May 13, 2015
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. |
May 13, 2015, Vancouver, BC - Taseko Mines Limited (TSX: TKO; NYSE MKT: TGB) (“Taseko” or the “Company”) reports the results for the three months ended March 31, 2015.
First Quarter Highlights
The table below details monthly production statistics for the first quarter, as well as a second quarter forecast:
|
Jan-15 | Feb-15 | Mar-15 | Q1 Total | Q2 Forecast |
Tons Milled (000s tons) | 2,480 | 2,600 | 2,680 | 7,760 | 7,700 |
Tons Per Day | 79,800 | 92,700 | 86,500 | 86,100 | 84,600 |
Strip Ratio | 2.4 | 2.1 | 2.5 | 2.4 | 2.2 |
Grade | 0.23% | 0.21% | 0.24% | 0.23% | 0.27% |
Recovery | 81.1% | 80.2% | 83.0% | 81.4% | 84.0% |
Cu Production (000s lbs) | 9,100 | 8,600 | 10,700 | 28,400 | 35,500 |
Cost Per Tonne Milled (C$) | $10.09 | $8.96 | $10.00 | $9.66 | $10.80 |
Site Operating Costs Net of By-Product Credits (US$/lb) |
$2.06 | $2.13 | $1.77 | $2.00 | $1.75 |
“Last week we announced an updated mine plan and long-term reserves for Gibraltar. The six-month engineering study optimized cut-off grade, strip ratio and pit development sequencing. The new mine plan significantly reduces the strip ratio and in combination with the new pit development sequence, will result in lower costs and more profitable copper production,” continued Mr. Hallbauer. “This is only achievable because of the investments we have made at Gibraltar. In recent months, we have been mining to a short-term plan which is similar to the updated long-term plan. In the space of just a few months, we have made significant reductions in cost per ton milled, and as the grade has been improving, costs per pound are also falling. Costs will continue to decline as grade stabilizes at higher levels, recoveries improve and as we advance other cost saving initiatives.”
Mr. Hallbauer added, “Our Florence and Aley projects continue to progress through the permitting and environmental assessment phases. We are managing spending on these projects to correspond with our cash flow and liquidity. Until copper market conditions improve, we will maintain a very conservative spending policy.”
Mr. Hallbauer concluded, “I would also like to congratulate three members of my management team who have recently received important industry awards. In January, Rob Rotzinger, Vice President, Capital Projects, was awarded the Mineral Processor of the Year by the Canadian Mineral Processors (CMP) Group. This award was presented to Rob in recognition of the outstanding work he performed on the GDP3 project, for his dedication to the successful advancement of the Gibraltar Mine, and for his commitment to advancing mineral processing solutions at Gibraltar and Taseko as a whole. In May, John McManus, Chief Operating Officer, was named Mining Person of the Year by the Mining Association of BC. This award publicly recognizes an outstanding individual who has shown leadership in advancing and promoting the mining industry in British Columbia. John was recognized for his work on leading the Mining Association of British Columbia both as Chairman and as a Director during a period when significant changes were occurring with respect to how our industry is perceived by the public, government, media, and First Nations.”
“Also in May, Tom Broddy, Manager, Engineering Projects received two awards from the Canadian Institute of Mining, Metallurgy and Petroleum (CIM). He was presented the District Distinguished Service Award for exemplary effort in introducing students to the mining industry and to the CIM, as well as the Distinguished Service Medal for his commendable mentoring, his commitment to the Surface Mining Society and his dedication to the CIM Vancouver Branch.”
HIGHLIGHTS
Financial Data | Three months ended March 31, | ||
(Cdn$ in thousands, except for per share amounts) | 2015 | 2014 | Change |
Revenues | 61,835 | 104,996 | (43,161) |
Earnings (loss) from mining operations before depletion and amortization* | 2,329 | 19,439 | (17,110) |
Earnings (loss) from mining operations | (7,979) | 8,787 | (16,766) |
Net earnings (loss) | (25,206) | (9,148) | (16,058) |
Per share - basic (“EPS”) | (0.11) | (0.05) | (0.06) |
Adjusted net earnings (loss)* | (2,434) | (2,710) | 275 |
Per share - basic (“adjusted EPS”) * | (0.01) | (0.01) | - |
EBITDA * | (11,996) | 8,858 | (20,854) |
Adjusted EBITDA * | 11,224 | 14,594 | (3,370) |
Cash flows provided by (used for) operations | (3,328) | 23,301 | (26,629) |
Operating Data (Gibraltar - 100% basis) | Three months ended March 31, | ||
|
2015 | 2014 | Change |
Tons mined (millions) | 21.0 | 25.9 | (4.9) |
Tons milled (millions) | 7.8 | 7.0 | 0.8 |
Production (million pounds Cu) | 28.4 | 34.5 | (6.1) |
Sales (million pounds Cu) | 25.4 | 40.0 | (14.6) |
REVIEW OF OPERATIONS
Gibraltar mine (75% Owned)
Operating results in the following table are presented on a 100% basis.
