralization collectively termed the Green Zone. The Green Zone was intercepted in several holes over various but mainly narrow widths and displays a roughly vertical disposition; it may be more structurally controlled than the main body of the Martel.

 

A new resource for the Martel Zone was announced August 14, 2017. The Zone as presently delineated consists of 6.8 MT in the measured and indicated category, grading 0.91% copper, 0.28 g/t gold, and 5.79 g/t silver. In addition, there is an inferred resource of 635,600 tonnes grading 1.29% copper, 0.59 g/t gold, and 8.32 g/t silver. These underground resources will be incorporated into the future open pit and underground mine planning.

 

In 2018, all open pit production came from the Cariboo, supplemented by previously stockpiled ore. Rehabilitation work at the TSF and areas affected by the Mount Polley Breach continued through all phases of operations and in care and maintenance.

 

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In January 2019, the Company announced Mount Polley mine operations would be suspended due to low and declining copper prices. Milling of low grade stockpiles continued through until the end of May 2019, at which time the mine was placed on care and maintenance status.

 

Historic production, from all zones at Mount Polley since start-up in 1997 through the temporary suspension of operations in May 2019, is approximately 594 million pounds copper and 928,000 ounces gold from about 118 MT mill throughput.

 

During 2019, a comprehensive exploration program was conducted of the Frypan/Morehead area, a largely till covered magnetic high which has a similar magnetic response to that obtained over the Mount Polley mine host rock of monzonite and hydrothermally altered monzonite breccia pipes. The area is located west and north of the mine and is approximately 3x3 km in size. There were 948 soil samples collected and analyzed using the Mobile Metal Ion (MMI) technique. A 80.7 line km Volterra-3D Induced Polarization (IP) survey covering the same grid area was also completed. A similar IP survey was conducted over the mine site to identify the geophysical response of the known mineralization to aid in prioritizing targets on the Frypan/Morehead area. This survey consisted of 81.5 line km and was successful in delineating the known mineralization, as well as outlining several new un-tested areas in the vicinity of the mine.

 

In the fourth quarter of 2021, MPMC took the initial steps towards recommencement of operations at Mount Polley mine. Stripping operations began to enable milling operations to restart in 2022. Mechanical and electrical contractors began on refurbishing the plant, including work on the tailings slurry and reclaim water pipelines and pumps, crushers, conveyors, screens, grinding mills, flotation and plant water systems. The crushing plant was commissioned by year end providing crush material for winter road maintenance. The Mount Polley management team is targeting the plant to be ready for a spring 2022 restart of plant operations.

 

Environment monitoring is ongoing during the current care and maintenance period. Site personnel continue to maintain access, fire watch, manage collection, treatment and discharge of site contact water, and actively monitor the tailings storage facility.

 

Geological Setting, Mineralization & Deposit Types

 

Mount Polley is an alkalic porphyry copper-gold deposit. It lies in the tectono-stratigraphic Quesnel terrane or Quesnellia, which is characterized by a Middle Triassic to Early Jurassic assemblage of volcanic, sedimentary and plutonic rocks which formed in an island arc tectonic setting outboard of the ancestral North American continental margin. Quesnellia hosts several major porphyry copper deposits such as Highland Valley, Copper Mountain, Afton-Ajax, Gibraltar and Mount Milligan, all generated by early Mesozoic, calc-alkalic or alkalic arc magmatism.

 

In the Mount Polley region, the Triassic arc rocks are assigned to the Nicola Group and comprise alkalic basaltic to andesitic volcanics and sedimentary rocks, which are intruded by sub-volcanic stocks; all are overlain by post-Nicola, Early Jurassic clastic rocks and rare volcanics. Mount Polley itself is a complex of alkalic intermediate porphyritic intrusions and related magmatic-hydrothermal breccias. It was emplaced into the Nicola Group in the Late Triassic around 205 million years ago. The intrusive complex is about 6 km long (north-northwest) and 3 km wide, lying between Polley Lake in the east and Bootjack Lake in the west. The intrusions range from diorite (oldest) to monzonite (youngest) and are marginally undersaturated in silica. The Mount Polley Intrusive Complex is in the centre of the Mount Polley property; the remainder of the property is underlain mainly by Nicola Group volcanics and post-Nicola conglomerate, and small intrusions in which no economic mineralization has been found to date.

 

Mineralization in the Mount Polley Intrusive Complex (“MPIC”) is primarily hosted by irregular zones of hydrothermal breccia, which are closely related to the porphyry intrusions and were formed by magmatic devolatization processes. Mineralization and brecciation were accompanied by potassic or calc-potassic, albite, and magnetite alteration; the MPIC is bounded on most sides by propylitic country rocks. As in many alkalic porphyry systems, there is no single or simple zoned mineralization pattern, but instead a number of copper-gold zones of various size, shape and grade characteristics, distributed around the MPIC from the far north to the south. There is no clear structural control on the location of these mineralized breccia zones, although the greatest continuity and the bulk of the past and present resources occur in the centre of the MPIC (e.g. Springer, Cariboo, Bell Zones) between two pre-mineral diorite intrusions. Dimensions of mineralized breccias in the MPIC range up to many hundred metres in length and width, such as in the Springer Zone. Elsewhere, smaller zones (generally less than 100 m across) may form mineable bodies if grades and other factors are favourable. Post-mineral faulting probably did not disrupt the continuity of mineralized zones very significantly, except in the Northeast Zone where deeper mineralization was offset along a fault a few hundred metres laterally and dropped vertically slightly.

 

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In the deposits, the degree of brecciation and associated hydrothermal alteration is usually a reliable guide as to grade. There is relatively little post-mineralization dike dilution. Chalcopyrite is the dominant copper mineral, typically accompanied by pyrite; bornite is relatively uncommon in the centre of the MPIC. Here, copper sulfides occur as disseminations or veins and fracture coatings in brecciated intrusion, or they are disseminated in the matrix of breccias, in both cases precipitated along with alteration minerals. Mineralization has been traced by deep drilling in the Springer Zone to a depth of around 900 m (from pre-mining surface).

 

In the north of the MPIC are much higher grade orebodies, namely the Northeast (mined in the Wight Pit, 2005-2009) and Boundary Zones, where copper grades can reach several percent per tonne. Chalcopyrite and significant bornite form coarse-grained infill in breccias, and intense vein and microvein stockworks. As in the zones in the centre of the MPIC, gold and silver occur mainly as microscopic inclusions in the copper sulfides and in pyrite.

 

Exploration has always proceeded alongside mining at Mount Polley, leading to the expansion and deepening of known deposits, or to the discovery of new zones, or raising the status or resource category of marginal prospects, potentially towards feasibility for profitable mining. Geological and geotechnical logging of drill core is integrated with down-hole assay data and used with software for computation of the resource block model and mine design. In addition, exploration and research since the restart of operations in 2004-2005 have considerably advanced understanding of geology, structure and deposit genesis at Mount Polley, improving interpretation of mineralization geometry and the design of drill programs. New underground development is followed where appropriate by wall mapping and rib sampling to further characterize the mineralization, fill gaps in the resource model, and help guide stope design.

 

Airborne and ground magnetic signature are regarded as the most important geophysical tool for identifying new mineralization, although tellingly it was not effective in the Northeast Zone, possibly delaying discovery of that high-grade but magnetite-poor orebody until 2003. An 11-line Titan-24 deep Induced Polarization-Magnetotelluric survey was completed by Quantec Geoscience Ltd. in Fall 2009 to potentially locate blind sulfide targets and guide exploration drilling where appropriate. Outlying parts of the Mount Polley property, away from the mine site, have been explored by geological mapping, sampling and trenching and by soil surveys over intrusive bodies, with no significant results to date. Mineral potential remains most promising within the MPIC itself, or possibly buried beneath the unconformity with cover rocks (conglomerate, breccia) immediately to its north.

 

Exploration

 

MPMC acquired an option to earn a 100% interest in seven mineral claims (3,331 ha) adjacent to the mine in 2020. Three target settings occur within the optioned claims and adjacent Mount Polley claims, including a potential northern projection of the high-grade Quarry Zone beneath a post-mineral conglomerate unit, a partially tested glacial till covered area where regional magnetics suggests a faulted offset of the Mount Polley Intrusive complex, which hosts the Mount Polley orebodies, is present and a till covered prospective area immediately east of the Southeast Zone. A deep looking IP survey, along with a soil sampling program, was completed over the optioned claims. Drill programs have been designed to test the targets outlined on the optioned claims and to expand the copper and gold resource near historic deposits, with a focus on gold rich zones.

 

The 2020 exploration program was planned to improve drill hole data density of mineralization near historic mining areas where the use of underground mining is being considered, and to drill new geophysical and geochemical anomalies outlined by recent surveys in the Trio Creek area located north and northwest of the mine. Six drill holes totalling 3,792 metres were completed.

 

The WX Zone is the most recent major discovery (2009) at Mount Polley. Located south of the Springer Pit, it is noted for its high gold grades and high gold/copper ratio mineralization. Drill hole WX-20-78 was designed test and confirm the continuity of the mineralization in an area of proposed underground mining. Drilled down the plunge, this hole served to confirm the continuity of this modelled higher grade target within the WX Zone.

 

The C2 Zone is located south of the Cariboo Pit. Two holes were drilled to test a zone of higher gold grade along the Polley fault at depth. Historic drilling in this zone yielded an intercept of 55 metres grading 2.14 g/t gold and 1.19% copper in drill hole C2-11-97. Both holes were successful in extending this lower gold zone.

 

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Drill hole SD-20-162 was designed to fill a gap in drilling on the eastern side of the target area beneath the Springer Pit. The Springer Zone contains most of the reserves in the current open pit mine plan. Historic drilling beneath the currently planned Springer Pit confirmed the mineralization continues for at least 250 metres below the pit bottom. Studies are underway to evaluate the potential for bulk underground mining beneath the planned pit.

 

The Trio Creek target area is located north and northwest of the mine. This area is covered by glacial till with limited bedrock exposure. Using new geophysical and geochemical anomalies outlined by recent surveys, the goal was to gain an understanding of the geological system. Drill holes TC-20-01 and TC-20-02 were designed to test new anomalies north and west of the mine. The targeted areas feature favorable geophysics that match the geophysical fingerprint of the Mount Polley mineralized host rock. Drill holes TC-20-01 and TC-20-02 have defined a clear extension to the north of similar geology and associated hydrothermal alteration zones to that which hosts the mineralization at Mount Polley. Additional exploration is planned to further define the targets located in this area.

 

The 2021 exploration program was planned to acquire high density ground magnetic data over top of high priority areas within the mine site and areas immediately to the north while remaining available to support geotechnical drilling that was ongoing on site.

 

The ground magnetic survey was successful in providing high resolution magnetic data overtop of high priority targets located north of the Junction Zone, north of the old Bell Pit, west of the Wight Pit, adjacent to Polley Lake and south of the South East Rock Dump. The ground magnetic data has highlighted many magnetic anomalies around the property that have a similar geophysical signature as the known mineralization found at Mount Polley. Several more magnetic surveys have been planned to cover areas where data and exploration is limited. Additional exploration is planned to further define the anomalies derived from the ground magnetic surveys.

 

At December 31, 2021, a total of 2,783 exploration holes (surface and underground combined) had been drilled.

