Taseko Reports Second Quarter 2018 Financial and Operational Results
*Non-GAAP performance measure. See end of news release.
TASEKO REPORTS SECOND QUARTER
2018 FINANCIAL AND OPERATIONAL RESULTS
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 dollar s. Taseko’s 75% owned Gibraltar Mine is located north of the City
of Williams Lake in south-central British Columbia. Production volume stated in this release are on a 100% basis
unless otherwise indicated.
August 7, 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 $36.3
million, adjusted EBITDA* of $32.3 million and adjusted net income* of $2.3 million the second quarter
of 2018.
Russell Hallbauer, President & CEO commented, “Following six months of lower head grade at Gibraltar,
mining operations returned to plan and copper grades increased by approximately 50% in the second
quarter, as compared to the previous two quarters. This resulted in copper production of 34 million pounds
in the second quarter, much higher than the previous two quarters. Improved metal production was due to
the higher copper grade ore and improved copper recovery. Copper recovery improvement was a result
of higher grades as well as less oxidation in the ore that was processed. We expect copper grades and
recovery to average similar levels for the balance of 2018.”
“Our Florence Copper Project continues to advance on time and on budget. Wellfield construction was
completed in April and we have recently conducted a number of wellfield tests with very encouraging
results that meet or exceed the bench-scale testing used for the 2017 technical report. We expect to begin
injecting solutions and pre-leaching the deposit in August at the same time as we are commissioning the
SX/EW plant. First cathode is anticipated before the end of December,” Mr. Hallbauer added.
“Development of our Florence project will com e at a critical time as trade tariffs and trade disputes
continue among the largest consumers of copper in the world. The USA imports approximately 600,000
metric tonnes of refined copper annually. With limited new copper production capacity expected to come
on stream in the USA, Florence is an extremely valuable asset for our Company.”
Mr. Hallbauer continued, “Demand for molybdenum remains strong and continue s to reflect a tight
market. We experienced some recovery issues with our molybdenum circuit in the second quarter which
impacted metal production and resulted in reduced by- product credits . The circuit issues have been
resolved and we expect molybdenum production to increase for the rest of the year and the important by-
product credits to improve accordingly.”
“Cash flow in the quarter was impacted by continued spending at our Florence Copper Project as well as
a semi-annual bond interest payment. With our current cost structure and spending at Florence on the
decline, we anticipate maintaining a solid cash balance in the months ahead. While the copper price has
been volatile over the past six weeks, we continue to believe the fundamentals remain strong for copper
in the medium to long-term,” concluded Mr. Hallbauer.
Second Quarter Highlights
• Earnings from mining operations before depletion and amortization* were $36.3 million;
• Copper and molybdenum production in the second quarter was 33.5 million pounds and 0.5 million
pounds, respectively, an increase from previous quarters as a result of the higher head grades and
recoveries;
• Net loss was $ 4.7 million ($0.02 net loss per share) and Adjusted net income* was $2.3 million
($0.01 per share);
• Site operating costs, net of by -product credits* were US$1.66 per pound produced and Total
operating costs (C1)* were US$1.98 per pound produced, as unit costs were positively impacted
by the higher grades and production;
• Total sales (100% basis) for the quarter were 32.2 million pounds of copper and 0.4 million pounds
of molybdenum;
• Construction of the Production Test Facility (“PTF”) for the Florence Copper Project progressed
on time and on budget. Construction activities at the site are now nearing completion and the
facility is expected to be operational by the end of third quarter, with first copper cathode expected
by the end of this year. Capital expenditures in the second quarter were $10.1 million (US$7.3
million);
• Cash flow from operations was $20.3 million and was negatively impacted by a $10.9 million
working capital adjustment related to increased accounts receivables and inventories;
• At June 30, 2018 the Company held put options for 30 million pounds of copper with maturities
between July 2018 and December 2018 at a strike price of US$2.80 per pound; and
• The Company’s cash balance at June 30, 2018 was $52 million, reduced from $64 million at the
end of the previous quarter due in part to cash used for construction of the Florence Copper PTF.
*Non-GAAP performance measure. See end of news release.
