Taseko Announces 43 Million Pounds of Copper Production and Financial Results FOR the Third Quarter
*Non-GAAP performance measure. See end of news release.
TASEKO ANNOUNCES 43 MILLION POUNDS OF COPPER PRODUCTION
AND FINANCIAL RESULTS FOR THE THIRD QUARTER
This release should be read with the Company’s Financial Statements and Management Discussion & Analysis ("MD&A"),
available at www.tasekomines.com and filed on www.sedar.com. Except where otherwise noted, all currency amounts are
stated in Canadian dollars. Taseko’s 75% owned Gibraltar Mine is located north of the City of Williams Lake in south -central
British Columbia. Production volumes, sales volumes and inventory stated in this release are on a 100% basis unless otherwise
indicated.
October 31, 2018, Vancouver, BC – Taseko Mines Limited (TSX: TKO; NYSE American: TGB)
("Taseko" or the "Company") reports earnings from mining operations before depletion and
amortization* of $33.7 million and adjusted net income* of $1.5 million for the three months ended
September 30, 2018.
Russell Hallbauer, President & CEO commented, “In August, Gibraltar’s mine engineering group
determined that the Granite Pit high wall could be steepened, based on data from geotechnical and rock
structure evaluations. We immediately redesigned the Granite Pit pushback, which allowed us earlier
access to high grade ore benches. These benches, which we partially mined in the third quarter, were not
included in the 2018 mine plan and ended up having a dramatic impact on copper production during the
quarter.”
“Not only did we benefit from higher grade ore in the third quarter, but the ore that was processed was
also softer and we were able to achieve higher than design throughput of 87,000 tons per day, 6% higher
than the previous quarter. The combination of higher grade ore and throughput resulted in 43 million
pounds of copper production in the third quarter,” added Mr. Hallbauer.
Mr. Hallbauer continued, “Sales of 29 million pounds in the quarter were below production due to
extremely poor rail service, which stranded 18.5 million pounds of copper in concentrate at the mine.
The lower sales affected our quarterly revenues by approximately $40 million and cash flow by
approximately $30 million, based on current copper pricing.”
“We continued to make progress at our Florence Copper Project during the quarter. The wellfield,
SX/EW plant and all associated infrastructure are now commissioned and pre-operations tests are being
performed with positive results to-date. We anticipate final authorizations to commence operations from
the regulators shortly, and are ready to immediately commence leaching operations. This project
represents many near-term catalysts for the Company as we demonstrate the low-cost, environmental
and technical attributes of the in-situ production process,” continued Mr. Hallbauer.
“Fourth quarter production is expected to be at a more normalized level, with estimated total copper
production of 130 million pounds for 2018. We anticipate that during the fourth quarter the railway will
be able to move most of the excess copper concentrate inventory, in addition to the fourth quarter
production, to the port for shipping. Depending on vessel scheduling and berth availability, we could
realize sales of approximately 45 million pounds (100% basis) for the quarter,” concluded Mr.
Hallbauer.
Third Quarter Highlights
• Copper production in the third quarter was 43.0 million pounds (100% basis), which represents a
28% increase over the previous quarter as a result of the higher head grades and increased mill
throughput;
• Total copper sales for the quarter were 29.0 million pounds (100% basis), as concentrate
shipments were delayed by poor rail service between the mine and the port terminal. As a result,
inventories increased to 18.5 million pounds of copper (100% basis) at September 30, 2018. The
lower sales affected the Company’s quarterly revenues by approximately $40 million and cash
flow by approximately $30 million, based on current copper pricing. The excess inventory is
expected to be sold in the fourth quarter; Third quarter earnings from mining operations before
depletion and amortization* were $33.7 million;
• Net income was $7.1 million ($0.03 net earnings per share) and Adjusted net income* was $1.5
million ($0.01 per share);
• Site operating costs, net of by-product credits* were US$1.34 per pound produced and Total
operating costs (C1)* were US$1.58 per pound produced, as unit costs were positively impacted
by the higher grades and production;
• The Company has finalized an insurance claim of $7.9 million (75% basis) related to the Cariboo
region wildfires in July 2017. Third quarter earnings include an insurance recovery of $3.9
million;
• Construction of the Production Test Facility (“PTF”) for the Florence Copper Project was
completed in October, on time and on budget. The facility is operational and first copper cathode
is expected by the end of this year;
• Cash flow from operations was $18.1 million, which was impacted by a $12.6 million working
capital adjustment related to the increased inventories and the timing of customer payments;
• At September 30, 2018 the Company held put options for 15 million pounds of copper with
scheduled maturities over the fourth quarter of 2018 at a strike price of US$2.80 per pound; and
• The Company’s cash balance at September 30, 2018 was $45 million, a reduction from the
previous quarter mainly due to the build-up of unsold copper concentrate inventories.
