Discover, Develop, Operate

President's Message

While the past year continued to be a difficult period for the mining industry due to low commodity prices, we were pleased to have successfully achieved Mount Polley’s return to normal mine operations, and the first full year of mine operations at Red Chris. Imperial recorded a net loss of $54.1 million ($0.66 per share) for the year ended 2016, compared to a net loss of $97.0 million ($1.25 per share) for 2015, while cash flow was $107.6 million in 2016 compared to $14.1 million in 2015.

At Red Chris, the reconciliation of the exploration block model to the mining block model has been good overall, with reductions in tonnage and grade from the East zone being offset by similar gains in the Main zone. Tonnage mined from the high grade ores were down 6% at predicted copper grade, while the gold grade increased by 5%. When lower grade ores are included, overall tonnage was up 2% in the mining block model compared to the exploration block model with mined copper grade down 6% and mined gold grade up 1% from the grades estimated by the exploration model.

A total of 9.65 million tonnes of ore were treated at the Red Chris mine, achieving 88% of the design capacity during its first full year of operations. Progress is being made on copper recoveries, which have been below feasibility predictions, due largely to the higher clay content in the near surface mineralization. With an increase in ore mined from lower benches of the Main zone pit, and a revised reagent scheme implemented in late 2016, copper recovery in the fourth quarter was 75.96% up about 3% from the comparative 2015 quarter. The increase in recovery during the fourth quarter was achieved while treating ore with a significantly lower copper head grade; 0.382% copper compared to 0.502% copper in the comparative 2015 quarter. To further enhance recovery, an additional flotation cell is being installed. In addition, a drill program was completed to collect drill core samples of ore that will be milled later in 2017 for a comprehensive off-site program of metallurgical test-work to further investigate possible improvements to copper recoveries.

Looking to the future, we have initiated engineering studies to determine the optimum path to develop the deep resource below the current designed pit at Red Chris. Based on the preliminary studies, it appears the best method will be a block cave that will include the deep resource below both the East and Main zones.

Mount Polley mine returned to normal operations in June utilizing the repaired and buttressed tailings storage facility. A permit application has been submitted for discharge of treated water, via a pipeline and diffuser system, deep into Quesnel Lake, and the requisite review process is nearing completion. This permit will provide the site, which has a positive water balance, with a solution enabling the discharge of excess site water.

Martel zone underground drill results at Mount Polley have been promising, and we are optimistic an economic underground mine plan can be developed and integrated into future mine plans. This would have a positive impact on overall mine operations by providing higher-grade feed to the mill.

South Springer is another area with the potential to significantly increase the mineral resource, and potentially increase mine life at Mount Polley. South Springer mineralization is well situated under the saddle separating the Cariboo and Springer Phase 6 pits, which presents an ideal location for additional low stripping ratio reserves, should drilling extend mineralization extend to this area. At the end of 2017, the configuration of the Cariboo pit will provide an excellent platform to conduct an exploration drilling program to follow up on the drilling conducted in 2012.

The Huckleberry mine was placed on care and maintenance at the end of August 2016. It will remain on care and maintenance until there is a sustained improvement in the copper price. Preliminary mine planning to develop a longer mine life by converting part of the large resource into reserves is being conducted. As a result of this work, an exploration drilling program in the southwest quadrant of the Main zone has been recommended.

With large mineral resources at Red Chris, Mount Polley and Huckleberry, and all sites with existing plants and infrastructure, we are well positioned to take advantage of higher copper prices in the future. We are working to extend the life, and enhance performance, of all three mines by developing mine plans to convert these resources into reserves.

On behalf of Imperial’s Board of Directors, I wish to express our appreciation for the resilience and dedication of our employees and support of our shareholders and stakeholders.

J. Brian Kynoch
March 30, 2017