Operating Data (100% basis) | Q1 2015 | Q4 2014 | Q3 2014 | Q2 2014 | Q1 2014 |
Tons mined (millions) | 21.0 | 25.1 | 32.5 | 30.2 | 25.9 |
Tons milled (millions) | 7.8 | 7.6 | 7.8 | 7.7 | 7.0 |
Strip ratio | 2.4 | 3.1 | 3.0 | 3.1 | 2.8 |
Site operating cost per ton milled (CAD) * | $9.66 | $10.13 | $12.10 | $11.42 | $11.91 |
Copper concentrate | |
|
|
|
|
Grade (%) | 0.225 | 0.222 | 0.267 | 0.285 | 0.290 |
Recovery (%) | 81.4 | 81.3 | 83.3 | 85.3 | 84.6 |
Production (million pounds Cu) | 28.4 | 27.7 | 34.5 | 37.6 | 34.5 |
Sales (million pounds Cu) | 25.4 | 26.0 | 37.1 | 38.1 | 40.0 |
Inventory (million pounds Cu) | 6.2 | 3.2 | 1.4 | 3.9 | 4.4 |
Copper cathode | |
|
|
|
|
Production (million pounds) | - | 0.4 | 0.9 | 0.9 | - |
Sales (million pounds) | - | 0.5 | 1.0 | 0.6 | - |
Molybdenum concentrate | |
|
|
|
|
Grade (%) | 0.006 | 0.008 | 0.011 | 0.011 | 0.009 |
Recovery (%) | 40.0 | 38.8 | 38.0 | 41.4 | 42.5 |
Production (thousand pounds Mo) | 404 | 445 | 654 | 667 | 566 |
Sales (thousand pounds Mo) | 379 | 481 | 708 | 731 | 589 |
Per unit data (US$ per pound) * | |
|
|
|
|
Site operating costs* | $2.12 | $2.43 | $2.60 | $2.11 | $2.19 |
By-product credits * | (0.12) | (0.11) | (0.25) | (0.35) | (0.21) |
Site operating costs, net of by-product credits * | $2.00 | $2.32 | $2.35 | $1.76 | $1.98 |
Off-property costs | 0.39 | 0.45 | 0.40 | 0.36 | 0.50 |
Total operating costs (C1) * | $2.39 | $2.77 | $2.75 | $2.12 | $2.48 |
OPERATIONS ANALYSIS
During the first quarter of 2015, Gibraltar milled 7.8 million tons of ore, slightly over the design capacity of 85,000 tons per day. Gibraltar mined 21.0 million tons of material which was lower than recent quarters due to the idling of mine equipment to reduce expenditures in the face of temporary lower grade to the mill.
Average head grade for the first quarter of 2015 was 0.225% compared to 0.29% in the first quarter of 2014. Head grades are expected to fluctuate between 0.25% and 0.28% for the remainder of 2015. Lower head grades also negatively impacted copper recoveries in the first quarter of 2015. As grade improves recoveries are expected to improve as well.
Copper in concentrate production in the first quarter of 2015 was 28.4 million pounds, a decrease of 18% from copper production in the first quarter of 2014 of 34.5 million pounds. Molybdenum production during the first quarter of 2015 was 0.4 million pounds, a decrease of 29% over the first quarter of 2014. The decrease in molybdenum production is due to lower molybdenum grade.
Gibraltar’s SX/EW plant was seasonally idle in in the first quarter but was restarted in April 2015.
