Taseko Reports 2018 Fourth Quarter and Annual Financial Results
TASEKO REPORTS 2018 FOURTH QUARTER AND
ANNUAL FINANCIAL 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 dollars. Taseko’s 75% owned Gibraltar Mine is located north of the City of Williams Lake in south -central
British Columbia. Production volumes stated in this release are on a 100% basis unless otherwise indicated.
February 12, 2019, Vancouver, BC – Taseko Mines Limited (TSX: TKO; NYSE American: TGB) ("Taseko" or
the "Company") reports financial results for the fourth quarter and full year ending December 31, 2018.
Russell Hallbauer, President and CEO of Taseko, commented, “ In 2018, Gibraltar generated $149 million of
earnings from mining operations before depletion and amortization* on a 100% basis. The copper price volatility
over the year, ranging from a high of US$3.25 to a low of US$2.60 per pound, made it a challenging environment
for many aspects of our business, from mine planning to pricing, as we tried to maximize operating margin and
returns. We expect, as do many industry analysts, increased copper prices in 2019 and a rebound in gross revenue
and margins. With global copper inventories at multi-year lows and less scrap copper being used in the manufacture
of final products combined with limited new production capacity , the growing copper deficit will only result in
higher prices.”
Mr. Hallbauer continued, “We are pleased with the performance of Gibraltar, but the focus of shareholders should
be on our Florence Copper Project, with it now transitioning from a development project to an operating asset and
continuing to advance as planned. Since we began operating the commercial scale wellfield, we have been extremely
pleased with the results. The main focus of this phase is to demonstrate to the regulators and key stakeholders that
we are able to maintain hydraulic control of the leach solutions underground. All of the data gathered since we
began injecting solutions indicate that copper mineralizat ion is dissolving into copper solution as predicted . With
operations underway, we have commenced detailed engineering and the process to finalize the commercial scale
permits, with the goal of commencing construction of the commercial plant as soon as possible.”
“The fourth quarter of 2018 was generally in line with our expectations for sales which came in at 43 million pounds
of copper and 738,000 pounds of molybdenum (100% basis). Copper production was slightly lower than anticipated
due to a series of minor operational issues, particularly in December, which were compounded by higher work index
ore and lower grade stockpile feed. We were able to ship most of the excess concentrate from the third quarter with
copper inventory declining from 19 million pounds to two million pounds by year end,” Mr. Hallbauer continued.
“Gibraltar is expected to produce approximately 130 million pounds (+/-5%) on a 100% basis in 2019, comparable
to the level achieved in 2018. While there will be quarterly fluctuations in both copper and molybdenum production,
we do not anticipate those fluctuations to be as significant as last year. Even though we expect higher copper pricing
in 2019, we have made a number of mine plan adjustments and spending curtailments to address the current weaker
pricing environment,” added Mr. Hallbauer.
Mr, Hallbauer continued, “ Our acquisition of Yellowhead Mining is expected to close in the coming days as the
transaction was approved by Yellowhead shareholders at a special meeting held on February 8, 2019. I cannot
emphasize how enthused we are to have acquired this quality , near-shovel-ready asset. The intrinsic value of the
Yellowhead project to Taseko has not been recognized by the investment community. During the first seven years
of operation, the mi ll will process head grades of 0.32% CuEQ. Simplistically put , the in -situ o re value is
approximately US$22 per tonne at the long-term copper price. With a cost per tonne milled expected to be below
C$10 per tonne, the mine site operating margin is approximately C$16 per tonne. At present design capacity of
70,000 tonnes per day of throughput the Yellowhead Mine will generate roughly $400 million in operating margin
a year, and place it as one of the largest, long life copper mines in Canada.”
“As with all of our acquisitions of undervalued assets, we believe our operating and engineering expertise can create
substantial long-term value. Based on Yellowhead’s 2014 technical report, the project has a pre-tax net present
value in excess of C$1 billion, or approximately $4.00 per Taseko share. We expect to unlock further value for our
shareholders in the months ahead,” concluded Mr. Hallbauer.
2018 Annual Review
• Earnings from mining operations before depletion and amortization* was $112.0 million and Adjusted
EBITDA* was $98.2 million;
• Cash flows from operations were $94.1 million;
• The cash balance at the end of 2018 was $46 million, which is lower than the end of 2017 as the Company
incurred expenditures of $36.5 million at the Florence Copper Project in the year;
• Net loss for the year was $35.8 million ($0.16 per share) includes an unrealized foreign exchange loss of
$28.7 million. Adjusted net loss* was $8.5 million ($0.04 per share);
• The Gibraltar Mine (100% basis) produced 125.2 million pounds of copper and 2.4 million pounds of
molybdenum. Copper head grades for the year were 3% lower than the life of mine average reserve grade;
• Site operating costs, net o f by-product credits* were US$1.60 per pound produced, and Total operating
costs (C1)* were US$1.93 per pound produced; and
• Construction of the Production Test Facility (“PTF”) for the Florence Copper Project in Arizona was
completed on time and on budget and commenced operation in the fourth quarter. Results to date have been
in line with management's expectations.
