Taseko Reports $42 Million of Adj. EBITDA IN Third Quarter
TASEKO REPORTS $42 MILLION OF ADJ. EBITDA IN 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 26, 2017, Vancouver, BC – Taseko Mines Limited (TSX: TKO; NYSE American: TGB)
("Taseko" or the "Company") reports the results for the three months ended September 30, 2017.
“The third quarter was another very good quarter for Taseko and despite being impacted by the wildfires
in central British Columbia we still produced 35 million pounds of copper and generated $42 million of
adjusted EBITDA*. Mine personnel did an excellent job of managing through the provincial state of
emergency and widespread evacuation orders,” highlighted Russell Hallbauer, President and CEO of
Taseko. “Manpower levels at times were one quarter of normal levels which impacted mine sequencing
and mill operations. Truck and rail shipments were also halted for an extended period which resulted in
reduced sales volumes and an increase in copper concentrate inventory of approximately five million
pounds, which reduced earnings for the quarter. We expect a significant reduction in concentrate
inventory by year end.”
Third Quarter 2017 Highlights
• Earnings from mining operations before depletion and amortization* were $45.1 million;
• Cash flow from operations was $37.1 million for the third quarter;
• Adjusted net income* for the third quarter was $13.4 million (or $0.06 per share) and net income
was $20.1 million (or $0.09 per share);
• Site operating costs, net of by -product credits* were US$0.88 per pound produced, down 44%
from the third quarter of 2016;
• The Gibraltar Mine produced 35.1 million pounds of copper and 0.4 million pounds of
molybdenum (100% basis) at a total operating cost (C1)* of US$1.18 per pound;
• Total sales for the third quarter were 30.2 million pounds of copper and 0.4 million pounds of
molybdenum;
*Non-GAAP performance measure. Refer to end of news release.
• In July 2017, Gibraltar’s mining and milling operations were impacted by wildfires in the
Cariboo region which limited our employees’ ability to travel to the mine site. A temporary
shutdown of rail service also affected our ability to get product to the port, and as a result sales
volumes were lower than planned;
• On September 25, 2017, the Company announced that the Environmental Appeals Board of the
U.S. Environmental Protection Agency (“EPA”) had issued an order denying any further review
of the Underground Injection Control (“UIC”) Permit granted in 2016 for Taseko’s Florence
Copper Project. All necessary state and federal permits are now in place to build and operate
the Production Test Facility (“PTF”), and the Company’s board of directors has approved the
construction of the PTF at an estimated cost of US$25 million; and
• The Company’s cash balance at September 30, 2017 was $96 million.
“With Gibraltar operations once again stabilized after being impacted by wildfires in the third quarter,
our focus is on Florence Copper and advancing one of the lowest capital intensity projects in the world
towards commercial production,” commented Mr. Hallbauer. “With receipt of final permits and
construction progressing, we are excited about the prospects of producing copper in 2018.”
“We have seen the copper price increase by nearly 50% since the lows of 2016 and believe the market is
in the early stages of a major copper deficit. Given the long timelines to develop, permit, finance and
construct a mine, there is no way that copper supply can quickly be increased to meet growing demand,”
continued Mr. Hallbauer. “With the ability to have Florence Copper in commercial production in 2020,
we are ideally positioned to capitalize on a rapidly improving market. Additionally, with recent
announcements by a number of major auto manufacturers regarding electric vehicles (EVs), some
experts are now forecasting copper demand for EVs will far surpass previous estimates. Using up to 175
pounds of copper per car, which is approximately four times that of a conventional vehicle, plus the
associated charging infrastructure, demand from this sector could prove to be very supportive for copper
and other base metals much earlier than originally anticipated.”
*Non-GAAP performance measure. Refer to end of news release.
HIGHLIGHTS
Financial Data
Three months ended
September 30,
Nine months ended
September 30,
(Cdn$ in thousands, except for per share amounts) 2017 2016 Change 2017 2016 Change
Revenues 78,508 55,964 22,544 282,891 169,237 113,654
Earnings from mining operations before depletion
and amortization* 45,133 11,566 33,567 145,020 8,098 136,922
Earnings (loss) from mining operations 33,348 (4,501) 37,849 111,859 (35,617) 147,476
Net income (loss) 20,136 (15,610) 35,746 41,862 (36,509) 78,371
Per share - basic (“EPS”) 0.09 (0.07) 0.16 0.19 (0.16) 0.35
Adjusted net income (loss)*
13,405 (10,423) 23,828 42,965 (48,264) 91,229
Per share - basic (“adjusted EPS”)* 0.06 (0.05) 0.11 0.19 (0.22) 0.41
EBITDA* 48,457 4,064 44,393 141,407 7,208 134,199
Adjusted EBITDA* 42,356 9,285 33,071 133,110 (2,849) 135,959
Cash flows provided by (used for) operations 37,124 (7,493) 44,617 179,180 (15,810) 194,990
Operating Data (Gibraltar - 100% basis)
Three months ended
September 30,
Nine months ended
September 30,
2017 2016 Change
2017 2016 Change
Tons mined (millions) 23.3 21.5 1.8 66.2 69.2 (3.0)
Tons milled (millions) 7.2 7.4 (0.2) 22.0 22.1 (0.1)
Production (million pounds Cu) 35.1 33.1 2.0 115.7 92.6 23.1
Sales (million pounds Cu) 30.2 29.8 0.4 111.7 90.6 21.1
*Non-GAAP performance measure. Refer to end of news release.