*Non-GAAP performance measure. See end of news release.
HIGHLIGHTS
Financial Data
Three months ended September
30,
Nine months ended September
30,
(Cdn$ in thousands, except for per share amounts) 2018 2017 Change 2018 2017 Change
Revenues 74,297 78,508 (4,211) 232,749 282,891 (50,142)
Earnings from mining operations before depletion and
amortization* 33,742 45,133 (11,391) 83,553 145,020 (61,467)
Earnings from mining operations 13,568 33,348 (19,780) 30,644 111,859 (81,215)
Net income (loss) 7,098 20,136 (13,038) (16,054) 41,862 (57,916)
Per share - basic (“EPS”) 0.03 0.09 (0.06) (0.07) 0.19 (0.26)
Adjusted net income (loss)*
1,464 13,405 (11,941) (7,198) 42,965 (50,163)
Per share - basic (“adjusted EPS”)* 0.01 0.06 (0.05) (0.03) 0.19 (0.22)
EBITDA* 37,718 48,457 (10,739) 63,597 141,407 (77,810)
Adjusted EBITDA* 31,940 42,356 (10,416) 71,728 133,110 (61,382)
Cash flows provided by operations 18,053 37,124 (19,071) 49,958 179,180 (129,222)
Operating Data (Gibraltar - 100% basis) Three months ended September 30, Nine months ended September 30,
2018 2017 Change 2018 2017 Change
Tons mined (millions) 29.0 23.3 5.7 83.1 66.2 16.9
Tons milled (millions) 8.0 7.2 0.8 22.9 22.0 0.9
Production (million pounds Cu) 43.0 35.1 7.9 99.4 115.7 (16.3)
Sales (million pounds Cu) 28.8 30.2 (1.4) 83.8 111.7 (27.9)
*Non-GAAP performance measure. See end of news release.
REVIEW OF OPERATIONS
Gibraltar Mine (75% Owned)
Operating data (100% basis) Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017
Tons mined (millions) 29.0 27.4 26.7 26.9 23.3
Tons milled (millions) 8.0 7.5 7.5 7.9 7.2
Strip ratio 1.7 1.9 4.1 4.9 4.1
Site operating cost per ton milled (CAD$)* $10.60 $10.31 $8.68 $7.68 $5.93
Copper concentrate
Grade (%) 0.314 0.263 0.201 0.209 0.284
Recovery (%) 85.9 85.3 75.7 77.5 86.1
Production (million pounds Cu) 43.0 33.5 22.9 25.5 35.1
Sales (million pounds Cu) 28.8 32.2 22.8 32.0 30.2
Inventory (million pounds Cu) 18.5 4.2 2.9 2.7 9.3
Molybdenum concentrate
Production (thousand pounds Mo) 690 506 443 537 445
Sales (thousand pounds Mo) 709 424 433 589 403
Per unit data (US$ per pound produced)*
Site operating costs* $1.50 $1.78 $2.25 $1.86 $0.97
By-product credits* (0.16) (0.12) (0.23) (0.17) (0.09)
Site operating costs, net of by-product credits* $1.34 $1.66 $2.02 $1.69 $0.88
Off-property costs 0.24 0.32 0.31 0.42 0.30
Total operating costs (C1)* $1.58 $1.98 $2.33 $2.11 $1.18
OPERATIONS ANALYSIS
Third quarter results
Copper production in the third quarter was 43.0 million pounds, significantly higher than previous quarters as a
result of improved head grade and increased concentrator throughput. The improved head grade was mainly
achieved by developing a very high grade ore zone near the bottom of the Granite pit pushback faster than planned.
During bench development, geotechnical drilling and rock structure evaluations indicated that the high wall could
be steepened and additional ore benches could be developed deeper into the Granite Pit. Steepening of the high wall
and accelerated mining allowed access to the higher grade ore quicker than that anticipated in the 2018 mine plan.
A total of 29.0 million tons were mined during the period, an increase over previous quarters as haulage truck hours
were increased to meet mine plan sequencing requirements. The strip ratio for the third quarter of 1.7 to 1 was lower
than recent quarters as a total of 2.9 million tons of mined ore was added to the ore stockpile in the period.
Site operating cost per ton milled* was $10.60 in the third quarter of 2018, which is higher than recent quarters.
The increased operating costs are due to the increased mining rate as well as a reduction in the proportion of the
mining costs that are capitalized. Waste stripping costs of $ 7.6 million (75% basis), were capitalized in the third
quarter.
*Non-GAAP performance measure. See end of news release.
OPERATIONS ANALYSIS – CONTINUED
Site operating costs per pound produced* decreased to US$1.50 from US$1.78 in the previous quarter, primarily
due to higher copper production. Site operating costs per pound produced* does not take into account the insurance
recoverable of $3.9 million that was recorded in the third quarter.