Fourth Quarter Review
• Fourth quarter earnings from mining operations before depletion and amortization* were $28.5 million, and
Adjusted EBITDA was $26.5 million;
• Net loss was $19.7 million ($0.09 per share) includes an unrealized foreign exchange loss of $17.9 million.
Adjusted net loss* was $1.3 million ($0.01 per share);
• Net loss and adjusted net loss for the fourth quarter include a $1.7 million write -down to reduce the net
realizable value of ore stockpile inventories, as a result of the decline in copper prices;
*Non-GAAP performance measure. See end of news release.
• Cash flow from operations was $44.1 million;
• Total copper sales for the quarter were 42.7 million pounds (100% basis) as the excess inventory on hand
at the end of the third quarter was sold in the fourth quarter;
• Copper production in the fourth quarter was 25.8 million pounds (100% basis) as a result of reduced head
grades and mill throughput; and
• Site operating costs, net of by-product credits* were US$1.62 per pound produced and Total operating costs
(C1)* were US$2.11 per pound produced.
HIGHLIGHTS
Financial Data (includes 75% share of Gibraltar)
Year ended
December 31,
Three Months Ended
December 31,
(Cdn$ in thousands, except for per share amounts) 2018 2017 Change 2018 2017 Change
Revenues 343,870 378,299 (34,429) 111,121 95,408 15,713
Earnings from mining operations before depletion and
amortization* 112,003 177,716 (65,713) 28,450 32,696 (4,246)
Earnings from mining operations 41,222 129,994 (88,772) 10,578 18,135 (7,557)
Net income (loss) (35,774) 34,262 (70,036) (19,720) (7,600) (12,120)
Per share - basic (“EPS”) (0.16) 0.15 (0.31) (0.09) (0.03) (0.06)
Adjusted net income (loss)* (8,508) 41,420 (49,928) (1,310) (1,544) 234
Per share - basic (“adjusted EPS”)* (0.04) 0.18 (0.22) (0.01) (0.01) -
EBITDA* 71,483 163,757 (92,274) 7,886 22,350 (14,464)
Adjusted EBITDA* 98,217 161,749 (63,532) 26,489 28,639 (2,150)
Cash flows provided by operations 94,078 211,079 (117,001) 44,120 31,899 12,221
Operating Data (Gibraltar - 100% basis)
Year ended
December 31,
Three Months Ended
December 31,
2018 2017 Change 2018 2017 Change
Tons mined (millions) 111.6 93.1 18.5 28.4 26.9 1.5
Tons milled (millions) 30.1 29.8 0.3 7.1 7.9 (0.8)
Production (million pounds Cu) 125.2 141.2 (16.0) 25.8 25.5 0.3
Sales (million pounds Cu) 126.5 143.7 (17.2) 42.7 32.0 10.7
*Non-GAAP performance measure. See end of news release.
REVIEW OF OPERATIONS
Gibraltar Mine (75% Owned)
Operating data (100% basis) Q4
2018
Q3
2018
Q2
2018
Q1
2018
Q4
2017
YE
2018
YE
2017
Tons mined (millions) 28.4 29.0 27.4 26.7 26.9 111.6 93.1
Tons milled (millions) 7.1 8.0 7.5 7.5 7.9 30.1 29.8
Strip ratio 5.1 1.7 1.9 4.1 4.9 2.7 3.4
Site operating cost per ton milled (CAD$)* $9.16 $10.60 $10.31 $8.68 $7.68 $9.71 $7.48
Copper concentrate
Head Grade (%) 0.222 0.314 0.263 0.201 0.209 0.251 0.281
Copper Recovery (%) 81.3 85.9 85.3 75.7 77.5 82.7 84.1
Production (million pounds Cu) 25.8 43.0 33.5 22.9 25.5 125.2 141.2
Sales (million pounds Cu) 42.7 28.8 32.2 22.8 32.0 126.5 143.7
Inventory (million pounds Cu) 1.6 18.5 4.2 2.9 2.7 1.6 2.7
Molybdenum concentrate
Production (thousand pounds Mo) 727 690 506 443 537 2,366 2,637
Sales (thousand pounds Mo) 738 709 424 433 589 2,304 2,645
Per unit data (US$ per pound produced)*
Site operating costs* $1.92 $1.50 $1.78 $2.25 $1.86 $1.80 $1.22
By-product credits* (0.30) (0.16) (0.12) (0.23) (0.17) (0.20) (0.13)
Site operating costs, net of by-product credits* $1.62 $1.34 $1.66 $2.02 $1.69 $1.60 $1.09
Off-property costs 0.49 0.24 0.32 0.31 0.42 $0.33 0.34
Total operating costs (C1)* $2.11 $1.58 $1.98 $2.33 $2.11 $1.93 $1.43
OPERATIONS ANALYSIS
Full-year results
In 2018, Gibraltar produced 125.2 million pounds of copper. Copper grade for the year averaged 0.251% copper,
approximately 3% below the life of mine average grade. Throughput and recoveries were both slightly below
targeted levels for the year. Copper recovery was 82.7% for the year due to lower head grades in the current year.