HIGHLIGHTS
Financial Data Three months ended June 30, Six months ended June 30,
(Cdn$ in thousands, except for per share amounts) 2018 2017 Change 2018 2017 Change
Revenues 94,273 99,994 (5,721) 158,452 204,383 (45,931)
Earnings from mining operations before depletion
and amortization* 36,267 46,460 (10,193) 49,811 99,887 (50,076)
Earnings from mining operations 18,312 34,661 (16,349) 17,076 78,511 (61,435)
Net income (loss) (4,671) 5,247 (9,918) (23,152) 21,726 (44,878)
Per share - basic (“EPS”) (0.02) 0.02 (0.04) (0.10) 0.10 (0.20)
Adjusted net income (loss)*
2,337 14,305 (11,968) (8,662) 29,560 (38,222)
Per share - basic (“adjusted EPS”)* 0.01 0.06 (0.05) (0.04) 0.13 (0.17)
EBITDA* 25,509 43,805 (18,296) 25,879 92,950 (67,071)
Adjusted EBITDA* 32,251 42,820 (10,569) 39,788 90,754 (50,966)
Cash flows provided by operations 20,349 62,291 (41,942) 31,905 142,056 (110,151)
Operating Data (Gibraltar - 100% basis) Three months ended June 30, Six months ended June 30,
2018 2017 Change
2018 2017 Change
Tons mined (millions) 27.4 21.1 6.3 54.1 42.9 11.2
Tons milled (millions) 7.5 7.5 - 15.0 14.8 0.2
Production (million pounds Cu) 33.5 39.4 (5.9) 56.4 80.6 (24.2)
Sales (million pounds Cu) 32.2 40.7 (8.5) 55.0 81.5 (26.5)
*Non-GAAP performance measure. See end of news release.
REVIEW OF OPERATIONS
Gibraltar Mine (75% Owned)
Operating data (100% basis) Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017
Tons mined (millions) 27.4 26.7 26.9 23.3 21.1
Tons milled (millions) 7.5 7.5 7.9 7.2 7.5
Strip ratio 1.9 4.1 4.9 4.1 2.8
Site operating cost per ton milled (CAD$)* $10.31 $8.68 $7.68 $5.93 $7.67
Copper concentrate
Grade (%) 0.263 0.201 0.209 0.284 0.309
Recovery (%) 85.3 75.7 77.5 86.1 85.2
Production (million pounds Cu) 33.5 22.9 25.5 35.1 39.4
Sales (million pounds Cu) 32.2 22.8 32.0 30.2 40.7
Inventory (million pounds Cu) 4.2 2.9 2.7 9.3 4.6
Molybdenum concentrate
Production (thousand pounds Mo) 506 443 537 445 789
Sales (thousand pounds Mo) 424 433 589 403 794
Per unit data (US$ per pound produced)*
Site operating costs* $1.78 $2.25 $1.86 $0.97 $1.08
By-product credits* (0.12) (0.23) (0.17) (0.09) (0.11)
Site operating costs, net of by-product
credits* $1.66 $2.02 $1.69 $0.88 $0.97
Off-property costs 0.32 0.31 0.42 0.30 0.34
Total operating costs (C1)* $1.98 $2.33 $2.11 $1.18 $1.31
OPERATIONS ANALYSIS
Second quarter results
Gibraltar mining operations returned to plan during the quarter, following the impact of the 2017 summer
wildfires that affected the previous two quarters. Copper production in the second quarter was 33.5 million
pounds, approximately 50% higher than the previous two quarters as a result of increased copper grade and
recovery. Copper head grade was 0.263%, in line with expectations and consistent with Gibraltar’s average
reserve grade. Copper recovery also improved to 85.3% for the quarter, a result of the increased head
grades and reduced oxidized ore in the mill feed.
A total of 27.4 million tons were mined during the period, an increase over previous quarters as additional
trucking capacity was utilized to increase the mining rate. The strip ratio for the second quarter of 1.9 to 1
was lower than recent quarters and 1.9 million tons of mined ore was added to the ore stockpile. Whereas
in the previous three quarters the strip ratio was higher and mill feed was drawn from the ore stockpile.
*Non-GAAP performance measure. See end of news release.
OPERATIONS ANALYSIS - CONTINUED
Site operating cost per ton milled* was $10.31 in the second quarter of 2018, which is higher than the first
quarter primarily due to the decreased capitalization of stripping costs. Waste stripping costs of $7.7 million
(75% basis), or $1.37 per ton milled, were capitalized in the second quarter, compared to $14.7 million
($2.61 per ton milled) in the first quarter of 2018. However, total site spending (including capitalized costs)
remained at a similar level to the previous quarter.
Site operating costs per pound produced* decreased to US$1.78 from US$2.25 in the previous quarter,
primarily due to higher copper production.
Molybdenum production was 0.5 million pounds in the second quarter which was in line with the previous
quarter. Mechanical issues in the molybdenum plant, which have now been resolved, impacted recovery
and as a result, molybdenum production did not increase in line with copper production in the period. By-
product credits per pound of copper produced* decreased to US$0.12 in the second quarter from US$0.23
in the previous quarter.
Off-property costs per pound produced* were US$0.32 for the second quarter of 2018, which is in line with
recent quarters. Total operating costs (C1) per pound* decreased to US$1.98, a 15% decrease from the first
quarter of 2018.
GIBRALTAR OUTLOOK
Copper grades are expected to average approximately 0.26% for the remainder of 2018, which is consistent
with the life of mine average grade and will result in continued strong production in the second half of the
year.
