INFORMATION AS OF FEBRUARY, 27 2015
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Imperial Metals Corporation, founded in 1959 and listed on the Toronto Stock Exchange as "III", is an atypical junior miner with a market cap of approximately US$700 million. Imperial explores for copper, gold, and silver mineral deposits, develops mining sites, and focuses on maintaining core ownership of assets with the mantra, "own what we operate". Operations are focused primarily in British Columbia, Canada, where Imperial processes mineralized ore into concentrate, which is then shipped to Asia for refining.
Fairholme, as adviser to its clients, began acquiring Imperial in 2006, and by 2014 was the second largest shareholder with 19.7% of shares outstanding. Imperial’s largest shareholder is Edco Financial Holdings Ltd, a Canadian holding company with significant investments in the natural resources sector. Edco’s longstanding involvement with Imperial has helped the company prudently allocate capital while avoiding equity dilution and other mistakes that commonly plague junior miners.
In August 2014, a media-sensationalized breach of the tailings storage facility at Imperial's Mount Polley Mine sent its share price tumbling approximately 40%. This created a buying opportunity despite the negative fanfare and Fairholme's investment thesis remains intact.
Our purpose here is to provide an orientation to Imperial using open source information, share highlights from our investment thesis, demonstrate the depth of our investment research, and provide resources to assist you in your own research. We purposely do not touch on our internal mine valuation models and intrinsic value as this is proprietary in nature. Not all information relating to Imperial is included within our highlights. We welcome dialogue on Imperial Metals, or any of our portfolio holdings that have been publicly disclosed. As always, we recommend you do your own research and arrive at your own conclusions.
Please note that this website presentation does not constitute an offer to buy, sell, or recommend any securities.
Imperial's long-awaited C$643 million Red Chris Mine is now commissioning for start-up. With a mill process rate of 30,000 metric tons per day and the capacity to expand significantly in the future, the Red Chris Mine ranks as world class. Most importantly, the mine now has the power it needs to operate.
A lack of sufficient power was a major impediment to British Columbia's energy-hungry mining growth, so almost C$800 million of public funds were invested in power transmission lines leading to Imperial's new mine, at a cost to Imperial of only C$50 million. Imperial now has access to clean energy and the ability to expand operations.
The price of Imperial's stock fell approximately 40% after an environmental accident involving the tailings facility at its Mount Polley Mine. The facts suggest that the long-term effects may have been overstated by media and environmental groups, although there still remains a chance that Imperial will incur environmental fines and liability. We believe Imperial has managed the accident prudently, and look forward to the continued rebuilding of the tailings facility, and rehabilitation of the surrounding area.