 

Sampling, Analysis & Data Verification

 

Early drill core from 1966 to 1980 has largely been lost to vandalism. All core samples from 1981 onwards were collected in wooden core boxes at the drill. The average core size was NQ2, but HQ diameter drill core has become more common with deep drilling in recent years. Each core box holds approximately 4 m. Mount Polley drill core is sampled in its entirety, in most cases, with sample length of 1.0-2.5 m. The standard maximum length of a 2.5 m sample may be broken into smaller intervals where required by significant changes in geology, faults, or mineralization intensity. The core is first logged geotechnically and geologically photographed and then sample lengths are cut axially with a rock saw. One half of the core is sent for analysis and the other half stored on the property in covered core racks for future reference as a geological record, or for any necessary test work at a later date. The core library and core logging facility are located at the mine site, securely inside the mine perimeter. Pulps and rejects are stored in the same facility. All drill core post-1980 was assayed for gold, total copper, and iron while non-sulphide copper, silver and some other analyses were completed on core from certain areas of the property where the additional data was considered to be important. Much of the pre-1980 core was assayed only for total copper. Over the life of the mine, exploration samples have been assayed at a number of labs in British Columbia.

 

From 2006 to 2017 approximately 80% of core samples were analyzed by the on-site mine laboratory. Thereafter, core samples have been analysed at Bureau Veritas Mineral Laboratories in Vancouver. A full QA/QC program using blanks, standards and duplicates was completed for all diamond drilling samples submitted to the labs. Significant assay intervals reported represent apparent widths. Insufficient geological information is available to confirm the geological model and true width of significant assay intervals.

 

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Mineral Reserve and Mineral Resource Estimates: Effective date January 1, 2019

 

Mineral Resources are inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Ore grade cutoffs are based on the same cost assumptions used January 1, 2018.

 

Mount Polley Mineral Reserves at January 1, 2020

 

       Grade   Contained Metal     
Zone/Pit  Tonnes Ore   Copper %   Gold g/t   Silver g/t   Copper lbs   Gold oz   Silver oz   Stripping Ratio 
Springer   42,500,000    0.303    0.258    0.577    284,000,000    353,000    788,000    2.44 
Cariboo   depleted                                     
WX   8,400,000    0.270    0.484    0.576    50,000,000    131,000    155,000    5.65 
Boundary OP   600,000    0.647    0.579    4.392    9,000,000    11,000    85,000    8.67 
Martel UG   2,272,000    1.145    0.299    7.205    57,000,000    22,000    526,000    n/a 
Total Reserve   53,772,000    0.337    0.299    0.899    400,000,000    517,000    1,554,000    3.12 

 

Mount Polley Mineral Resources at January 1, 2020

 

       Grade   Contained Metal 
   Tonnes Ore   Copper %   Gold g/t   Silver g/t   Copper lbs   Gold oz   Silver oz 
Measured   103,193,000    0.319    0.300    0.823    725,000,000    996,000    2,730,000 
Indicated   91,127,000    0.266    0.269    0.619    534,000,000    787,000    1,814,000 
Total Measured & Indicated   194,320,000    0.294    0.285    0.727    1,259,000,000    1,783,000    4,544,000 
Total Inferred   5,619,000    0.374    0.276    2.187    46,000,000    50,000    395,000 

 

The 2019 Mineral Reserve estimate includes open pit mining of the Springer, Boundary, and WX Zones, and underground mining of the Martel Zone. The Cariboo reserve was mined to completion in 2018. The Mineral Reserve estimate was calculated using a detailed mine schedule based upon open pit and underground mine designs created using the following metal price assumptions: US$3.00/lb copper, US$1,250/oz gold, US$18.00/oz silver and a $0.80 US/CDN exchange rate. The Mineral Reserve for the Martel Zone was generated using detailed stope designs. Ore cut-off grades were calculated using a mill head value (“MHV”) calculation which is similar to a net-smelter return calculation with unit site operating costs included to provide an estimation of ore value after all costs except direct mining costs. For open pit mining, a $1 per tonne MHV cut-off is employed, while a $40 MHV reserve cutoff was used for the Martel Zone.

 

The 2019 Mineral Resource estimate includes both open pit and underground Mineral Resources. All Mineral Resources were calculated using the following metal price assumptions: US$3.40/lb copper, US$1,300/oz gold, US$21.00/oz silver and a $0.80 US/CDN exchange rate. Open Pit Mineral Resources were calculated using a Lerchs-Grossman algorithm to define the largest incrementally profitable pit pushback using the stated metal price assumptions and current pit wall angles. This pushback was restricted from encroaching within 100 m of the mill facility. Open Pit Mineral Reserves are contained within this Open Pit Mineral Resource shape, with ore cut-offs utilizing a $1 per tonne MHV cutoff using Mineral Resource metal prices. Underground Mineral Resources were calculating by applying a MHV cutoff of either $30 or $40 per tonne depending on zone and potential mining costs. A manual removal of isolated or small areas of modelled mineralization was also undertaken to ensure that the Underground Mineral Resource has reasonable prospects for economic extraction.

 

The Mineral Resource and Mineral Reserve estimates for the Mount Polley property were prepared by Art Frye, Mine Operations Manager, MPMC, under the supervision of Greg Gillstrom, P.Eng.. Refer to the 2016 Mount Polley Report for detailed information.

 

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Mining and Mineral Processing

 

The Mount Polley mine is a 20,000 tonne per day open pit conventional milling operation. In the Mount Polley mine mill, run-of-mine ore from the open pits and underground is hauled to the crusher. The crusher has three stages of crushing involving five crushers, twenty conveyors and four sets of screens. Ore is deposited by rock trucks into the feed pocket of the primary gyratory crusher and is then crushed in three stages to produce a product for the grinding circuit. Pebbles obtained from the triple deck screen in the crushing plant are used as grinding media in the pebble mills. Periodically, the crusher is also used for production of aggregates used in TSF construction and other tasks.

 

The grinding circuit consists of two parallel rod mill/ball mill circuits and a pebble mill circuit. Crusher product is first split between two rod mills where water is added, and a slurry is formed to grind the product down to a sand like texture. The rod mill discharge is pumped to the primary hydrocyclones that classify the particles by size. The larger particles flow to feed the ball mills while the fine particles report to two flash flotation cells. The ball and pebble mills are in “closed circuit”, meaning that the discharge is pumped to the classifying units (primary hydrocyclones) and the particles will not pass to the next stage until the particle sizes are fine enough. The flash flotation product can report directly to the dewatering circuit or to the cleaner circuit for further upgrading. The overflow from the pebble mill hydrocyclones reports to the flotation circuit.

 

The flotation circuit separates the valuable minerals from the rest of the ground particles. With the addition of reagents, the valuable minerals, mostly in the form of sulphides, are separated by flotation and are collected and upgraded to produce a concentrate. Initial separation is completed in a rougher/scavenger circuit, where the remaining minerals are discarded as tailings (which flow by gravity to the TSF). Rougher concentrate is reground in a regrind mill and further upgraded in a cleaner circuit to produce the final concentrate product. Cleaner tailings report to the cleaner scavenger circuit, and the tailings from the cleaner scavenger circuit are recycled to the rougher scavenger circuit to maximize recovery.

 

The concentrate from the flotation circuit is dewatered in two stages. In the first stage the thickener settles particles and decants water so that the settled particles form a sludge that has a reduced water content of roughly 25%-30%. In the second stage, pressure filtration further reduces water content to approximately 8%. The water removed is utilized as process water. The filtered concentrate is stored in the load-out building and loaded onto 40-tonne trucks for shipping. Tailings materials generated by mill operations are piped via gravity to the TSF.

 

Information on Mining, Milling, Infrastructure, Permitting and Compliance Activities, Environmental, Permitting, Social or Community factors, and Capital and Operating Costs can be viewed in the 2016 Mount Polley Report.

 

Production

 

Mount Polley mine has been on care and maintenance status since operations were suspended in May 2019.

 

The mine restart plan was updated in early 2021 to include revised pit designs, results of recent drilling, and current metal prices. The COVID-19 pandemic has had an impact on mine restart scenarios; however, MPMC took the initial steps towards recommencement of operations in late 2021 with the introduction of mine pre-stripping and plant refurbishing activities under a protective COVID-19 plan.

 

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Other Properties

 

In addition to the material properties outlined in this AIF, the Company also has the Huckleberry Mine, which is not considered a material property for the purposes of the Company’s AIF.

 

Huckleberry Mine

 

Huckleberry Mines Ltd. (“HML”) is owner/operator of the Huckleberry copper mine in west-central British Columbia. Imperial holds 100% of the shares of HML through HML Mining Inc., a wholly owned subsidiary of Imperial.

 

On January 6, 2016, HML suspended pit mining operations. Stockpiles were then milled until the end of August 2016. Huckleberry mine remains on care and maintenance.

 

The Huckleberry mine lies on the southern flank of Huckleberry Mountain, the highest point at 1,542 masl and north of Tahtsa Reach, the lowest point at 860 masl on the Nechako Reservoir. The deposits have an average surface elevation of 1,036 masl. Access to the property is along 121 km of gravel forest service roads and a private access road. A 138 kV power line supplies hydro power to the site. The District of Houston is 307 km west of Prince George, 411 km east of Prince Rupert and served by Highway 16 and the Canadian National Railway. When in operation the mine employs approximately 260 people from nearby Houston and surrounding local communities.

 

The Huckleberry property covers 25,767 ha and consists of two mining leases having terms to June 25, 2027 and April 26, 2022, respectively, and totaling 2,422 ha and 49 mineral claims (one valid to May 18, 2022, 39 valid to August 31, 2022, six valid to August 31, 2023, two valid to February 1, 2024 and one valid to July 17, 2026) encompassing 23,345 ha.

 

Three contiguous claims (3,059 ha / included in aggregate figures above) approximately eight km north of the mine and identified as the Whiting Creek property are subject to a 60% interest buyback provision in favour of Rio Tinto Exploration Canada Inc.

 

Pursuant to an agreement dated July 15, 2021, HML purchased a 100% interest in five mineral tenures (2,526 ha / included in aggregate figures above) from ArcWest. The claims are situated in and around Sweeney Lake between the Whiting Creek property and the Huckleberry Mine and are subject to a 1% net smelter return royalty in favour of ArcWest with no buyout provision.

 

Other Exploration Properties

 

Imperial holds a portfolio of 23 greenfield exploration properties in British Columbia. These properties have defined areas of mineralization and clear exploration potential. Management continues to evaluate various opportunities to advance many of these properties, and work will be conducted to keep these properties in good standing.

 

Imperial Metals Corporation | 2021 Annual Information Form

P 43 

 

Dividends and Distributions

 

Imperial has not declared, and does not intend to declare, cash dividends or distributions on its securities. Payment of dividends is within the discretion of the Company’s Board of Directors and will depend on Imperial’s future earnings, if any, its capital requirements and financial condition, and other relevant factors.

 

Capital Structure

 

Imperial’s Authorized Share Capital:

 

·50,000,000 First Preferred shares without par value with special rights and restrictions to be determined by the directors, of which 3,100,000 have been designated as Series A First Preferred shares (issued & outstanding–nil).

 

·50,000,000 Second Preferred shares without par value with rights and restrictions to be determined by the directors (issued & outstanding–nil).

 

·An unlimited number of Common Shares without par value.

 

·As at December 31, 2021 there were 141,392,191 Common Shares issued & outstanding.

