Imperial files for court protection (December 10, 2001)

Vancouver — Imperial Metals (IPM-T) has been granted bankruptcy protection by the Supreme Court of British Columbia. The junior filed for protection as a result of financial troubles caused by low gold and copper prices.

The move gives the producer time to secure new financing and address its balance sheet. Under a reorganization plan, the company proposes to split into two companies. Imperial would retain all of the company’s oil and natural gas and investment interests, whereas a newly created company, held by Imperial shareholders, would take over its mining assets. The company’s convertible debentures and a portion of its secured debt would be exchanged for shares. The unsecured creditors of the now-closed Mount Polley copper-gold mine in north-central British Columbia will receive full payment in cash if they were owed less than $5,000, while other creditors will get a combination of cash and shares. The proposal will be tabled at a meeting of shareholders in January.

For the first nine months of the year, Imperial lost $9.9 million (or 12 per share), compared with a loss of $6 million (8 per share) in the corresponding period of 2000. Revenue jumped to $95.5 million, up from the $70.3 million tallied last year. In the third quarter ended Sept. 30, the company lost $5.4 million (7 per share) on revenue of $29.5 million.

In June, less than a year after taking over sole ownership of the Mount Polley copper-gold mine from Japan-based Sumitomo in a $11.5-million deal, Imperial suspended the operation. Imperial picked up the additional 47.5% stake it did not own by restructuring its debt and issuing up to $5 million of convertible debentures with an interest rate of 8% per year. The debentures mature at the end of 2006, and each 25 of the principal amount is convertible to one share. The maximum shares issuable upon conversion are 20 million, representing almost a quarter of Imperial’s 80.5 million shares.

The Mount Polley open-pit operation produced 15,500 tonnes copper and 83,194 oz. gold from its Cariboo and Bell pits in 2000. The average grade for the site is 0.35% copper and 0.53 gram gold per tonne.

The company’s only remaining operation is the 50%-owned Huckleberry copper-molybdenum mine. Situated 86 km southwest of Houston in west-central British Columbia, the mine processes 21,000 tonnes per day. Production began in 1997 and the mine life is projected to be 11 years.