REVIEW OF OPERATIONS
Gibraltar Mine (75% Owned)
Operating data (100% basis) Q3 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016
Tons mined (millions) 23.3 21.1 21.8 18.5 21.5
Tons milled (millions) 7.2 7.5 7.3 7.3 7.4
Strip ratio 4.1 2.8 2.4 1.1 1.0
Site operating cost per ton milled (CAD$) $5.93 $7.67 $8.59 $9.13 $9.47
Copper concentrate
Grade (%) 0.284 0.309 0.328 0.319 0.259
Recovery (%) 86.1 85.2 85.9 87.0 85.9
Production (million pounds Cu) 35.1 39.4 41.3 40.7 33.1
Sales (million pounds Cu) 30.2 40.7 40.8 40.4 29.8
Inventory (million pounds Cu) 9.3 4.6 5.9 5.6 5.4
Molybdenum concentrate
Production (thousand pounds Mo) 445 789 866 764 185
Sales (thousand pounds Mo) 403 794 859 798 105
Per unit data (US$ per pound produced)*
Site operating costs* $0.97 $1.08 $1.15 $1.23 $1.64
By-product credits* (0.09) (0.11) (0.15) (0.11) (0.06)
Site operating costs, net of by-product
credits* 0.88 $0.97 $1.00 $1.12 $1.58
Off-property costs 0.30 0.34 0.33 0.36 0.31
Total operating costs (C1)* $1.18 $1.31 $1.33 $1.48 $1.89
OPERATIONS ANALYSIS
Third quarter results
Copper head grade at Gibraltar was 0.284% in the third quarter and copper recovery for the quarter was 86%. Mill
throughput was 7.2 million tons of ore and the mine produced 35.1 million pounds of copper.
A total of 23.3 million tons were mined duri ng the quarter at a strip ratio of 4.1 to 1. Waste stripping costs of $22.9
million (75% basis) were capitalized in the quarter primarily related to a new pushback in the Granite pit.
Mining and milling operations in July were impacted by wildfires in the Cariboo region which limited our employees’
ability to travel to the mine site, due to restrictions on road access and evacuation orders in the region. This resulted
in reduced production for periods of time as well as a complete mine shutdown for sever al days during July. Mill
operations returned to normal in early August. During the quarter, approximately 2.6 million tons of ore were drawn
from the ore stockpile, which was largely due to the wild fires impact on mine site access and the lack of employees
available for mine operations.
*Non-GAAP performance measure. Refer to end of news release.
OPERATIONS ANALYSIS – CONTINUED
Site operating cost per ton milled* was $5.93 in the third quarter of 2017, which is lower than recent quarters due
to the increased capitalization of stripping costs and the drawdown of ore stockpiles.
The molybdenum circuit was negatively impacted by a lack of personnel during the wild fires . A total of 0.4 million
pounds of molybdenum were produced. By -product credits per pound produced* was US$0.09 in the third quarter
of 2017. Site operating costs per pound produced, net of by -product credits* decreased to US$0.88 in the third
quarter of 2017 from US$0.97 in the second quarter of 2017.
Off-property costs per pound produced* were US$0.30 for the third quarter of 2017 compared to the prior quarter
off-property costs of US$0.34. The decrease is due to lower than planned sales volumes, as treatment and refining
and ocean freight costs are recognized at the time of sale.
Total operating costs (C1) per pound* decreased to US$1.18, a 10% reduction from the second quarter of 2017.
GIBRALTAR OUTLOOK
Overall, Gibraltar has maintained a stable level of operations and management continues to focus on further
improvements to operating practices to reduce unit costs. Copper prices have continued to strengthen in the fourth
quarter of 2017, increasing to US$3.16 per pound as of October 26, 2017, which is US$0.28 higher than the average
LME copper price in the third quarter of 2017. Operating margins at Gibraltar are sensitive to the Canadian dollar
as approximately 80% of mine operating costs are paid in Canadian dollars.
The Company is pursuing a potential insurance claim related to the Cariboo region wildfires in July, however, the
outcome of the claim cannot be determined at this time.
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. During the third quarter of 2017, expenditures of $1.8 million
were incurred on the Florence Copper project, and total expenditures of $1.0 million were incurred on the Aley and
New Prosperity projects. Taseko will continue to take a prudent approach to spending on development projects.