 

Each Common Share entitles its holder to notice of all meetings of holders of Common Shares and to attend and vote at such meetings. All of the Common Shares rank equally as to participation in dividends as and when declared and in the distribution of Imperial’s remaining assets on a liquidation, dissolution or winding-up.

 

The directors of Imperial are authorized to issue the First Preferred shares and the Second Preferred shares in one or more series, to set the number of shares in and determine the designation of each such series and to attach such rights and restrictions to each series as they may determine. No First Preferred shares or Second Preferred shares have been issued subject to call or assessment. Currently, there are no pre-emptive or conversion or exchange rights attached to First Preferred shares or Second Preferred Shares and no provisions for redemption, retraction, or purchase for cancellation, surrender, or sinking or purchase funds.

 

Provisions as to the modification, amendment or variation of the authorized share structure of Imperial are contained in the British Columbia Business Corporations Act.

 

Market for Securities

 

Imperial’s common shares are listed on The Toronto Stock Exchange and trade under symbol III.

 

2021  High   Low   Volume Traded 
Jan   6.25    3.95    1,672,679 
Feb   5.02    4.05    1,340,691 
Mar   4.79    4.01    1,019,959 
Apr   5.38    4.33    838,951 
May   5.95    4.75    994,853 
Jun   5.08    4.43    894,014 
Jul   4.73    4    395,044 
Aug   4.75    3.86    379,003 
Sep   4.23    3.37    521,405 
Oct   4.4    3.83    609,459 
Nov   4.1    3.3    584,759 
Dec   3.55    2.95    504,276 

 

Imperial Metals Corporation | 2021 Annual Information Form

P 44 

 

Directors & Executive Officers

 

The term of office for each director will expire at Imperial’s 2022 Annual General Meeting, or when their successor is duly elected or appointed, unless their office is earlier vacated in accordance with the articles of the Company.

 

Name, Province and
Country of Residence
 

Current Position
with Imperial

 

Present Principal Occupation and
Preceding Five Years

 

Director
Since

Pierre Lebel

British Columbia, Canada

 

Chairman

Director 1.3.4.

  Chairman   2001 Dec 6

J. Brian Kynoch

British Columbia, Canada

 

President

Director 4.

  President   2002 Mar 7

Larry G. Moeller

Alberta, Canada

  Lead Director 1.2.3.   President, Kimball Capital Corporation   2002 Mar 7

Theodore Muraro

British Columbia, Canada

  Director 2.4.5.   Geological Engineer   2009 Nov 4

Janine North

British Columbia, Canada

  Director 1.2.5.   Professional Director   2018 May 22

JP Veitch

Alberta, Canada

  Director 1.5.   Director, Secretary/Treasurer of a private consultancy company   2018 May 22

Edward Yurkowski

British Columbia, Canada

  Director 1.2.3.4.5.   Retired mining contractor & mining executive   2005 May 20

Darb Dhillon

British Columbia, Canada

 

Chief Financial Officer

& Corporate Secretary

  Chief Financial Officer & Corporate Secretary (2020); prior thereto: Vice President Finance (2017); Director of Finance, Newmarket Gold Inc., Kirkland Lake Gold (2017).   -

Don Parsons

British Columbia, Canada

  Chief Operating Officer   Chief Operating Officer   -

Randall Thompson

British Columbia, Canada

  Vice President
Operations
  Vice President Operations (2018); prior thereto:    Red Chris Mine General Manager (2018); Chief Operating Officer, JDS Silver Inc.(2017); President, Huckleberry Mines Ltd. (2016).   -

Jim Miller-Tait

British Columbia, Canada

  Vice President Exploration   Vice President Exploration (2017);
Exploration Manager (2009)
  -

Sheila Colwill

British Columbia, Canada

 

Vice President

Marketing

  Vice President Marketing (2017);
Marketing Manager (2011)
  -

 

Committees: 1. Audit 2. Compensation 3. Corporate Governance & Nominating 4. Health & Safety 5. Special: Mount Polley Breach

 

Shareholdings of Directors and Executive Officers

 

The directors and executive officers beneficially owned, or controlled, or directed, directly or indirectly, a total of 6,282,299 common shares of Imperial, representing approximately 4.4% of the total 141,392,191 issued and outstanding common shares of Imperial as at December 31, 2021.

 

Imperial Metals Corporation | 2021 Annual Information Form

P 45 

 

Audit Committee

 

The Audit Committee is structured to comply with National Instrument 52-110 (“NI 52-110”) and is responsible for reviewing the Company's financial reporting procedures, internal controls and the performance of the Company's external auditors.

 

All members of the Audit Committee are independent, financially literate, and understand the breadth and level of complexity of the issues that may reasonably be expected to be raised by the Company's financial statements.

 

Larry Moeller, B. Comm., CPA, CA, CBV – Audit Committee Chair

 

President, Kimball Capital Corporation, a private company in Calgary, Alberta, and Director, Magellan Aerospace Corporation and Orbus Pharma Inc.

 

Pierre Lebel, LL.B., MBA

 

Director & Audit Committee, HomeEquity Bank and West Vault Mining Inc., and Director, Business Council of British Columbia, Lions Gate Hospital Foundation and Vancouver Opera Association.

 

Janine North, ICD.D.

 

Director, Conifex Timber Inc., BC Ferry Services Corp., Mercer International Inc. and Fraser Basin Council.

 

J.P Veitch

 

Director & Secretary/Treasurer, a private consultancy company.

 

Edward Yurkowski, P.Eng.

 

Mining industry Engineer & Consultant, and Director & Audit Committee, Fortune Minerals Ltd.

 

Audit Committee Charter

 

The Audit Committee is responsible for reviewing the Company’s financial reporting procedures, internal controls and the performance of the Company’s external auditors. The Audit Committee Charter is available in the Corporate Governance section on imperialmetals.com.

 

Reliance on Certain Exemptions

 

At no time since commencement of the Company’s most recently completed financial year has the Company relied on the exemptions in Sections 2.4, 3.2, 3.3(2), 3.4, 3.5, 3.6 or 3.8 of NI 52-110, or an exemption from NI 52-110, in whole or in part, granted under Part 8 of NI 52-110.

 

Audit Committee Oversight

 

At no time since commencement of the Company’s most recently completed financial year has a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board.

 

Pre-Approval Policies and Procedures

 

The Audit Committee is authorized by the Board to review the performance of the Company’s external auditors and approve in advance provision of non-audit services and to consider the independence of the external auditors. The Audit Committee has delegated to the Chair of the Audit Committee the authority to act on behalf of the Committee with respect to the pre-approval of the audit and permitted non-audit services provided by Deloitte LLP from time to time. The Chair reports on any such pre-approval at each meeting of the Audit Committee.

 

Imperial Metals Corporation | 2021 Annual Information Form

P 46 

 

External Auditor Service Fees

 

Fees paid to Deloitte LLP:

 

Years Ended  2021   2020 
Audit fees (1)  $477,755   $438,700 
Audit related fees  $-   $- 
Total  $477,755   $438,700 

 

(1)For professional services rendered for the audit and review of our financial statements or services provided in connection with statutory and regulatory filings or engagements.

 

Complaint Procedures

 

The Company has implemented detailed procedures for receipt, retention and treatment of complaints or submissions regarding accounting, internal accounting controls or auditing matters, and confidential and anonymous submission of concerns from employees of the Company or any of its subsidiaries about questionable accounting or auditing matters. Imperial’s procedures for filing complaints relating to accounting and auditing matters is available in the Corporate Governance section on imperialmetals.com.

 

Compensation Committee

 

Larry Moeller, Chair; Ted Muraro; Janine North; Edward Yurkowski

 

The Committee is to discharge the Board’s responsibilities relating to compensation and benefits of the executive officers and directors of the Company.

 

Corporate Governance & Nominating Committee

 

Pierre Lebel, Chair; Larry Moeller; Edward Yurkowski

 

The Committee is to assist the Board in fulfilling its oversight responsibilities to identify and recommend qualified individuals for appointment or election to the Board, and to develop and recommend to the Board corporate governance guidelines and practices for the Company.

 

Health & Safety Committee

 

Ted Muraro, Chair; Brian Kynoch; Pierre Lebel; Edward Yurkowski

 

The Committee is to oversee the development and implementation of appropriate policies and to review the performance of the Company with respect to industrial health and safety matters.

 

Special Committee: Mount Polley Breach

 

J.P. Veitch, Chair; Ted Muraro; Janine North; Edward Yurkowski

 

The Committee is to provide oversight on the legal and technical work resulting from the Mount Polley Breach.

 

Imperial Metals Corporation | 2021 Annual Information Form

P 47 

 

Corporate Cease Trade Orders or Bankruptcies

 

Mr. Yurkowski was a Director of Chieftain Metals Corp. (Chieftain) from May 22, 2013 to September 1, 2016. On August 31, 2016, Chieftain and its wholly owned subsidiary (Chieftain Metals Inc.) was served with an application by West Face Capital Inc., as agent for West Face Long Term Opportunities Global Master LP, seeking the appointment of Grant Thornton Limited as receiver of all of the assets, undertakings and properties of Chieftain. On September 6, 2016, the Ontario Superior Court of Justice issued an order appointing Grant Thornton Limited as the receiver and manager of all the assets, undertakings and properties of Chieftain. On June 2, 2017, the Ontario Superior Court of Justice issued an order authorizing Grant Thornton Limited to file a proposal under the Bankruptcy and Insolvency Act (Canada) in respect of Chieftain and its wholly owned subsidiary.

 

Conflicts of Interest

 

Certain of the Company's directors and officers also serve as directors or officers of other companies or they may have significant shareholdings in other companies. As a result, they may be in a position where their duty to another company conflicts with their duty to Imperial. To the extent that other companies may transact with the Imperial or participate in ventures in which Imperial may participate, the directors and officers of Imperial may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event a conflict of interest arises at a meeting of the Board, a director or officer who has a conflict will disclose the nature and extent of their interest to the meeting and abstain from voting in respect of the matter.

 

Interest of Management & Others in Material Transactions

 

During its three most recently completed financial years, the Company closed various financings that involved its significant shareholders and other insiders of the Company. Details are provided in General Development & Outlook, Corporate General in this AIF.

 

On March 10, 2019, the Company entered into an agreement to sell a 70% interest in the Red Chris mine to Newcrest. The sale was completed on August 15, 2019 for a final purchase price of US$804.4 million subject to debt and working capital adjustments.

 

On March 10, 2021, the Company entered into a $10.0 million promissory note financing with an affiliate of its major shareholder. The Note matures on April 1, 2022 and bears interest of 8.0% per annum. The Note was fully repaid on June 28, 2021 prior to its maturity date.

 

In October 2021, the existing Credit Facility was increased from $50.0 million to $75.0 million maturing October 9, 2022. The increase of $25 million in the facility is guaranteed by an affiliate of the Company’s major shareholder, to which the Company will pay certain fees for providing the guarantee.

 

Subsequent to December 31, 2021, the Company increased its existing Credit Facility from $75.0 million to $100.0 million. This additional increase of $25.0 million in the facility is guaranteed by a related party.

 

Except as otherwise disclosed herein, no director, executive officer or principal shareholder of the Company, or any associate or affiliate of the foregoing, have had any material interest, direct or indirect, in any other transaction within the three most recently completed financial years or during the current financial year prior to the date of this AIF that has materially affected or is reasonably expected to materially affect the Company.