Copper markets have declined since the end of the second quarter, falling from US$3.01 per pound at June
30, 2018 to US$2.78 per pound as of August 7, 2018. Molybdenum prices have strengthened to US$12.30
per pound as of August 7, 2018, compared to US$10.72 per pound at the end of the second quarter.
The Company is progressing with an insurance claim related to the Cariboo region wildfires in July 2017.
The amount of the insurance claim has not been finalized and is currently estimated to be in the range of $4
million to $10 million on a 75% basis.
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 located 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.
*Non-GAAP performance measure. See end of news release.
REVIEW OF PROJECTS - CONTINUED
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, will be built
for approximately US$25 million. Construction of the PTF progressed smoothly through the second quarter
and is now nearing completion.
The project is on time and on budget with expenditures in the first half of 2018 of $24.4 million (US$18.1
million). The facility, plant and wells are expected to be operational at the end of the third quarter of 2018,
and first copper production is expected by the end of the year.
Successful operation of t he 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 by late 2019, construction
on the commercial scale operation could be commenced.
Aley Niobium Project
In 2014, the Company filed an NI43-101 technical report for the Aley Niobium Project. Further engineering
and metallurgical test work has been completed since then which is expected to result in improved project
economics. Environmental monitoring on the project continues and a number of product marketing
initiatives are underway. A drill program is underway in the third quarter to collect samples for further
metallurgical testing.
The Company will host a telephone conference call and live webcast on Wednesday , August 8, 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 August 1 5, 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 3185058.
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 Compa ny’s financial
statements and applied on a consistent 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 and insurance recoverable. Si te
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 bas ed on actual
sales of molybdenum (net of treatment costs) and silver during the period divided by the total pounds of copper produced duri ng
the period. These measures are calculated on a consistent basis for the periods presented.
Three months ended
June 30,
Six months ended
June 30,
(Cdn$ in thousands, unless otherwise indicated) – 75%
basis 2018 2017 2018 2017
Cost of sales 75,961 65,333 141,376 125,872
Less:
Depletion and amortization (17,955) (11,799) (32,735) (21,376)
Insurance recoverable - - 4,000 -
Net change in inventories of finished goods (813) 23 154 256
Net change in inventories of ore stockpiles 5,007 (5,021) 1,111 (3,849)
Transportation costs (4,529) (5,492) (7,358) (10,709)
Site operating costs 57,671 43,044 106,548 90,194
Less by-product credits:
Molybdenum, net of treatment costs (3,830) (4,335) (8,839) (10,142)
Silver, excluding amortization of deferred revenue (159) (82) (251) (530)
Site operating costs, net of by-product credits 53,682 38,627 97,458 79,522
Total copper produced (thousand pounds) 25,120 29,531 42,265 60,474
Total costs per pound produced 2.14 1.31 2.31 1.31
Average exchange rate for the period (CAD/USD) 1.29 1.34 1.28 1.33
Site operating costs, net of by-product credits (US$ per
pound) 1.66 0.97 1.80 0.99
Site operating costs, net of by-product credits 53,682 38,627 97,458 79,522
Add off-property costs:
Treatment and refining costs of copper concentrate 5,938 8,066 9,892 16,522
Transportation costs 4,529 5,492 7,358 10,709
Total operating costs 64,149 52,185 114,708 106,753
Total operating costs (C1) (US$ per pound) 1.98 1.31 2.12 1.32
NON-GAAP PERFORMANCE MEASURES - CONTINUED
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; and
• Losses on settlement of long-term debt and copper call option.
Management believes these transactions do not reflect the underlying operating performance of our core mining business and ar e
not necessarily indicative of future operating results. Furthermore, unrealized gains/losses on derivative instruments, chang es in
the fair value of financial instruments, and unrealized foreign currency gains/losses are not necessarily reflective of the underlying
operating results for the reporting periods presented.
Three months ended
June 30,
Six months ended
June 30,
($ in thousands, except per share amounts) 2018 2017 2018 2017
Net income (loss) (4,671) 5,247 (23,152) 21,726
Unrealized foreign exchange (gain) loss 7,729 (6,249) 16,061 (8,926)
Unrealized (gain) loss on copper put options (987) 373 (2,152) 425
Loss on copper call option - 4,891 - 6,305
Loss on settlement of long-term debt - 13,102 - 13,102
Estimated tax effect of adjustments 266 (3,059) 581 (3,072)
Adjusted net income (loss) 2,337 14,305 (8,662) 29,560
Adjusted EPS 0.01 0.06 (0.04) 0.13
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 in 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 interest 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 performa nce 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 ongoing operating performance.
Adjusted EBITDA is calculated by adding to EBITDA certain i tems 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; and
• Losses on settlement of long-term debt and copper call option.