A total of 111.6 million tons were mined in 2018, a 20% increase over the prior year as waste stripping was increased
to meet mine plan sequencing requirements. Waste stripping costs of $48.8 million (75% basis) were capitalized
in 2018, as a new pushback in the Granite pit was initiated. The ore stockpile tons remained relatively unchanged
year over year.
Site operating costs* for the year were US$1.80 per pound of copper produced, an increase from 2017, due to the
lower copper production, higher mining costs and decreased capitalization of stripping costs in the current year.
*Non-GAAP performance measure. See end of news release.
OPERATIONS ANALYSIS - CONTINUED
Site operating costs* does not include the benefit of an insurance recovery of $7.9 mi llion (75% basis) that was
recorded in the current year related to the 2017 Cariboo wildfires.
Molybdenum production for 2018 was 2.4 million pounds, resulting in by- product credits per pound of copper
produced* of US$0.20, an increase from US$0.13 in the prior year. The higher by-product credit was due to higher
molybdenum prices, partially offset by lower sales volumes in the current year.
Off property costs* were US$0.33 per pound of copper produced, consistent with US$0.34 per pound produced in
2017.
Total operating costs (C1)* were US$1.93 per pound of copper produced for the year.
Fourth quarter results
Copper production in the fourth quarter was 25.8 million pounds. Production was affected by lower head grades
and recovery in the quarter as a result of the metallurgical makeup of the ore and severe winter weather which
impacted mining operations and ore access.
A total of 28.4 million tons were mined during the period. The strip ratio for the fourth quarter of 5.1 to 1 was
higher than recent quarters and above the life of mine average strip ratio of 1.9 to 1. Mill feed was supplemented
with 2.2 million tons of ore drawn from stockpile.
Site operating cost per ton milled* was $9.16 in the fourth quarter of 2018.
Total site spending (including site operating costs and capitalized stripping costs) in the fourth quarter was 5%
lower than the previous quarter. However, site operating costs per pound produced* increased to US$1. 92 from
US$1.50 in the previous quarter, because of lower copper production.
Molybdenum production was 0.7 million pounds in the fourth quarter, a result of continued strong molybdenum
plant operating performance. By-product credits per pound of copper produced* increased to US$0.30 in the fourth
quarter from US$0.16 in the previous quarter, as molybdenum revenues increased in the quarter while copper
production volumes dropped.
Off-property costs per pound produced* were US$0.49 for the fourth quarter of 2018, which is higher than normal
as a result of significantly higher copper sales volume during the current period. The unusually high copper
concentrate inventory at the end o f the third quarter was sold in the fourth quarter. Off -property costs per pound
produced, including transportation, smelting and refining costs, are higher in periods where sales volumes are higher
than production volumes.
Total operating costs (C1) per pound* were US$2.11 in the period, and were impacted by lower copper production
and higher than normal off-property costs.
*Non-GAAP performance measure. See end of news release.
OPERATIONS ANALYSIS - CONTINUED
Health, Safety, and Environment
Health and safety have always been a high -level commitment for Taseko, Gibraltar, and Florence management.
Taseko is committed to operational practices that result in improved efficiencies, safety performance and
occupational health. Nothing is more important to the Company than the safety, health and well -being of our
workers and their families.
Taseko places a high priority on the continuous improvement of performance in the areas of employee health and
safety at the workplace and protection of the environment. The Gibraltar Mine’s 2018 results of zero loss time
accidents, and zero accidents that affected the environment, are both a reflection of that priority and a reflection of
the general standard of work at that site. We do not have access to comparable data for environmental performance
but Gibraltar’s zero loss time accidents is once again an industry leading performance in an industry that prides
itself on their ability to have their employees come to work and then return home safely. Gibraltar received the
Province of British Columbia Ministry of Energy and Mines John Ash Award for the years 2015, 2016, and 2017
and is in line to receive it again for 2018. This award goes to the mine in British Columbia that has worked m ore
than one million hours with the lowest injury frequency rate.