 

Material Contracts

 

On October 2, 2019, the Company entered into a one year $50 million revolving credit facility (“Credit Facility”). The Credit Facility is used to support letters of credit relating to future reclamation liabilities and general corporate purposes. The Credit Facility includes various restrictive covenants that, subject to exceptions, limit the Company’s ability to, among other things, incur or assume indebtedness, grant or assume security, engage in affiliate transactions, undertake material changes in the Company’s business or enter into acquisitions, mergers and consolidations. The Credit Facility also requires compliance with financial covenants pertaining to minimum cash balances on hand. As stated above, the Credit Facility was increased from $50.0 million to $75.0 million in October 2021, and further increased from $75.0 million to $100.0 million in February 2022 maturing October 9, 2022.

 

Imperial Metals Corporation | 2021 Annual Information Form

P 48 

 

Legal Proceedings

 

The nature of the Company’s business may subject it to numerous regulatory investigations, claims, lawsuits and other proceedings. The results of these legal proceedings cannot be predicted with certainty. In the opinion of management, these matters, unless otherwise described herein, are not expected to have a material effect on the Company’s consolidated financial position, cash flow or results of operations.

 

During the third quarter of 2014, a securities class action under section 138 of the Ontario Securities Act was filed against the Company and certain of its directors, officers and others. On September 23, 2020, the Ontario Superior Court denied leave to proceed with this claim. The Plaintiff’s appeal of this decision was partially successful with the action being returned to the Ontario Superior Court for reconsideration of the leave application.

 

The Company is of the view that the allegations contained in the claim are without merit and are unlikely to succeed.

 

The Company prevailed at the arbitration of a claim filed by a contractor for additional compensation owed for work previously carried out. The arbitrator ruled that no further amounts are owed and that the contractor had overbilled the Company in an amount exceeding $2.0 million. The contractor has appealed the ruling.

 

The Company was partially successful in its action against its insurance underwriters to recover business interruption losses incurred at the Mount Polley mine. The insurance company has filed an appeal.

 

Transfer Agent & Registrar

 

The Company’s transfer agent and registrar is Computershare Investor Services Inc. (Canadian offices in Vancouver and Toronto).

 

Interests of Experts

 

Deloitte LLP, the Company’s auditors, have prepared an opinion with respect to the Company’s consolidated financial statements for the year ended December 31, 2021 available on imperialmetals.com and sedar.com. Deloitte LLP is independent of Imperial within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of British Columbia.

 

The following persons prepared or certified a statement, report, opinion or valuation described or included in, or referred to in, a filing made under National Instrument 51-102 by the Company, and whose profession or business gives authority to such statement, report, opinion or valuation. Some of these persons were employees of the Company at the date of the stated reports, and may have had registered or beneficial interests, direct or indirect in the securities of the Company; however such securities would represent substantially less than one per cent of the Company’s outstanding securities.

 

2021 Red Chris Report: Rob Stewart, FAusIMM; Brett Swanson, MMSAQP.; Michael Sykes, FAusIMM; Laurie Reemeyer, P.Eng.; Dr. Bing Wang, P.Eng.; Philip Stephenson, FAusIMM. Report filed on SEDAR November 29, 2021.

 

2016 Mount Polley Report: Ryan Brown, P.Eng.; Gary Roste, P.Geo.; Janice Baron, P.Eng.; and Chris Rees, Ph.D., P.Geo. Report filed on SEDAR May 26, 2016.

 

Additional Information

 

Additional information, including details of director and officer remuneration and indebtedness, principal holders of Imperial shares, securities authorized for issuance or equity compensation plans, options to purchase Imperial shares and certain other matters, is contained in the Company’s Information Circular for its most recent annual general meeting of shareholders that involved the election of directors, and on sedar.com. Complete financial disclosure is provided in the Company’s consolidated comparative financial statements, and management’s discussion and analysis for the fiscal year ended December 31, 2021. Copies of these and other disclosure documents are available at imperialmetals.com and sedar.com, or by contacting the Company’s Shareholder Communications at 604.669.8959.

 

Imperial Metals Corporation | 2021 Annual Information Form

 

 

Exhibit 99.2

 

Management’s Responsibility for Financial Reporting

 

The accompanying consolidated financial statements and all information in the annual report are the responsibility of management. These consolidated financial statements have been prepared by management in accordance with the accounting policies described in the notes to the consolidated financial statements. Where necessary, management has made informed judgments and estimates of the outcome of events and transactions. In the opinion of management, the consolidated financial statements have been prepared within acceptable limits of materiality and are in accordance with International Financial Reporting Standards appropriate in the circumstances. The financial information elsewhere in the annual report has been reviewed to ensure consistency with that in the consolidated financial statements.

 

Management maintains appropriate systems of internal control. Policies and procedures are designed to give reasonable assurance that transactions are appropriately authorized, assets are safeguarded from loss or unauthorized use and financial records are properly maintained to provide reliable information for preparation of financial statements. Deloitte LLP, Chartered Professional Accountants, has been engaged, as approved by a vote of the shareholders at the Company’s most recent Annual General Meeting, to audit the consolidated financial statements in accordance with Canadian generally accepted auditing standards and provide an independent auditor’s opinion. Their report is presented with the consolidated financial statements.

 

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Board exercises this responsibility through the Audit Committee of the Board. This Committee, which is comprised of a majority of non-management Directors, meets with management and the external auditors to satisfy itself that management’s responsibilities are properly discharged and to review the consolidated financial statements before they are presented to the Board of Directors for approval. The consolidated financial statements have been approved by the Board of Directors on the recommendation of the Audit Committee.

 

/s/  J. Brian Kynoch

 

/s/  Darb S. Dhillon
J. Brian Kynoch   Darb S. Dhillon
President   Chief Financial Officer
     

March 16, 2022

   

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 1

 

 

Independent Auditor's Report

 

To the Shareholders and the Board of Directors of Imperial Metals Corporation:

 

Opinion

 

We have audited the consolidated financial statements of Imperial Metals Corporation (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2021 and 2020, and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the "financial statements").

 

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").

 

Basis for Opinion

 

We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Key Audit Matter

 

A key audit matter is the matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements for the year ended December 31, 2021. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

 

Mineral Properties —Impairment Analysis – Refer to Notes 2 and 4 to the financial statements

 

Key Audit Matter Description

 

The Company determined that impairment indicators exist at the Red Chris Mine, Mount Polley Mine and Huckleberry Mine cash generating units ("identified CGUs”) at December 31, 2021. The recoverable amount for the identified CGUs is the greater of the fair value less cost of disposal and the value in use. The value in use for these identified CGUs was calculated using discounted cash flow techniques which factor future metal prices, the amount of reserves, resources and exploration potential, the cost of bringing the project into production, production schedules, production costs, sustaining capital expenditures, future site reclamation costs, and a discount rate. As the recoverable amounts exceeded the carrying values for the identified CGUs, no impairment was recorded.

 

While there are several estimates and assumptions that are required to determine the recoverable amounts for the identified CGUs, the estimates and assumptions with the highest degree of subjectivity are future metal prices and the selected discount rates. This required a high degree of auditor judgment and an increased extent of audit effort, including the involvement of fair value specialists.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 2

 

 

How the Key Audit Matter Was Addressed in the Audit

 

Our audit procedures related to the future metal prices and the selected discount rates used in the calculation of the recoverable amounts for the identified CGUs included the following, among others:

 

With the assistance of fair value specialists, evaluated the reasonableness of:

 

- Future metal prices by comparing management’s forecasts to independent third-party forecasts. 

- Discount rates by developing a range of independent estimates and comparing to the discount rates selected by management.

 

Other Information

 

Management is responsible for the other information. The other information comprises:

 

Management's Discussion and Analysis

The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.

 

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

 

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

 

The Annual Report is expected to be made available to us after the date of the auditor's report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

 

Responsibilities of Management and Those Charged with Governance for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing the Company's financial reporting process.

 

Auditor's Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 3

 

 

As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

 

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

 

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

The engagement partner on the audit resulting in this independent auditor’s report is Leigh Derksen.

 

/s/ Deloitte LLP

 

Chartered Professional Accountants 

Vancouver, British Columbia 

March 16, 2022

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 4

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 

expressed in thousands of Canadian dollars

 

   Notes   December 31
2021
   December 31
2020
 
ASSETS                
Current Assets               
Cash       $33,308   $34,019 
Marketable securities        81    130 
Trade and other receivables   5    8,887    5,968 
Inventory   3    27,616    12,420 
Prepaid expenses and deposits        3,603    2,840 
         73,495    55,377 
Mineral Properties   4    1,064,720    979,484 
Other Assets   3, 6    38,087    45,230 
Deferred Income Tax Assets   14    10,039    11,230 
        $1,186,341   $1,091,321 
LIABILITIES               
Current Liabilities               
Trade and other payables       $59,582   $44,170 
Taxes payable        91    313 
Provision for rehabilitation costs        486    762 
Short term debt   7    29,500    - 
Current portion of debt   8    2,896    840 
         92,555    46,085 
Provision for Rehabilitation Costs        -    308 
Non-Current Debt   8    2,579    1,582 
Future Site Reclamation Provisions   9    147,622    127,828 
Deferred Income Tax Liabilities   14    180,489    187,035 
         423,245    362,838 
EQUITY               
Share Capital   10    379,570    319,216 
Contributed Surplus        41,385    41,028 
Currency Translation Adjustment        7,604    7,632 
Retained Earnings        334,537    360,607 
         763,096    728,483 
        $1,186,341   $1,091,321 
Commitments and Pledges   19           
Contingent Liabilities   20           

 

See accompanying notes to these consolidated financial statements.