Florence Copper
On September 25, 2017, the Company announced that the Environmental App eals Board (“EAB”) of the
Environmental Protection Agency had issued an order denying any further review of the Underground Injection
Control Permit granted in 2016 for Taseko’s Florence Copper Project. In the September 22, 2017 decision, the EAB
found that the petitioners failed to demonstrate that any errors were made in issuing the federal permit. The
Company now has all necessary state and federal permits in place to build and operate the Production Test Facility
(“PTF”).
The Company is moving forward with the construction of the PTF at an estimated cost of US$25 million. The PTF
will include a well field comprised of thirteen (four injection and nine recovery) commercial scale production wells
and numerous monitoring, obs ervation and point of compliance wells, and also an integrated SX/EW plant. With
major components already on site, the PTF is expected to be operational in the latter half of 2018.
REVIEW OF PROJECTS – CONTINUED
In January 2017, the Company announced that completed technical work on the Florence property has resulted in
a significant improvement in project economics. On February 28, 2017, the NI 43-101 technical report documenting
these results was filed on www.sedar.com.
New Prosperity
On July 18, 2017, Taseko received approval from the Province of British Columbia to undertake a site investigation
program to conduct exploratory work at the New Prosperity project site. The Province issued a Notice of Work,
which is a multi-year permit from the Ministry of Energy & Mines that allows the Company to gather information for
the purpose of advancing mine permitting under the British Columbia Mines Act.
Taseko is proceeding with its request to amend the British Columbia envi ronmental assessment certificate for the
New Prosperity Project.
The two Judicial Reviews initiated by Taseko were heard in federal court over a five day period in the week of
January 30, 2017. Both Judicial Reviews focus on the principles of administrative and procedural fairness. Taseko’s
allegation is that the Government of Canada, through the conduct of the environmental assessment and the
decisions which resulted from it, failed in their obligation to uphold those fundamental principles.
The Company will host a telephone conference call and live webcast on Friday, October 27 at 11:00 a.m. Eastern
Time (8:00 a.m. Pacific) to discuss these results. 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 2, 2017 and can be accessed by dialing (855)
859-2056 in Canada and the United States, or (404) 537-3406 internationally and using the passcode 86634056.
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 convent ional 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 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. Site operating costs is calculated
by removing net changes in inventory and depletion and amortization 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.
Three months ended
September 30,
Nine months ended
September 30,
(Cdn$ in thousands, unless otherwise indicated) – 75% basis 2017 2016 2017 2016
Cost of sales 45,160 60,465 171,032 204,854
Less:
Depletion and amortization (11,785) (16,067) (33,161) (43,715)
Net change in inventory 3,027 12,076 (566) 9,156
Transportation costs (4,498) (3,544) (15,207) (11,149)
Site operating costs 31,904 52,930 122,098 159,146
Less by-product credits:
Molybdenum, net of treatment costs (2,725) (508) (12,867) (508)
Silver, excluding amortization of deferred revenue (107) (1,128) (637) (2,970)
Site operating costs, net of by-product credits 29,072 51,294 108,594 155,668
Total copper produced (thousand pounds) 26,306 24,838 86,780 69,426
Total costs per pound produced 1.11 2.06 1.25 2.24
Average exchange rate for the period (CAD/USD) 1.25 1.30 1.31 1.32
Site operating costs, net of by-product credits (US$ per
pound) 0.88 1.58 0.96 1.69
Site operating costs, net of by-product credits 29,072 51,294 108,594 155,668
Add off-property costs:
Treatment and refining costs of copper concentrate 5,378 6,187 21,900 18,266
Transportation costs 4,498 3,544 15,207 11,149
Total operating costs 38,948 61,025 145,701 185,083
Total operating costs (C1) (US$ per pound) 1.18 1.89 1.28 2.02
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;
• Write-down of mine equipment;
• Unrealized gain/loss on copper put options;
• Loss on settlement of long-term debt;
• Gain/loss on copper call option; and
• Non-recurring transactions, including related tax adjustments.
Management believes these transactions do not reflect the underlying operating 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 currency gains/losses are not necessarily reflecti ve 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) 2017 2016 2017 2016
Net income (loss) 20,136 (15,610) 41,862 (36,509)
Unrealized foreign exchange (gain) loss (10,299) 5,090 (19,225) (16,587)
Write-down of mine equipment 3,551 - 3,551 -
Unrealized loss on copper put options 647 567 1,072 567
Loss on settlement of long-term debt - - 13,102 -
(Gain) loss on copper call option - (517) 6,305 474
Other non-recurring expenses* - 81 - 5,489
Estimated tax effect of adjustments (630) (34) (3,702) (1,698)
Adjusted net income (loss) 13,405 (10,423) 42,965 (48,264)
Adjusted EPS 0.06 (0.05) 0.19 (0.22)
* Other non-recurring expenses includes legal and other advisory costs associated with the special shareholder meeting, the proxy contest and
related litigation, and other non-recurring financing costs.
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 believ es 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 i s
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 ongoing operating performance.