August 12, 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.
August 12, 2015, Vancouver, BC — Taseko Mines Limited (TSX: TKO; NYSE MKT: TGB) (“Taseko” or the “Company”) reports the results for the three and six months ended June 30, 2015.
Second Quarter Highlights
Russell Hallbauer, President and CEO of Taseko, commented, “Concentrator throughput, head grade and recoveries all trended higher through the second quarter, with a corresponding decrease in site operating costs. We targeted site operating costs of roughly US$1.50-US$1.60 per pound by the end of 2015; however, through the efforts of our operations and maintenance teams, we have already achieved that level in May and June. This past quarter is a good indication of how we expect Gibraltar to perform on an on-going basis. Steady production has continued into the third quarter with approximately 14.5 million pounds of copper production in July. Due to planned mill maintenance in the third quarter, throughput will be slightly reduced from the previous quarter, although we still expect to average design rates for the quarter.”
Mr. Hallbauer continued, “The improved financial results in the second quarter were a result of increased copper production and decreased operating costs per pound. The $35 million of cash flow from operations demonstrates the ability of Gibraltar to generate significant returns, even in times of weaker copper pricing. We remain focussed on the things we can control and it is imperative that we continuously look to improve our cornerstone operation to ensure it will generate positive cash flow at all points of the copper price cycle.”
The table below details monthly production statistics for the second quarter:
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Q1 Total | Apr-15 | May-15 | Jun-15 | Q2 Total |
Tons Milled (000s tons) | 7,760 | 2,575 | 2,765 | 2,700 | 8,040 |
Tons Per Day | 86,100 | 85,800 | 89,200 | 89,900 | 88,300 |
Strip Ratio | 2.4 | 2.3 | 2.5 | 2.5 | 2.5 |
Grade | 0.23% | 0.26% | 0.29% | 0.30% | 0.28% |
Recovery | 81.4% | 82.7% | 85.9% | 87.9% | 85.6% |
Cu Production (000s lbs) | 28,400 | 11,100 | 14,100 | 14,600 | 39,800 |
Cost Per Tonne Milled (C$) | $9.66 | $10.72 | $9.63 | $9.37 | $9.89 |
Site Operating Costs Net of By-Product Credits (US$/lb) |
$2.00 | $1.87 | $1.46 | $1.40 | $1.54 |
Note: Numbers may not add up exactly due to rounding
“We have also recently purchased 15 million pounds of copper put options for the fourth quarter with a strike price of US$2.40 per pound. These are in addition to the five million pounds per month that we have in place for the third quarter at a strike price of US$2.50 per pound. At today’s copper price, the options effectively reduce our operating costs by a further seven cents per pound in the third quarter,” concluded Mr. Hallbauer.
HIGHLIGHTS
Financial Data | Three months ended June 30, | Six months ended June 30, | ||||
(Cdn$ in thousands, except for per share amounts) | 2015 | 2014 | Change | 2015 | 2014 | Change |
Revenues | 103,251 | 107,307 | (4,056) | 165,086 | 212,303 | (47,217) |
Earnings (loss) from mining operations before depletion and amortization* |
26,267 | 26,665 | (398) | 28,596 | 46,104 | (17,508) |
Earnings (loss) from mining operations | 14,010 | 13,334 | 676 | 6,031 | 22,121 | (16,090) |
Net earnings (loss) | 4,017 | 2,628 | 1,389 | (21,189) | (6,520) | (14,669) |
Per share - basic (“EPS”) | 0.02 | 0.01 | 0.01 | (0.10) | (0.03) | (0.07) |
Adjusted net earnings (loss)* | 1,601 | (2,172) | 3,773 | (833) | (4,881) | 4,048 |
Per share - basic (“adjusted EPS”) * | 0.01 | (0.01) | 0.02 | - | (0.03) | 0.03 |
EBITDA * | 25,959 | 23,336 | 2,623 | 13,963 | 32,194 | (18,231) |
Adjusted EBITDA * | 23,402 | 19,217 | 4,185 | 34,626 | 33,811 | 815 |
Cash flows provided by (used for) operations | 35,212 | 13,551 | 21,661 | 32,482 | 36,852 | (4,370) |
Operating Data (Gibraltar - 100% basis) | Three months ended June 30, | Six months ended June 30, | ||||
|
2015 | 2014 | Change | 2015 | 2014 | Change |
Tons mined (millions) | 24.0 | 30.3 | (6.3) | 45.0 | 56.1 | (11.1) |
Tons milled (millions) | 8.0 | 7.7 | 0.3 | 15.8 | 14.8 | 1.0 |
Production (million pounds Cu) | 39.8 | 38.5 | 1.3 | 68.2 | 73.0 | (4.8) |
Sales (million pounds Cu) | 42.2 | 38.7 | 3.5 | 67.7 | 78.7 | (11.0) |
REVIEW OF OPERATIONS
Gibraltar mine (75% Owned)
Operating results in the following table are presented on a 100% basis.