 

Approved by the Board and authorized for issue on March 16, 2022 

 
/s/ Larry G. Moeller   /s/ J. Brian Kynoch
Director   Director

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 5

 

 

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS 

Years Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

   Notes   2021   2020 
Revenue       $133,591   $148,097 
Cost of Sales   11    (123,162)   (127,470)
Income from Mine Operations        10,429    20,627 
General and Administration        (4,386)   (3,352)
Idle Mine Costs        (24,884)   (22,342)
Mine Restart Costs        (11,350)   - 
Reversal of Impairment on Exploration and Evaluation Assets, net of write downs   4    3,634    - 
Interest Expense        (1,497)   (1,358)
Other Finance Loss   12    (2,599)   (2,472)
Other Income        31    31 
Loss before Taxes        (30,622)   (8,866)
Income and Mining Tax Recovery   14    4,552    3,974 
Net Loss        (26,070)   (4,892)
Other Comprehensive Loss               
Currency translation adjustment        (28)   (130)
Total Comprehensive Loss       $(26,098)  $(5,022)
                
Loss Per Share               
Basic   15   $(0.19)  $(0.04)
Diluted   15   $(0.19)  $(0.04)
                
Weighted Average Number of Common Shares Outstanding               
Basic        135,223,279    128,490,174 
Diluted        135,223,279    128,490,174 

 

See accompanying notes to these consolidated financial statements.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 6

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

Years Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

   Share Capital       Currency         
   Number of
Shares
   Amount   Contributed
Surplus
   Translation
Adjustment
   Retained
Earnings
   Total 
Balance December 31, 2019   128,490,174   $319,216   $40,302   $7,762   $365,499   $732,779 
Share based compensation expense   -    -    726    -    -    726 
Total comprehensive loss   -    -    -    (130)   (4,892)   (5,022)
Balance December 31, 2020   128,490,174   $319,216   $41,028   $7,632   $360,607   $728,483 
                               
Balance December 31, 2020   128,490,174   $319,216   $41,028   $7,632   $360,607   $728,483 
Rights offering (Note 10)   12,853,267    60,208    -    -    -    60,208 
Exercised options   48,750    146    (48)   -    -    98 
Share based compensation expense   -    -    405    -    -    405 
Total comprehensive loss   -    -    -    (28)   (26,070)   (26,098)
Balance December 31, 2021   141,392,191   $379,570   $41,385   $7,604   $334,537   $763,096 

 

See accompanying notes to these consolidated financial statements.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 7

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

Years Ended December 31, 2021 and 2021 

expressed in thousands of Canadian dollars, except share and per share amounts

 

   Notes   2021   2020 
OPERATING ACTIVITIES               
Net Loss       $(26,070)  $(4,892)
Items not affecting cash flows               
Deferred mining and income tax recovery   14    (5,279)   (4,326)
Depletion and depreciation        40,953    40,288 
Write down of exploration cost        523    - 
Reversal of impairment on exploration costs        (4,157)   - 
Share based compensation        405    726 
Accretion of future site reclamation provisions        3,110    2,764 
Interest expense        1,497    1,358 
Unrealized foreign exchange losses        31    1,113 
Other        21    (122)
         11,034    36,909 
Net change in non-cash operating working capital balances   13    6,183    (10,302)
Income and mining taxes paid        (949)   (483)
Interest paid        (1,252)   (1,241)
Cash provided by operating activities        15,016    24,883 
                
FINANCING ACTIVITIES               
Proceeds from short term debt        55,000    - 
Repayment of short term debt        (25,500)   (437)
Proceeds from non-current debt        10,000    - 
Repayment of non-current debt        (10,049)   - 
Share capital issued for rights offering, net of issue costs        60,132    - 
Share capital issued for exercised options        98    - 
Lease payments   8    (2,467)   (1,060)
Cash provided by (used in) financing activities        87,214    (1,497)
                
INVESTING ACTIVITIES               
Acquisition and development of mineral properties   4    (102,192)   (73,601)
Net change in investing working capital balances        (712)   (1,040)
Payments of other obligations        -    (3,933)
Proceeds on sale of mineral properties        27    438 
Other investing items        (29)   (45)
Cash used in investing activities        (102,906)   (78,181)
                
EFFECT OF FOREIGN EXCHANGE ON CASH        (35)   (1,139)
DECREASE IN CASH        (711)   (55,934)
CASH, BEGINNING OF YEAR        34,019    89,953 
CASH, END OF YEAR       $33,308   $34,019 

 

See accompanying notes to these consolidated financial statements.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 8

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

Year Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

1.NATURE OF OPERATIONS

 

Imperial Metals Corporation (the “Company”) is incorporated under the laws of the Province of British Columbia, Canada, and its principal business activity is the exploration, development, and production of base and precious metals from its mineral properties. The head office, principal address and registered and records office of the Company are located at 580 Hornby Street, Suite 200, Vancouver, British Columbia, Canada V6C 3B6. The Company’s shares are listed as symbol “III” on the Toronto Stock Exchange.

 

The Company’s key projects are:

 

30% interest in the Red Chris copper-gold mine in northwest British Columbia; and

Mount Polley copper-gold mine in central British Columbia.

 

These consolidated financial statements have been prepared on a going concern basis which assumes the Company will continue operating in the foreseeable future and will be able to service its debt obligations, realize its assets and discharge its liabilities in the normal course as they come due. The Company has in place a planning, budgeting, and forecasting process to determine the funds required to support the Company’s operations and expansionary plans.

 

In March 2020, the World Health Organization declared a global pandemic related to COVID-19. Although, the widespread impact of COVID-19 on global commerce have been far-reaching, it had limited adverse effect on the Company's operating and financing capabilities as Mount Polley and Huckleberry mine sites have been on care and maintenance during 2020-2021 periods. We continue to act to protect the safety and health of our employees, contractors and the communities in which we operate in accordance with guidance from governments and public health authorities. Should the length or severity of the pandemic be prolonged for an extended period, this could have a significant adverse impact on the Company's financial position and results of operations for future periods.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

Statement of Compliance

 

These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, revenue and expenses. Actual results may differ from these estimates.

 

Basis of Presentation

 

The Company’s consolidated financial statements and those of all of its controlled subsidiaries are presented in Canadian dollars as this is the presentation and functional currency for all its operations except for the Company’s US subsidiary, Sterling Gold Mining Corporation, which has US dollars as its functional currency.

 

These consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments measured at fair value.

 

Basis of Consolidation

 

These consolidated financial statements include the accounts of the Company and those entities which are controlled by the Company. Control is achieved when the Company has power over the investee; is exposed to or has rights to variable returns from its investment with the investee; and has the ability to use its power to affect its returns. All inter-company balances, transactions, revenues and expenses have been eliminated upon consolidation.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 9

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

Year Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

Joint Ventures

 

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control and whereby each party has rights to the net assets of the arrangement. Joint control is considered to exist when all parties to the joint arrangement are required to reach unanimous consent over decisions about relevant business activities pertaining to the contractual arrangement. Interests in joint ventures are recognized as an investment and accounted for using the equity method of accounting.

 

Joint Operations

 

A joint operation is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control and whereby each party has rights to the assets and liabilities relating to the arrangement. Joint control is considered to exist when all parties to the joint arrangement are required to reach unanimous consent over decisions about relevant business activities pertaining to the contractual arrangement. Interests in joint operations are accounted for by recognizing the Company’s share of assets, liabilities, revenues and expenses incurred jointly.

 

Joint Operations Without Sharing Control

 

The Company participates in an unincorporated arrangement relating to its interest in the Red Chris mine and has rights to its share of the undivided assets, liabilities, revenues and expenses of the property, subject to the arrangement, rather than a right to a net return, and does not share joint control. All such amounts are measured in accordance with the terms of the arrangement, which is based on the Company’s proportionate interest in the asset, liabilities, revenues and expenditures of the property and recorded in the financial statements in the appropriate line items according to their nature. The Company’s proportionate share includes certain adjustments to ensure consistency of accounting policies with those of the Company.

 

Business Combinations and Goodwill

 

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests (“NCI”) in the acquiree. For each business combination, the Company elects whether to measure the NCI in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

 

When the Company acquires a business, it assesses the assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Mineral reserves, resources and exploration potential that can be reliably measured are recognized separately in the assessment of fair values on acquisition. Other potential reserves, resources and rights, for which fair values cannot be reliably measured, are not recognized separately, but instead are subsumed in goodwill.

 

If the business combination is achieved in stages, any previously held equity interest is re-measured at its acquisition-date fair value, and any resulting gain or loss is recognized in the statement of profit or loss and other comprehensive income. It is then considered in the determination of goodwill.

 

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 is measured at fair value, with changes in fair value recognized in profit or loss in the statement of profit or loss and other comprehensive income in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognized in profit or loss.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 10

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

Year Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognized for NCI over the fair value of the identifiable net assets acquired and liabilities assumed). If the fair value of the identifiable net assets acquired is in excess of the aggregate consideration transferred, the Company reassesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in statement of profit or loss and other comprehensive income.

 

After initial recognition, goodwill is measured at cost less any accumulated impairment losses, if any. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company’s cash-generating units (CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

 

Inventory

 

Copper concentrates, inclusive of contained gold and silver, and costs associated with stockpile ore are valued on a first in first out basis at the lower of production cost to produce saleable metal and net realizable value. Net realizable value is calculated as described under “Revenue Recognition”. Production costs include direct labour, operating materials and supplies, transportation costs and applicable overhead, and depletion and depreciation.

 

Stores and supplies inventories are valued at the lower of cost and net realizable value. Cost includes acquisition cost and any directly related costs, including freight.

 

The portion of the ore stockpile and supplies that are to be processed/used more than 12 months from the reporting date and critical spare items, which might impact production if unavailable, are classified as other assets.

 

Materials and supplies are valued at the lower of cost or net realizable value. Any provision for obsolescence is determined by reference to specific items of stock and a general allowance for obsolescence. A regular review is undertaken to determine the extent of any provision for obsolescence.

 

Mineral Properties

 

Mineral properties represent capitalized expenditures related to the development of mining properties, related plant and equipment, expenditures related to exploration activities and expenditures arising from property acquisitions. Capitalized costs include interest and financing costs for amounts borrowed to develop mining properties and construct facilities, and operating costs, net of revenues, incurred prior to the commencement of commercial production.

 

The costs associated with mineral properties are separately allocated to reserves, resources and exploration potential, and include acquired interests in production, development and exploration stage properties representing the fair value at the time they were acquired. The value associated with resources and exploration potential is the value beyond proven and probable reserves assigned through acquisition. The value allocated to reserves is depleted on a unit-of-production method over the estimated recoverable proven and probable reserves at the mine. The reserve value is noted as mineral properties being depleted in Note 4.

 

The resource value represents the property interests that are contained in the measured and indicated resources that are not within the proven and probable reserves. Exploration potential is (i) mineralization included in inferred resources; (ii) areas of potential mineralization not included in any resource category.

 

Resource value and exploration potential value is noted as mineral properties not being depleted in Note 4. At least annually or when otherwise appropriate and subsequent to its review and evaluation for impairment, value from the non-depletable category is transferred to the depletable category if resources or exploration potential have been converted into reserves.

 

Capitalized costs for mineral properties being depleted are depleted by property using the unit-of-production method over the estimated recoverable proven and probable reserves at the mines to which they relate.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 11

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

Commencement of Commercial Production

 

On the commencement of commercial production, net costs are charged to operations using the unit-of-production method by property based upon estimated recoverable reserves.  Management considers a number of factors related to the ability of a property to operate at its design capacity over a specified period of time in determining when a property has reached commercial production. These factors include production levels as intended by management, plant throughput quantities, recovery rates, and number of uninterrupted days of production.

 

Property, Plant and Equipment

 

Property, plant and equipment is carried at cost, less accumulated depreciation and accumulated impairment losses. Capitalized costs include the fair value of consideration given to acquire or construct an asset, capitalized interest related to that asset and includes the direct charges associated with bringing the asset to the location and condition necessary for placing it into use along with the future cost of dismantling and removing the asset.

 

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

 

The costs of major overhauls of parts of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in income or loss as incurred.

 

Milling equipment and related buildings, intangible assets used in production, and tailings facilities are depleted on a unit-of-production basis over the estimated recoverable proven and probable reserves at the mines to which they relate.

 

Mobile mine equipment and vehicles are depreciated over the estimated useful lives of the assets either on a unit-of-production basis or using the straight line method with useful lives of 4-12 years. Office, computer and communications equipment are depreciated using the straight line method with useful lives of 4-5 years. The estimated residual value and useful lives are reassessed at each year end and depreciation expense is adjusted on a prospective basis.

 

Stripping Costs

 

Costs associated with the removal of overburden and rock that are incurred in the production phase of mining operations are included in the cost of the inventory produced in the period in which they are incurred, except when the charges represent a betterment to the mineral property. Charges represent a betterment to the mineral property when the stripping activity provides access to reserves that will be produced in future periods that would not have been accessible without the stripping activity. When charges are deferred in relation to a betterment, the charges are amortized over the reserve accessed by the stripping activity using the unit-of-production method as these reserves will directly benefit from the deferred stripping costs incurred.