Molybdenum production increased to 0.7 million pounds in the third quarter due to improved molybdenum plant
operating performance. Molybdenum sales volumes were in line with production levels as the product is delivered
to the customer at the mine gate and not affected by rail transportation delays. By -product credits per pound of
copper produced* increased to US$0.16 in the third quarter from US$0.12 in the previous quarter.
Off-property costs per pound produced* were US$0.24 for the third quarter of 2018, which is lower than recent
quarters as a result of lower copper sales volume relative to copper production during the current period. Off -
property costs are lower in periods where sales volumes are lower. Total operating costs (C1) per pound* decreased
to US$1.58, a 20% decrease from the second quarter of 2018.
GIBRALTAR OUTLOOK
Fourth quarter 2018 copper production is expected to return to more normal levels, and total copper production is
expected to be approximately 130 million pounds for the 2018 year. Inventories of copper in concentrate increased
to 18.5 million pounds at September 30, 2018, and we expect that during the fourth quarter rail service will move
most of the excess inventory to the port for shipping. Sales volumes in the fourth quarter could be approximately
45 million pounds of copper (100% basis), depending on vessel scheduling and berth availability.
The Company has finalized an insurance claim of $7.9 million (75% basis) related to the Cariboo region wildfires
in July 2017. Cash settlement is expected in the fourth quarter.
REVIEW OF PROJECTS
Taseko’s strategy has been to grow the Company by leveraging cash flow from the Gibraltar Mine to assemble and
develop a pipeline of projects. We continue to believe this will generate the best, long-term returns for shareholders.
Our development projects are locat ed in British Columbia and Arizona and represent a diverse range of metals,
including gold, copper, molybdenum and niobium. Our current focus is on the development of the Florence Copper
Project.
Florence Copper Project
In September 2017, the Company announced that it was moving forward with the construction of the Production
Test Facility (“PTF”) for the Florence Copper Project. The SX/EW Plant and the associated wellfield, comprised
of 24 production, monitoring, observation and point of compliance wells.
Construction of the PTF progressed smoothly through the third quarter and has now been completed, on time and
on budget. Total construction expenditures were $32.5 million (US$25.0 million) as at September 30, 2018. T he
wellfield and associated facilities are ready to commence leaching activities, and first copper production is expected
by the end of the year. Construction expenditures on the PTF in the nine months ended September 30, 2018 were
$27.3 million (US$20.8 million).
*Non-GAAP performance measure. See end of news release.
REVIEW OF PROJECTS - CONTINUED
Successful operation of the in situ leaching process will allow permits to be amended for the full scale operation of
85 million pounds per year of copper cathode. It is anticipated that construction of the commercial scale operation
could be commenced in the first half of 2020.
Aley Niobium Project
Environmental monitoring on the project continues and a number of product marketing initiatives are underway. A
drill program was completed in the third quarter to collect samples for further metallurgical testing.
The Company will host a telephone conference call and live webcast on Thursday , November 1, 2018 at 11:00 a.m. Eastern
Time (8:00 a.m. Pacific) to discuss these results. After opening remarks by management, there will be a question and answer
session open to analysts and investors. The conference call may be accessed by dialing (877) 303 -9079 in Canada and the
United States, or (970) 315-0461 internationally.
The conference call will be archived for later playback until November 8, 2018 and can be accessed by dialing (855) 859-2056
in Canada and the United States, or (404) 537-3406 internationally and using the passcode 7999942.
For further information on Taseko, please visit the Taseko website at www.tasekomines.com or contact:
Brian Bergot, Vice President, Investor Relations - 778-373-4533 or toll free 1-877-441-4533
Russell Hallbauer
President and CEO
No regulatory authority has approved or disapproved of the information contained in this news release.
NON-GAAP PERFORMANCE MEASURES
This document includes certain non -GAAP performance measures that do not have a standardized meaning prescribed by IFRS. These
measures may differ from those used by, and may not be comparable to such measures as reported by, other issuers. The Company believes
that these measures are commonly used by certain investors, in conjunction with conventional IFRS measures, to enhance their understanding
of the Company’s performance. These measures have been derived from the Company’s financial statements and applied on a consi stent
basis. The following tables below provide a reconciliation of these non-GAAP measures to the most directly comparable IFRS measure.