In the first quarter of 2015, site operating costs, net of by-product credits per pound of copper produced was US$2.00, compared to US$1.98 during the first quarter of 2014. Site operating cost per ton milled decreased by approximately 19% to $9.66 in the first quarter of 2015 as a result of a reduction in waste mining, declining diesel prices and lower maintenance costs. The weakening Canadian dollar is also having a positive impact on our reported US dollar unit cost. The increase in per pound unit costs is being driven by the lower copper production as a result of lower head grades, which has offset the impact of operating cost reductions.
Off-property costs, including transportation, treatment and refining charges, for the first quarter of 2015 were US$0.39 per pound produced, compared to US$0.50 per pound produced in the first quarter of 2014. Off-property costs are driven by sales volumes, and therefore off-property cost per pound produced fluctuates based on differences between production and sales volumes.
The total operating costs, including off-property costs, for the first quarter of 2015 were US$2.39 per pound produced, compared to US$2.48 per pound in the first quarter of 2014.
GIBRALTAR OUTLOOK
For the balance of 2015, copper grades are forecasted to fluctuate between 0.25% and 0.28%. Based on forecasted grades and subsequent improved recoveries, the Gibraltar Mine is expected to produce 130-140 million pounds of copper in 2015 (100% basis). Increases in copper grades and production are expected to reduce total operating costs per pound over the remainder of this year. There are a number of cost control initiatives underway including mine plan modifications to reduce waste stripping requirements, a workforce reduction effective in January 2015, and initiatives with vendors to reduce costs of supplies and consumables. The mine is also benefiting from continued declines in the price of diesel, which is a significant input cost. Diesel prices have fallen by approximately 23% since the beginning of this year. The Canadian dollar has fallen approximately 15% since the beginning of 2014 and with approximately 80% of Gibraltar’s operating costs denominated in Canadian dollars, the weakening dollar has a significant impact on total operating costs per pound reported in US dollars.
The cumulative effects of these factors are expected to result in reduced operating costs at the Gibraltar Mine going forward.
REVIEW OF PROJECTS
Florence Copper Project
The Florence Copper Project is currently in the final stages of permitting for the Phase 1 Production Test Facility (“PTF”).
The Temporary Aquifer Protection Permit (“APP”) for the PTF issued in July 2013 by the Arizona Department of Environmental Quality (“ADEQ”) was subject to an appeal. As a result of the appeal an amendment was submitted in March 2015 and issuance of the amended APP is now anticipated during the third quarter of 2015. In December, 2014, the Company announced the receipt of a draft Underground Injection Control (UIC) permit from the U.S. Environmental Protection Agency (EPA). The UIC permit regulates the construction and operation of Florence Copper’s injection wells at the site and is the final regulatory milestone required by the Company to construct and operate the PTF. The public hearing for the draft permit was held on January 22, 2015 and the public comment period expired in April, 2015. The Company expects the UIC permit to be issued by mid-2015.
Aley Project
On September 19, 2014 the BC Environmental Assessment Office (EAO) issued a Section 10 Order under the BC Environmental Assessment Act, initiating the BC environmental assessment process for the Aley Niobium Project.
New Prosperity Project
On February 26, 2014 the Government of Canada announced its decision to not issue the authorizations necessary for the New Prosperity project to proceed. In the wake of this decision, Taseko initiated legal proceedings in the form of two separate judicial reviews which challenge the decision and the process by which the decision was reached. In August 2014, the Company applied to the Federal Court to convert both judicial reviews into a civil action. The motion was dismissed as the court felt that the judicial review process is the correct vehicle to pursue the remedies that the Company seeks.
On January 14, 2015 the British Columbia Minister of Environment granted the Company a five-year extension to the Environmental Assessment Certificate.
Taseko will host a conference call on Thursday, May 14, 2015 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. Alternatively, a live and archived webcast will also be available at tasekomines.com. The conference call will be archived for later playback until May 21, 2015 and can be accessed by dialing (855) 859-2056 in Canada and the United States, or (404) 537-3406 internationally and using the passcode 33407188. |
For further information on Taseko, please see the Company’s website at www.tasekomines.com or contact:
Brian Bergot, Vice President, Investor Relations - 778-373-4554, toll free 1-800-667-2114
Russell Hallbauer
President and CEO
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 consistent basis. The following tables below provide a reconciliation of these non-GAAP measures to the most directly comparable IFRS measure.