The same priority on health, safety, and environmental performance was exemplified during the construction of the
Florence Copper PTF and the methods and culture at Gibraltar are being imported and implemented as the PTF
enters the operations phase.
GIBRALTAR OUTLOOK
Gibraltar is expected to produce approximately 130 million pounds (+/-5%) on a 100% basis in 2019, comparable
to the production level achieved in 2018. While there will be quarterly fluctuations in both copper and molybdenum
production, the Company does not anticipate those fluctuations to be as significant as in 2018. The fundamentals
for copper remain strong and most analysts are projecting a growing deficit and higher copper prices in the coming
years.
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 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.
Florence Copper Project
Construction of the Production Test Facility (“PTF”) for the Florence Copper Project progressed smoothly in 2018
and was completed on time and on budget. Wellfield operations commenced in the fourth quarter. Total
expenditures at the Florence Project in 2018 were $36.5 million which includes PTF construction and operation,
and other project development costs.
REVIEW OF PROJECTS - CONTINUED
The main focus of the PTF phase is to demonstrate to regulators and key stakeholders that hydraulic control of
underground leach solutions can be maintained. Results to date are in line with management's
expectations. Successful operation of the in situ leaching process will allow permits to be amended for the full scale
operation, which is expected to produce 85 mi llion pounds of copper cathode per year. The permit amendment
process has started and 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 of 2018 to collect samples for further metallurgical testing. Aley
project expenditures were $2.7 million in 2018.
Yellowhead Copper Project
On December 4, 2018, the Company entered into an agreement to acquire all of the outstanding common shares of
Yellowhead Mining Inc. (“Yellowhead”) that it did not already own, in exchange for 17.3 million Taseko common
shares. The transaction was structured as a plan of arrangement pursuant to the Business Corporations Act (British
Columbia) and requires the approval of the Supreme Court of British Columbia and Yellowhead shareholders. At a
special meeting on February 8, 2019, Yellowhead shareholders voted to approve the acquisition and the transaction
is expected to close in February.
Yellowhead holds a 100% interest in a copper -gold-silver development project located in south -central British
Columbia. The project feasibility study dated July 31, 2014, proposed a 70,000 tonne per day concentrator with
total pre-production capital costs of approximately $1 billion and an average operating cost of US$1.46 per pound
of copper. Using US$3.00 per pound of copper, a Canadian/US dollar exc hange rate of 0.80, and an 8% discount
rate results in a pre-tax net present value of $1.1 billion.
The Company will host a telephone conference call and live webcast on Wednesday, February 13, 2019 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 (888)
390-0546 within North America, or (416) 764-8688 for international callers.
The conference call will be archived for later playback until February 20, 2019 and can be accessed by dialing
(888) 390-0541 within North America or, (416) 764-8677 internationally and using the passcode 572084 #.
For further information on Taseko, please see the Company’s website 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 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 and 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 opera ting 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.
Three months ended
December 31,
Year ended
December 31,
(Cdn$ in thousands, unless otherwise indicated) – 75% basis 2018 2017 2018 2017
Cost of sales 100,543 77,273 302,648 248,305
Less:
Depletion and amortization (17,872) (14,561) (70,781) (47,722)
Insurance recovered 38 - 7,913 -
Net change in inventories of finished goods (20,028) (5,392) (2,435) 302
Net change in inventories of ore stockpiles (8,905) (8,006) (1,078) (14,266)
Transportation costs (4,656) (4,074) (17,163) (19,281)
Site operating costs 49,120 45,240 219,104 167,338
Less by-product credits:
Molybdenum, net of treatment costs (7,643) (4,016) (23,419) (16,883)
Silver, excluding amortization of deferred revenue (118) (173) (327) (810)
Site operating costs, net of by-product credits 41,359 41,051 195,358 149,645
Total copper produced (thousand pounds) 19,372 19,094 93,888 105,874
Total costs per pound produced 2.13 2.15 2.08 1.41
Average exchange rate for the period (CAD/USD) 1.32 1.27 1.30 1.30
Site operating costs, net of by-product credits (US$ per
pound) 1.62 1.69 1.60 1.09
Site operating costs, net of by-product credits 41,359 41,051 195,358 149,645
Add off-property costs:
Treatment and refining costs 7,764 6,172 22,381 28,072
Transportation costs 4,656 4,074 17,163 19,281
Total operating costs 53,779 51,297 234,902 196,998
Total operating costs (C1) (US$ per pound) 2.11 2.11 1.93 1.43