 

Assessment of Impairment

 

Management reviews the carrying value of exploration and evaluation properties at the end of each reporting period for evidence of impairment. This review is generally made with reference to timing of exploration work, work programs proposed, and the exploration results achieved by the Company and by others in the related area of interest.

 

Post-feasibility exploration properties, producing mining properties and plant and equipment are reviewed at the end of each reporting period for evidence of impairment at the cash generating unit (CGU) level.  A CGU is defined as the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.  If any such indication exists, the entity shall estimate the recoverable amount of the CGU to determine if it exceeds the CGU’s carrying value.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 12

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

Year Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

The recoverable amount for a CGU is the greater of the fair value less cost of disposal (FVLCD) and the value in use.  Fair value less cost of disposal is the amount that would be received by the Company to sell a CGU in a transaction between arms-length parties less any costs directly attributable to the disposal of the CGU.  Value in use is the present value of future cash flows expected to be derived by the Company from the CGU, which is estimated using discounted cash flow techniques.  When it is not possible to determine fair value less cost of disposal by quotes from an active market, a written offer to purchase the CGU, or a binding sales agreement to purchase the CGU, the Company estimates the fair value less cost of disposal using discounted cash flow techniques.  Resources in the measured and indicated categories are valued using estimated fair values based on market transactions.

 

Discounted cash flow techniques are dependent on a number of factors, including future metal prices, the amount of reserves, resources and exploration potential, the cost of bringing the project into production, production schedules, production costs, sustaining capital expenditures, and future site reclamation costs. Additionally, the reviews take into account factors such as political, social, legal and environmental regulations. These factors may change due to changing economic conditions or the accuracy of certain assumptions and, hence, affect the recoverable amount. The Company uses its best efforts in assessing these factors.

 

Post-feasibility exploration properties, producing mining properties and plant and equipment that have been impaired in prior periods are tested for evidence of possible impairment reversal whenever events or significant changes in circumstances indicate that the impairment may have been reversed. Indicators of a potential reversal of an impairment loss mainly mirror the indicators present when the impairment was originally recorded

 

An impairment loss or reversal thereof is recognized in income or loss to the extent that the carrying amount exceeds or is below the recoverable amount.

 

Leases

 

Right-of-use assets. The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

 

Lease liabilities. At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

 

Short-term leases and leases of low-value assets. The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 13

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

Year Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

Significant judgement in determining the lease term of contracts with renewal options. The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).

 

Future Site Reclamation Costs

 

The Company’s mining and exploration activities are subject to various statutory, contractual or legal obligations for protection of the environment. At the date the obligation is incurred, the Company records a liability, discounted to net present value, for the best estimate of future costs to retire an asset including costs for dismantling, remediation and ongoing treatment and monitoring of the site. The present value is determined using a pre-tax interest rate reflecting the time of value of money. The liability is accreted over time to the estimated amount ultimately payable through periodic charges to income or loss. The estimated present value of the future site reclamation costs are reviewed for material changes at each reporting date and re-measured at least annually or when there are significant changes in the assumptions giving rise to the estimated cash flows.

 

Future site reclamation costs are capitalized as part of the carrying value of the related mineral property at its initial discounted value and amortized over the useful life of the mineral property using the unit-of-production method. Subsequent changes to future site reclamation costs are recorded with a corresponding change to the carrying amounts of related mineral property.

 

Income and Mining Taxes

 

The Company accounts for income and mining taxes using the liability method. Under this method, deferred tax assets and deferred tax liabilities are recorded based on temporary differences between the financial reporting basis of the Company’s assets and liabilities and their corresponding tax basis. The future benefits of deferred tax assets, including unused tax losses and tax credits, are recognized to the extent that it is probable that taxable profit will be available against the deductible temporary difference and the tax loss and tax credits can be utilized. These deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates and laws that are expected to apply when the tax liabilities or assets are to be either settled or realized.

 

In a business combination, temporary differences arise as a result of differences in the fair values of identifiable assets and liabilities acquired and their respective tax bases. Deferred tax assets and liabilities are recognized for the tax effects of these differences. Deferred tax assets and liabilities are not recognized for temporary differences arising from goodwill or from the initial recognition of assets and liabilities acquired in a transaction other than a business combination which does not affect either accounting or taxable income or loss. Government assistance, including investment tax credits, is credited against the expenditure generating the assistance when it is probable that the government assistance will be realized.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 14

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

Year Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

Revenue Recognition

 

The revenue from sale of concentrate is recognized at an amount that reflects the consideration that the Company expects to receive. The Company established a five-step model to account for revenue arising from contracts with customers: to identify the contract(s) with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to each performance obligation and recognize revenue as each performance obligation is satisfied. The Company exercises judgement, taking into consideration all of the relevant facts and circumstances when applying each step of revenue recognition model to contracts with customers.

 

The revenue from the sale of concentrate is recognized at the point in time when control of the concentrate passes to the customer which occurs when title transfer to the customer which is generally on the date of shipment.

 

Revenue is recorded in the statement of income and comprehensive income net of treatment and refining costs and royalties paid to counterparties under terms of the off take arrangements. The estimated revenue is recorded based on metal prices and exchange rates on the date of shipment and is adjusted at each reporting date to the metal prices at the date of settlement. The actual amounts will be reflected in revenue upon final settlement, which could be as long as four to five months after the date of shipment. These adjustments reflect changes in metal prices and changes in quantities arising from final weight and assay calculations. The adjustments are constrained and are only recognized to the extent that it is highly probable that a significant reversal of in the amount of cumulative revenue recognized will not occur.

 

Financial Assets

 

Financial assets are initially measured at fair value and are subsequently measured at either amortized cost or fair value through profit or loss, depending on the classification of the financial assets.

 

The classification of assets is driven by the Company’s business model for managing financial assets and their contractual cash flow characteristics and the Company’s business model for managing them. Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient for contracts that have a maturity of a year or less, are measured at the transaction price determined under IFRS 15 in accordance with revenue recognition accounting policy. For other financial assets, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transactions costs. The Company records the fair value of marketable securities at the reporting date using quoted market prices.

 

The Company has categorized its financial assets in accordance with International Financial Reporting Standard 9, Financial Instruments (“IFRS 9”) into one of the following two categories:

 

Fair Value Through Profit or Loss

 

Includes equity investments, gold and copper price contract assets, gold and copper swap contracts, copper forward contracts, and other financial assets designated to this category under the fair value option. The Company has assessed the contractual cash flows of its provisionally priced contracts in accordance with IFRS 9 and has classified these receivables as fair value through profit or loss (“FVTPL”).

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 15

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020 

expressed in thousands of Canadian dollars, except share and per share amounts

 

Financial Assets at Amortized Cost

 

Includes cash, future site reclamation deposits and trade receivables at amortized cost.

 

The fair value of financial instruments traded in active markets is based on quoted market prices at the date of the statement of financial position. The quoted market price used for financial assets held by the Company is the last bid price of the day.

 

Financial assets measured at amortized cost are subject to an allowance for expected credit losses based on the historic experience realizing these assets and information available about the probability of future collection. The Company applies a simplified lifetime expected credit loss model to measure expected credit losses for trade and other receivables that are not measured at FVTPL.

 

Impairment losses are recognized in income or loss in the period they occur based on the difference between the carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate.

 

The Company recognizes an impairment gain or loss in profit or loss for its financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

 

Financial Liabilities

 

Financial liabilities are accounted for at amortized cost except for those at FVTPL which includes liabilities designated as FVTPL and derivatives. Financial liabilities classified as FVTPL or those which are designated as FVTPL under the fair value option are measured at fair value with unrealized gains and losses recognized in net earnings. In cases where financial liabilities are designated as FVTPL, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the statements of operations. Financial liabilities at amortized cost are initially measured at fair value net of transaction costs, and subsequently measured at amortized cost.

 

The Company has classified its financial liabilities in accordance with IFRS 9 into one of the following two categories:

 

Fair Value Through Profit or Loss

 

Includes settlement payables related to copper price option contract liabilities.

 

Financial Liabilities at Amortized Cost

 

Includes trade and other payables and long-term debt.

 

Foreign Currency Translation

 

Items included in the financial statements of each of the Company’s subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the functional currency). Foreign currency transactions are translated into the functional currency using the actual rate prevailing at the date of transaction. Each reporting period foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities not denominated in the functional currency of the entity are recognized in the statement of income and comprehensive income.

 

Assets and liabilities of entities with functional currencies other than Canadian dollars are translated at the period end rates of exchange, and the results of their operations are translated at the actual rate prevailing at the date of transaction. Equity is translated at historical cost. The resulting translation adjustments are included in currency translation adjustment in other comprehensive income. Additionally, foreign exchange gains and losses related to the settlement of certain intercompany loans are also included in equity as the settlement of these loans is neither planned nor likely to occur in the foreseeable future.

 

Foreign exchange gains and losses that relate to debt are presented in the statement of income and comprehensive income within “Finance Costs”. All other foreign exchange gains and losses are presented in the statement of income and comprehensive income within “General and Administration”.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 16

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

Reportable Segment Information

 

The Company’s operations are primarily directed towards the exploration, development and production from its mineral properties in Canada. The Company has five reportable segments, Red Chris, including related exploration and development activities, Mount Polley, including related exploration and development activities, Huckleberry, including related exploration and development activities, Sterling, including related exploration and development activities and Corporate, including all other properties and related exploration and development activities.

 

Share Based Payments

 

The Company has a share option plan that provides all option holders the right to receive common shares in exchange for the options exercised which is described in Note 10. The fair value of each option award that will ultimately vest is estimated on the date of grant using the Black-Scholes option-pricing model. Compensation expense is determined when stock options are granted and recognized in operations over the vesting period of the option. Consideration received on the exercise of stock options is recorded as share capital and the related share-based amounts of contributed surplus are credited to share capital.

 

Borrowing Costs

 

The Company expenses borrowing costs when they are incurred, unless they are directly attributable to the acquisition of mineral properties or construction of property, plant and equipment extending over a period of more than twelve months.

 

Income (Loss) Per Common Share

 

Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed in accordance with the treasury stock method and “if converted” method, as applicable, which uses the weighted average number of common shares outstanding during the period and also includes the dilutive effect of potentially issuable common shares from outstanding stock options, warrants and convertible debentures.

 

Significant Accounting Judgments, Estimates and Assumptions

 

The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reported period. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenue and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions.

 

(i)Critical Judgments

 

Critical judgments exercised in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are as follows:

 

Revenue Recognition

 

Determination of performance obligations. The Company applied judgement to determine if a good or service that is promised to a customer is distinct based on whether the customer can benefit from the good or service on its own or together with other readily available resources and whether the good or service is separately identifiable. Based on these criteria, the Company determined the primary performance obligation relating to its sales contracts is the delivery of the concentrates. Shipping and insurance services arranged by the Company for its concentrate sales customers that occur after the transfer of control are also considered to be performance obligations.