Total operating costs and site operating costs, net of by-product credits
Total costs of sales include all costs absorbed into inventory, as well as transportation costs a nd insurance recoverable. Site operating costs
is calculated by removing net changes in inventory, depletion and amortization, insurance recoverable, and transportation costs from cost of
sales. Site operating costs, net of by-product credits is calculated by removing by-product credits from the site operating costs. Site operating
costs, net of by-product credits per pound are calculated by dividing the aggregate of the applicable costs by copper pounds produced. Total
operating costs per pound is the sum of site operating costs, net of by -product credits and off-property costs divided by the copper pounds
produced. By-product credits are calculated based on actual sales of molybdenum (net of treatment costs) and silver during the period divided
by the total pounds of copper produced during the period. These measures are calculated on a consistent basis for the periods presented.
NON-GAAP PERFORMANCE MEASURES - CONTINUED
Three months ended
September 30,
Nine months ended
September 30,
(Cdn$ in thousands, unless otherwise indicated) – 75% basis 2018 2017 2018 2017
Cost of sales 60,729 45,160 202,105 171,032
Less:
Depletion and amortization (20,174) (11,785) (52,909) (33,161)
Insurance recoverable 3,875 - 7,875 -
Net change in inventories of finished goods 17,439 5,440 17,593 5,696
Net change in inventories of ore stockpiles 6,716 (2,413) 7,827 (6,262)
Transportation costs (5,149) (4,498) (12,507) (15,207)
Site operating costs 63,436 31,904 169,984 122,098
Less by-product credits:
Molybdenum, net of treatment costs (6,937) (2,725) (15,776) (12,867)
Silver, excluding amortization of deferred revenue 42 (107) (209) (637)
Site operating costs, net of by-product credits 56,541 29,072 153,999 108,594
Total copper produced (thousand pounds) 32,251 26,306 74,516 86,780
Total costs per pound produced 1.75 1.11 2.07 1.25
Average exchange rate for the period (CAD/USD) 1.31 1.25 1.29 1.31
Site operating costs, net of by-product credits (US$ per
pound) 1.34 0.88 1.61 0.96
Site operating costs, net of by-product credits 56,541 29,072 153,999 108,594
Add off-property costs:
Treatment and refining costs of copper concentrate 4,725 5,378 14,617 21,900
Transportation costs 5,149 4,498 12,507 15,207
Total operating costs 66,415 38,948 181,123 145,701
Total operating costs (C1) (US$ per pound) 1.58 1.18 1.89 1.28
Adjusted net income (loss)
Adjusted net income (loss) remove the effect of the following transactions from net income as reported under IFRS:
• Unrealized foreign currency gains/losses;
• Unrealized gain/loss on copper put options;
• Losses on settlement of long-term debt and copper call option; and
• Write-down of mine equipment.
Management believes these transactions do not reflect the underlying op erating performance of our core mining business and are not
necessarily indicative of future operating results. Furthermore, unrealized gains/losses on derivative instruments, changes in the fair value of
financial instruments, and unrealized foreign curre ncy gains/losses are not necessarily reflective of the underlying operating results for the
reporting periods presented.
Three months ended
September 30,
Nine months ended
September 30,
($ in thousands, except per share amounts) 2018 2017 2018 2017
Net income (loss) 7,098 20,136 (16,054) 41,862
Unrealized foreign exchange (gain) loss (5,244) (10,299) 10,817 (19,225)
Unrealized (gain) loss on copper put options (534) 647 (2,686) 1,072
Loss on copper call option - - - 6,305
Loss on settlement of long-term debt - - - 13,102
Write-down of mine equipment - 3,551 - 3,551
Estimated tax effect of adjustments 144 (630) 725 (3,702)
Adjusted net income (loss) 1,464 13,405 (7,198) 42,965
Adjusted EPS 0.01 0.06 (0.03) 0.19
EBITDA and Adjusted EBITDA
EBITDA represents net income before interest, income taxes, and depreciation. EBITDA is presented because it is an important supplemental
measure of our performance and is frequently used by securities analysts, investors and other interested parties in the evaluation of companies
in the industry, many of which present EBITDA when reporting their results. Issuers of “high yield” securities also present EBITDA because
investors, analysts and rating agencies consider it useful i n measuring the ability of those issuers to meet debt service obligations. The
Company believes EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interes t are, by
definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense goes down as deductible
interest expense goes up; depreciation is a non-cash charge.
Adjusted EBITDA is presented as a further supplemental measure of the Company’s performance and ability to service debt. Adjusted
EBITDA is prepared by adjusting EBITDA to eliminate the impact of a number of items that are not considered indicative of ong oing
operating performance.
Adjusted EBITDA is calculated by adding to EBITDA certain items of expense and deducting from EBITDA certain items of income that
are not likely to recur or are not indicative of the Company’s future operating performance consisting of:
• Unrealized foreign exchange gains/losses;
• Unrealized gain/loss on copper put options;
• Losses on settlement of long-term debt and copper call option; and
• Write-down of mine equipment.
NON-GAAP PERFORMANCE MEASURES - CONTINUED