Total operating costs & Site operating costs, net of by-product credits
Total costs of sales include all costs absorbed into inventory, as well as treatment and refining costs and transportation costs. Site operating costs is calculated by removing net changes in inventory, depletion and amortization and off-property 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 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 March 31, |
|
(Cdn$ in thousands, unless otherwise indicated) - 75% basis | 2015 | 2014 |
Cost of sales | 69,814 | 96,209 |
Less Depletion and amortization | (10,308) | (10,652) |
Net change in inventory | 7,061 | (8,622) |
Less off-property costs: | |
|
Treatment and refining costs | (6,770) | (7,702) |
Transportation costs | (3,617) | (6,513) |
Site operating costs | 56,180 | 62,720 |
Less by-product credits: | |
|
Molybdenum | (2,598) | (5,090) |
Silver | (704) | (1,012) |
Site operating costs, net of by-product credits | 52,878 | 56,618 |
Total copper produced (thousand pounds) | 21,273 | 25,906 |
Total costs per pound produced | 2.49 | 2.19 |
Average exchange rate for the period (CAD/USD) | 1.24 | 1.10 |
Site operating costs, net of by-product credits (US$ per pound) | 2.00 | 1.98 |
Site operating costs, net of by-product credits | 52,878 | 56,618 |
Add off-property costs: | |
|
Treatment and refining costs | 6,770 | 7,702 |
Transportation costs | 3,617 | 6,513 |
Total operating costs | 63,265 | 70,833 |
Total operating costs (C1) (US$ per pound) | 2.39 | 2.48 |
Adjusted net earnings
Adjusted net earnings remove the effect of the following transactions from net earnings as reported under IFRS:
|
Three months ended March 31, | |
($ in thousands, except per share amounts) | 2015 | 2014 |
Net earnings (loss) | (25,206) | (9,148) |
Unrealized loss (gain) on derivatives | 1,751 | (2,744) |
Unrealized foreign exchange (gain) loss | 21,469 | 8,480 |
Estimated tax effect of adjustments | (448) | 702 |
Adjusted net earnings (loss) | (2,434) | (2,710) |
Adjusted EPS | (0.01) | (0.01) |
EBITDA and adjusted EBITDA
EBITDA represents net earnings 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 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.
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:
|
Three months ended March 31, |
|
($ in thousands, except per share amounts) | 2015 | 2014 |
Net earnings (loss) | (25,206) | (9,148) |
Add: | |
|
Depletion and Amortization | 10,334 | 10,735 |
Amortization of stock-based compensation | 206 | 2,083 |
Interest expense | 6,362 | 6,647 |
Interest income | (657) | (1,122) |
Income tax expense (recovery) | (3,035) | (337) |
EBITDA | (11,996) | 8,858 |
Adjustments: | |
|
Unrealized (gain)/loss on derivative instruments | 1,751 | (2,744) |
Unrealized foreign exchange (gain) loss | 21,469 | 8,480 |
Adjusted EBITDA | 11,224 | 14,594 |
Earnings from mining operations before depletion and amortization
Earnings from mining operations before depletion and amortization is earnings from mining operations with depletion and amortization added back. The Company discloses this measure, which has been derived from our financial statements and applied on a consistent basis, to provide assistance in understanding the results of the Company’s operations and financial position and it is meant to provide further information about the financial results to investors.
|
Three months ended March 31, | |
|
(Cdn$ in thousands, except per share amounts) | 2015 | 2014 | |
Earnings (loss) from mining operations | (7,979) | 8,787 | |
Add: | |
|
|
Depletion and amortization | 10,308 | 10,652 | |
Earnings from mining operations before depletion and amortization | 2,329 | 19,439 |
Site operating costs per ton milled
|
Three months ended March 31, | |
(Cdn$ in thousands, except per share amounts) | 2015 | 2014 |
Direct mining and processing costs (included in cost of sales) | 56,180 | 62,720 |
|
|
|
Tons milled (thousands) (75% basis) | 5,813 | 5,266 |
Site operating costs per ton milled | $9.66 | $11.91 |
No regulatory authority has approved or disapproved of the information contained in this news release.
This document contains “forward-looking statements” that were based on Taseko’s expectations, estimates and projections as of the dates as of which those statements were made. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “outlook”, “anticipate”, “project”, “target”, “believe”, “estimate”, “expect”, “intend”, “should” and similar expressions.
Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. These included but are not limited to:
For further information on Taseko, investors should review the Company’s annual Form 40-F filing with the United States Securities and Exchange Commission www.sec.gov and home jurisdiction filings that are available at www.sedar.com.