 

Transfer of control. Judgement is required to determine when transfer of control occurs relating to the sale of the Company’s concentrate to its customers. Management based its assessment on a number of indicators of control, which include, but are not limited to whether the Company has present right of payment, and whether the physical possession of the goods, significant risks and rewards and legal title have been transferred to the customer.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 17

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

Variable consideration. Variable consideration should only be recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company identified a variable component of its revenue for concentrate sales relating to adjustments to the final sales price based on differences between the original and final assay results relating to the quantity and quality of concentrate shipments. Based on the Company’s proficiency in its assaying process, evidenced by the insignificant amount of historical adjustments from the initial to final assays, the Company concluded the variability in consideration caused by assaying results was negligible. Therefore, the Company does not expect a significant amount of reversal in revenue related to assaying differences.

 

Impairment of Mineral Properties

 

Both external and internal information is reviewed and considered by management in their assessment of whether there are indicators that mineral properties and goodwill are impaired. External sources of information include changes in the market, economic and legal environment, in which the Company operates, that are not within its control and affect the recoverable amount of its mineral properties, plant and equipment. The internal sources of information include the manner in which mineral properties, plant and equipment are being used or are expected to be used and indications of economic performance of assets. In determining the recoverable amounts of producing mineral properties and goodwill management estimates the discounted future pre-tax cash flows expected to be derived from the Company’s producing mineral properties. Reductions in commodity prices, increases in estimated future production and capital costs, reductions in mineral reserves and exploration potential and adverse economic events can result in impairment charges. In determining the economic recoverability and probability of future economic benefit of non-producing mineral properties management also considers geological information, likelihood of conversion of resources to reserves, estimated market values of measured and indicated resources, scoping and feasibility studies, permitting, infrastructure, development costs, and life of mine plans.

 

Interests in Other Entities

 

As part of its process in determining the classification of its interests in other entities, the Company applies judgment in interpreting these interests such as

 

the determination of the level of control or significant influence held by the Company;

the accounting standard’s applicability to the operations;

the legal structure and contractual terms of the arrangement;

concluding whether the Company has rights to assets and liabilities or to net assets of the arrangement; and

when relevant, other facts and circumstances.

 

The Company has determined that Newcrest Red Chris Joint Venture represents joint operations without sharing control and Ruddock Creek Joint Venture represented joint operations with shared control until the Company acquired 100% interest and dissolved the Ruddock Creek Joint Venture.

 

Functional Currency

 

The functional currency for each of the Company’s subsidiaries is the currency of the primary economic environment in which the entity operates. The Canadian dollar is the functional currency for all operations of the Company except for the Company’s US subsidiary which uses the US dollar as its functional currency. Determination of the functional currency involves certain judgments to determine the primary economic environment of each entity. If events and conditions in this environment change then the Company may need to reconsider the functional currency of these entities.

 

Contingencies

 

Contingencies can be either possible assets or liabilities arising from past events which, by their nature, will be resolved only when one or more uncertain future events occur or fail to occur. Such contingencies include, but are not limited to, environmental obligations, litigation, regulatory proceedings, tax matters and losses that result from other events and developments. The assessment of the existence and potential impact of contingencies inherently involves the exercise of significant judgement regarding the outcome of future events.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 18

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

(ii)  Critical Estimates and Assumptions

 

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below:

 

Reserve and Resource Estimates

 

The Company estimates its reserves and resources based on information compiled by Qualified Persons as defined in accordance with Canadian Securities Administrators National Instrument 43-101 Standards for Disclosure of Mineral Projects. There are numerous uncertainties inherent in estimating reserves and resources, including many factors beyond the Company’s control. Assumptions used in estimating reserves and resources include the forecast prices of commodities, exchange rates, production and capital costs, recovery rates and judgments used in engineering and geological interpretation of available data. Assumptions that are valid at the time of estimation may change significantly when new information becomes available.

 

Estimated reserves are used in the calculation of depreciation and depletion, impairment assessment on mineral properties and goodwill, assessment of life of pit stripping ratios and for forecasting the timing of future site reclamation costs. Therefore, changes in the estimates and assumptions used to determine reserves could have a material effect in the future on the Company’s financial position and results of operations.

 

Depletion and Depreciation of Mineral Properties

 

Depletion and depreciation of mineral properties is based on the estimated mineral reserves for each mineral property subject to depletion and estimated useful lives and depreciation rates for property, plant and equipment. Should asset life, depletion rates or depreciation rates differ from the initial estimate then this would impact the carrying value of the assets resulting in the adjustment being recognized in the consolidated statement of income.

 

Stripping Costs

 

The determination of costs associated with the removal of overburden and rock involve estimates related to whether or not these costs represent a betterment to the mineral property. Management uses several factors to determine whether to capitalize stripping costs including quantity and grade of materials being accessed, estimated future commodity prices, operating costs and life of mine plan. If any of these factors change then the determination of which materials are included in stripping costs may change resulting in higher mine operating costs in future periods.

 

Future Site Reclamation Provisions

 

Future site reclamation provisions represent management’s estimate of the present value of future cash outflows required to settle estimated reclamation obligations at the end of a mine’s life. The provision incorporates estimated future costs, inflation, and risks associated with the future cash outflows, discounted at the pre-tax interest rate reflecting the time value of money for the future cash outflows. Estimating the inflation rates and discount rates for obligations beyond 2051 requires significant management judgement due to its high degree of estimation uncertainty. Changes in any of these factors can result in a change to future site reclamation provisions and the related accretion of future site reclamation provisions. Changes to future site reclamation provisions are charged or credited to mineral properties and may result in changes to future depletion expense.

 

Provision for Rehabilitation Costs

 

The provision for rehabilitation costs represents management’s estimate of the future cash outflows required to settle the estimated rehabilitation costs related to the August 4, 2014 Mount Polley mine tailings dam breach. The provision incorporates the Company’s estimate of costs for rehabilitation, including geotechnical investigations, environmental monitoring, community relations, communications and related corporate support costs. The provision is based on the scope and timing of work as determined by the Company in consultation with regulatory agencies and incorporates the risks associated with each activity. Changes in any of these factors can result in a change to the provision for rehabilitation costs.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 19

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

Income Taxes

  

In determining tax assets and liabilities and related tax expense management makes estimates of future taxable income, tax rates, expected timing of reversals of existing temporary differences and the likelihood that tax returns as filed by the Company will be assessed by taxation authorities as filed. Recoveries of deferred tax assets require management to assess the likelihood that the Company will generate sufficient taxable income in future periods to recognize the deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the deferred tax assets could be impacted.

 

Share Based Compensation

 

The Company uses the Black-Scholes Option Pricing Model for valuation of share based compensation. This pricing model requires the input of subjective assumptions including expected price volatility, interest rate and estimated forfeiture rate. Changes in these assumptions can materially affect the fair value estimate of share based compensation and the related equity accounts of the Company.

 

New Standards, Interpretations and Amendments

 

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform – Phase 2

 

In August 2020, the IASB issued amendments to IFRS 9, Financial Instruments (IFRS 9), IAS 39, Financial Instruments: Recognition and Measurement (IAS 39), IFRS 7, Financial Instruments: Disclosures (IFRS 7), IFRS 4, Insurance Contracts (IFRS 4) and IFRS 16, Leases (IFRS 16) as a result of Phase 2 of the IASB’s Interest Rate Benchmark Reform project. The amendments address issues arising in connection with reform of benchmark interest rates including the replacement of one benchmark rate with an alternative one. The amendments were effective January 1, 2021. These amendments did not affect our financial statements as the Company does not have financial instruments which are based on LIBOR settings.

 

Amendments to IAS 12 – Income Taxes

 

In May 2021, the IASB issued amendments to IAS 12, Income Taxes (IAS 12). The amendments will require companies to recognize deferred tax on particular transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The proposed amendments will typically apply to transactions such as leases for the lessee and decommissioning and restoration obligations related to assets in operation. An entity is required to apply these amendments for annual reporting periods beginning on or after January 1, 2023. Early application is permitted. The amendments are applied to transactions that occur on or after the beginning of the earliest comparative period presented. We do not expect these amendments to have a material effect on our financial statements.

 

3.INVENTORY

 

   December 31
2021
   December 31
2020
 
Stockpile ore  $12,609   $9,873 
Concentrate   7,410    1,725 
Supplies   31,271    31,643 
Total inventories   51,290    43,241 
Less non-current inventories included in other assets (Note 6)   (23,674)   (30,821)
Total current inventories  $27,616   $12,420 

 

During the year ended December 31, 2021, inventory of $115,309 was recognized in cost of sales (2020-$118,661) and an impairment charge of $133 (2020-$1,158) on stockpile ore, concentrate and supplies inventory was included in cost of sales.

 

At December 31, 2021, the Company had $23,736 (2020-$23,893) of inventory pledged as security for the credit facility (Note 7).

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 20

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

4.MINERAL PROPERTIES

 

   Mineral   Mineral Properties not being Depleted         
Cost  Properties
being
Depleted
   Projects
not in
Production
   Exploration
& Evaluation
Assets
   Plant &
Equipment
   Total 
Balance December 31, 2019   667,445    2,568    173,588    562,193    1,405,794 
Additions and reclasses   20,676    13,801    (1,428)   40,605    73,654 
Change in estimates of future site reclamation provisions   9,946    -    (43)   -    9,903 
Disposals   -    -    -    (1,255)   (1,255)
Foreign exchange movement   -    -    (130)   (16)   (146)
Balance December 31, 2020  $698,067   $16,369   $171,987   $601,527   $1,487,950 
Additions   15,558    33,488    2,865    56,673    108,584 
Change in estimates of future site reclamation provisions   16,471    -    (62)   -    16,409 
Disposals and write down   -    -    (531)   (1,471)   (2,002)
Reversal of impairment on exploration cost   -    -    4,157    -    4,157 
Foreign exchange movement   -    -    (27)   (3)   (30)
Balance December 31, 2021  $730,096   $49,857   $178,389   $656,726   $1,615,068 

 

   Mineral   Mineral Properties not being Depleted         

Accumulated depletion &

depreciation & impairment losses

  Properties
being
Depleted
   Projects
not in
Production
   Exploration
& Evaluation
Assets
   Plant &
Equipment
   Total 
Balance December 31, 2019   263,156    -    1,645    204,832    469,633 
Depletion and depreciation   17,613    -    -    22,065    39,678 
Disposals   -    -    -    (829)   (829)
Foreign exchange movement   -    -    -    (16)   (16)
Balance December 31, 2020  $280,769   $-   $1,645   $226,052   $508,466 
Depletion and depreciation   22,430    -    -    20,934    43,364 
Disposals and write down   -    -    (8)   (1,471)   (1,479)
Foreign exchange movement   -    -    -    (3)   (3)
Balance December 31, 2021  $303,199   $-   $1,637   $245,512   $550,348 
Carrying Amount                         
Balance December 31, 2019  $404,289   $2,568   $171,943   $357,361   $936,161 
Balance December 31, 2020  $417,298   $16,369   $170,342   $375,475   $979,484 
Balance December 31, 2021  $426,897   $49,857   $176,752   $411,214   $1,064,720 

 

At December 31, 2021, the net carrying value of the deferred stripping costs was $22,806 (December 31, 2020-$21,001) and is included in mineral properties.

 

At December 31, 2021, leased mobile equipment at cost of $10,541 (December 31, 2020-$5,124) and accumulated depreciation of $2,992 (December 31, 2020-$1,062) was included with plant and equipment.

 

At December 31, 2021, the Company had provided $28,370 (December 31, 2020-$28,370) of security for reclamation bonding obligations by securing certain plant and equipment.

 

At December 31, 2021, the Company had $28,389 of contractual commitments (2020-$2,741) for expenditures on property, plant and equipment.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 21

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

Red Chris Mine

 

Red Chris Development Company Ltd., a subsidiary of the Company, owns a 30% beneficial interest in the Red Chris copper/gold mine in northwest British Columbia. The Company and Newcrest formed a joint venture for the operation of Red Chris, with Newcrest Red Chris Mining Limited acting as operator. The property is comprised of the Red Chris Main claim group and the Red Chris South group, consisting of 77 mineral tenures (23,142 hectares). Five of these tenures are mining leases (5,141 hectares). Net smelter royalties between 1.0% to 2.0% are payable on production from the Red Chris mine.

 

On March 15, 2021, the Company acquired a 30% interest in the GJ Property for a payment of $3,038 to Newcrest Red Chris Mining Limited. The GJ Property consists of 87 mineral tenures (39,432 hectares).

 

Mount Polley Mine

 

The Mount Polley copper/gold mine in south-central British Columbia is owned by Mount Polley Mining Corporation, a wholly owned subsidiary of the Company. The property encompasses 23,369 hectares (including claims under option) consisting of seven mining leases (2,007 hectares) and 50 mineral claims (21,362 hectares). A production royalty is payable on ore mined from Mining Lease 933970 but no production occurred on this tenure in 2021. In October 2019, Mount Polley Mining Corporation optioned seven adjacent mineral tenures (3,331 hectares). Upon the exercising of the option on or before December 31, 2022, these claims will be subject to a production royalty payable on ore mined from the claims and milled in the Mount Polley processing plant.

 

Mount Polley mine operations were suspended in May 2019. The mine restart plan prepared in 2021 is being updated to include revised pit designs, results of recent drilling and current metal prices. The Company is actively seeking to secure financing to fund the restart of the mine.

 

Huckleberry Mine

 

The Huckleberry copper mine in west-central British Columbia is owned by Huckleberry Mines Ltd., a wholly owned subsidiary of the Company. The property encompasses 25,767 hectares, consisting of two mining leases (2,422 hectares) and 49 mineral claims (23,345 hectares).

 

Huckleberry mine operations were suspended in August 2016. The mine remains on care and maintenance status until the economics of mining and COVID-19 restrictions improve.

 

Other Exploration Properties

 

In July 2021, the Company acquired 100% interest in the Ruddock Creek high grade zinc-lead project by purchasing the remaining 54.72% interest previously held by its joint venture partners.

 

As at December 31, 2021 the Company reversed a previously recognized impairment charge of $4,157 in relation to Giant Copper project. This reversal resulted from a positive change in the estimates used to determine the recoverable amount as new information on fair value became available subsequent to the reporting period (Note 21).

 

As at December 31, 2021 the Company dropped 3 mineral tenure and written down related exploration and evaluation assets in amount of $523.

 

Imperial has a portfolio of 20 greenfield exploration properties consisting largely in British Columbia. These properties have defined areas of mineralization and clear exploration potential.

 

Impairment Analysis of Mineral Properties

 

In accordance with its accounting policies and processes, each asset or cash-generating unit (“CGU”) is evaluated to determine whether there are any indications of impairment or impairment reversal. If any such indications of impairment exist, a formal estimate of the recoverable amount is performed.

 

Based on the Company’s assessment with respect to possible indicators of either impairment or reversal of previous impairments to its mineral properties, including the impact of COVID-19 on the operations and the prevailing market metals prices, the Company concluded that as of December 31, 2021, an impairment indicator of mineral properties exists and performed an impairment analysis. As the recoverable amounts exceeded the carrying values, no impairment was recorded.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 22

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

5.TRADE AND OTHER RECEIVABLES

  

   December 31
2021
   December 31
2020
 
Trade receivables  $4,244   $3,834 
Tax credit receivable   4,643    2,134 
   $8,887   $5,968 

 

6.OTHER ASSETS

 

   December 31
2021
   December 31
2020
 
Future site reclamation deposits  $14,388   $14,359 
Non-current inventory – ore stockpile   12,609    9,873 
Non-current inventory – supplies   11,065    20,948 
Other   25    50 
   $38,087   $45,230 

 

7.CREDIT FACILITY

 

The Company has the following debt facilities:

 

Promissory Note

 

On March 10, 2021, the Company entered into an unsecured $10,000 promissory note financing (“Note”) with an affiliate of its major shareholder. The Note matures on April 1, 2022, and bears interest of 8.0% per annum. The Note was fully repaid on June 28, 2021, prior to its maturity date.

 

Credit Facility

 

At December 31, 2021, a credit facility aggregating $75,000 (December 31, 2020-$50,000) is in effect until expiry on October 9, 2022. The facility is secured by shares of all material subsidiaries and a floating charge on certain assets of the Company. The increase in the credit facility in 2021 in the amount of $25,000 is guaranteed by a related party. The Company paid an arrangement fee of $125 in relation to the $25,000 guarantee and a standby fee on the $25,000 guarantee payable monthly at a rate of 2.0% per annum. By virtue of the $25,000 guarantee, any funds borrowed under this portion of the credit facility bears an interest rate of 4.0% compared to the rate of 3.5% under the base $50,000 portion of the credit facility.

 

A total of $68,546 (December 31, 2020-$38,478) has been utilized, that consists of bankers acceptances in amount of $29,500 and $39,046 for letters of credit pledged for settlement of future site reclamation provisions and other obligations.

 

8.FINANCE LEASES AND EQUIPMENT LOANS

 

Amounts due for non-current debt are:

 

   December 31
2021
   December 31
2020
 
Equipment loans   (a)   $29   $78 
Equipment leases   (b)    5,446    2,344 
         5,475    2,422 
Less portion due within one year        (2,896)   (840)
        $2,579   $1,582 

 

Equipment Loans

 

The outstanding amount of equipment loans is $29 (December 31, 2020-$78) at a weighted average interest rate of 4.30% with monthly payments of $4. All equipment loans are secured by the financed equipment.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 23

 

  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

Equipment Leases

 

The outstanding amount of equipment leases is $5,446 (December 31, 2020-$2,344) at weighted average interest rate of 3.36% with monthly payments of $159.

 

Contractual Lease Payments  December 31
2021
   December 31
2020
 
Due in less than one year  $2,925   $960 
Due in one to three years   2,722    1,520 
Total undiscounted lease liabilities, end of year  $5,647   $2,480 

 

9.FUTURE SITE RECLAMATION PROVISIONS

 

The Company has recognized provisions for future site reclamation at its Red Chris, Mount Polley, Huckleberry, Ruddock Creek and Catface properties. Although the ultimate amounts of the future site reclamation provisions are uncertain, the provision of these obligations is based on information currently available, including closure plans and applicable regulations. Significant closure activities include land rehabilitation, water treatment, demolition of facilities, monitoring and other costs.

 

The total undiscounted amount of estimated cash flows required to settle the Company’s estimated future closure and decommissioning costs is $240,524 (December 31, 2020-$234,531). The estimated future cash flows were then inflated using inflation rates between 1.5% and 2.0% (December 31, 2020-1%). The total provision for closure and decommissioning costs is calculated using discount rates between 1.76% to 3.76% (December 31, 2020-2.24% to 3.24%). Obligations in the amount of $121,609 are expected to be settled in the years 2022 through 2051.

 

   2021   2020 
Balance, beginning of year  $127,828   $115,187 
Accretion   3,110    2,764 
Change in estimates of future costs and discount rate   16,409    9,903 
Increase (Dilution) in Ruddock Creek project   275    (26)
Balance, end of year  $147,622   $127,828 

 

The amount and timing of closure plans for the mineral properties will vary depending on a number of factors including exploration success and alternative mining plans.

 

10.SHARE CAPITAL

 

(i)Share Capital

 

Authorized
50,000,000 First Preferred shares without par value with special rights and restrictions to be determined by the directors, of which 3,100,000 have been designated as “Series A First Preferred shares” (issued and outstanding – Nil)
   
50,000,000   Second Preferred shares without par value with rights and restrictions to be determined by the directors (issued and outstanding – Nil)
   
An unlimited number of Common Shares without par value

 

On June 25, 2021, the Company completed a rights offering transaction and issued 12,853,267 common shares at $4.70 per share for gross proceeds of $60,410 and incurred transaction cost of $278.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 24

 

  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

(ii)Share Option Plans

  

Under the Share Option Plans, options not exceeding 10% of the issued common shares of the Company, may be granted to its directors, officers and employees. As at December 31, 2021, a total of 11,876,969 common share options had remained available for grant under the plans. Under the plans, the exercise price of each option cannot be greater than the market price of the Company’s shares on the date of grant and an option’s maximum term is 10 years. Options are granted from time to time by the Board of Directors and vest over a three or five year period.

 

During the year ended December 31, 2021, the Company granted nil stock options (2020 – 1,305,000) at a weighted average exercise price of $nil (2020 - $2.00). The weighted average fair value for the options granted in the year ended December 31, 2020 was $0.99 per option, which was estimated at the date of the grant using the Black-Scholes option pricing model using the following weighted average assumptions: risk-free interest rate – 0.40%; expected dividend yield - $nil; expected stock price volatility – 71.82%; expected option life - 5 years; and, estimated forfeiture rate – 5.00%.

 

Movements in Share Options

 

The changes in share options were as follows:

 

   2021   2020 
   Number
of Shares
   Weighted
Average
Exercise Price
   Number
of Shares
   Weighted
Average 
Exercise Price
 
Outstanding at beginning of year   2,345,000   $4.60    1,996,000   $9.62 
Granted   -   $-    1,305,000   $2.00 
Exercised   (48,750)  $2.00    -   $- 
Forfeited   (7,500)  $2.00    -   $- 
Cancelled   (24,000)  $8.00    (6,000)  $8.00 
Expired   (2,500)  $2.00    (950,000)  $11.55 
Outstanding at end of year   2,262,250   $4.63    2,345,000   $4.60 
Options exercisable at end of year   1,278,000   $6.62    1,014,000   $7.91 

 

The following table summarizes information about the Company’s share options outstanding at December 31, 2021:

 

   Options Outstanding  Options Exercisable 
Exercise Prices  Options
Outstanding
 

Remaining
Contractual
Life in Years

  Options
Outstanding &
Exercisable
 

Remaining
Contractual
Life in Years

 
$2.00  1,246,250  3.33  275,000  3.33 
$5.75  65,000  6.00  52,000  6.00 
$8.00  951,000  3.93  951,000  3.93 
   2,262,250  3.66  1,278,000  3.89 

 

11.COST OF SALES

 

   2021   2020 
Operating expenses  $85,609   $92,291 
Depletion and depreciation   37,553    35,179 
   $123,162   $127,470 

 

Included in cost of sales for the year ended December 31, 2021 is $133 of impairment charge (year ended December 31, 2020 - $1,158) in relation to concentrate, stockpile and supplies inventory.

 

Imperial Metals Corporation | December 31, 2021  |   Financial Statements | # 25

 

  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021 and 2020

expressed in thousands of Canadian dollars, except share and per share amounts

 

12.OTHER FINANCE LOSS

  

   2021   2020 
Accretion of future site reclamation provisions  $(3,110)  $(2,764)
Foreign exchange gain (loss