Operating Data (100% basis) | Q2 2015 | Q1 2015 | Q4 2014 | Q3 2014 | Q2 2014 |
Tons mined (millions) | 24.0 | 21.0 | 25.1 | 32.5 | 30.2 |
Tons milled (millions) | 8.0 | 7.8 | 7.6 | 7.8 | 7.7 |
Strip ratio | 2.5 | 2.4 | 3.1 | 3.0 | 3.1 |
Site operating cost per ton milled (CAD) * | $9.89 | $9.66 | $10.13 | $12.10 | $11.42 |
Copper concentrate |
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Grade (%) | 0.285 | 0.225 | 0.222 | 0.267 | 0.285 |
Recovery (%) | 85.6 | 81.4 | 81.3 | 83.3 | 85.3 |
Production (million pounds Cu) | 39.2 | 28.4 | 27.7 | 34.5 | 37.6 |
Sales (million pounds Cu) | 41.8 | 25.4 | 26.0 | 37.1 | 38.1 |
Inventory (million pounds Cu) | 3.6 | 6.2 | 3.2 | 1.4 | 3.9 |
Copper cathode |
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Production (million pounds) | 0.6 | - | 0.4 | 0.9 | 0.9 |
Sales (million pounds) | 0.4 | - | 0.5 | 1.0 | 0.6 |
Molybdenum concentrate |
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Grade (%) | 0.009 | 0.006 | 0.008 | 0.011 | 0.011 |
Recovery (%) | 33.7 | 40.0 | 38.8 | 38.0 | 41.4 |
Production (thousand pounds Mo) | 474 | 404 | 445 | 654 | 667 |
Sales (thousand pounds Mo) | 391 | 379 | 481 | 708 | 731 |
Per unit data (US$ per pound) * |
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Site operating costs* | $1.63 | $2.12 | $2.43 | $2.60 | $2.11 |
By-product credits * | (0.09) | (0.12) | (0.11) | (0.25) | (0.35) |
Site operating costs, net of by-product credits * | $1.54 | $2.00 | $2.32 | $2.35 | $1.76 |
Off-property costs | 0.43 | 0.39 | 0.45 | 0.40 | 0.36 |
Total operating costs (C1) * | $1.97 | $2.39 | $2.77 | $2.75 | $2.12 |
*Non-GAAP performance measure. See page 20 of this MD&A
OPERATIONS ANALYSIS
During the second quarter of 2015, Gibraltar milled on average 88,000 tons per day, 3,000 tons per day over the design capacity of 85,000 tons per day. Gibraltar mined 24.0 million tons of material which reflects the strip ratio of the new mine plan released in May 2015.
Average head grade for the second quarter of 2015 was 0.285% compared to 0.225% in the first quarter of 2015. Head grades are expected to fluctuate between 0.25% and 0.28% for the remainder of 2015. Copper in concentrate production in the second quarter of 2015 was 39.2 million pounds, an increase of 38% from copper production in the first quarter of 2015 of 28.4 million pounds. Molybdenum production during the second quarter of 2015 was 0.5 million pounds, an increase of 25% over the first quarter of 2015.
Gibraltar’s SX/EW plant was restarted for the 2015 season and produced 0.6 million pounds of copper in the second quarter of 2015.
In the second quarter of 2015, site operating costs, net of by-product credits per pound of copper produced was US$1.54, compared to US$2.00 during the first quarter of 2015 primarily due to increased copper production as a result of increased head grade and recoveries. Site operating cost per ton milled was $9.89 which is comparable to the first quarter of 2015 and 14% lower than the second quarter of 2014.
Off-property costs, including transportation, treatment and refining charges, for the second quarter of 2015 were US$0.43 per pound produced, compared to US$0.39 per pound produced in the first quarter of 2015. 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. Off-property costs are continuing to benefit from low ocean freight costs. Treatment and refining costs are also declining which should provide further cost reductions in the future.
The total operating costs, including off-property costs, for the second quarter of 2015 were US$1.97 per pound produced, compared to US$2.39 per pound in the first quarter of 2015.
During the first six months of 2015, Gibraltar spent $1.2 million on capital expenditures, and incurred capitalized stripping of $6.0 million.
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).
A number of cost control initiatives were completed during the first half of 2015 including mine plan modifications to reduce waste stripping requirements and a workforce reduction. Mine operating costs have also benefited from continued declines in the price of diesel, which has fallen 10% since the beginning of this year, and 41% over the last twelve months. As a result of these factors, Gibraltar’s site operating cost per ton milled* has fallen to CAD$9.92 in the second quarter of 2015, a 15% reduction from the second quarter of 2014. This unit cost is expected to be sustainable going forward.
The Canadian dollar exchange rate has fallen approximately 17.5% relative to the US dollar since the beginning of 2014, and has continued to decline since the end of the second quarter. The weakening Canadian dollar is contributing to improved operating margins at Gibraltar as approximately 80% of mine operating costs are paid in Canadian dollars. Gibraltar’s total operating costs (C1)* were $US 1.97 per pound produced for the second quarter of 2015, based on the average Canadian/US dollar exchange rate of 1.23 for the period. Assuming an exchange rate of 1.30, Gibraltar’s total operating costs (C1)* would have been approximately $US 1.90 per pound for the second quarter of 2015.
Gibraltar’s total operating costs (C1)* per pound in the second quarter include a by-product credit of $US 0.06/lb related to molybdenum revenues, which was offset by molybdenum off-property costs of $US 0.03/lb and site operating costs of $US 0.02/lb in the period. At current market prices there is no operating margin from molybdenum production at Gibraltar and, as a result, the molybdenum circuit has been temporarily idled. It will remain on care and maintenance until market conditions improve and a restart is warranted.
Capital expenditures at Gibraltar are expected to be between $8.0 million and $10.0 million for 2015, excluding capitalized stripping. Project development costs associated with the Florence copper and Aley niobium projects are being capitalized and make up the balance of the spending under Property, Plant and Equipment on the Statement of Cash Flows.
*Non-GAAP performance measure. See page 20 on this MD&A
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 Company is working with Arizona Department of Environmental Quality (“ADEQ”) in connection with the Temporary Aquifer Protection Permit (“APP”), and with the U.S. Environmental Protection Agency (EPA) in connection with the Underground Injection Control (UIC) permit. These are the final two remaining permits required for construction and operation of the PTF.
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. On December 31, 2014 EAO issued a Section 11 Order establishing the scope, procedures and methods concerning the environmental assessment for the project.
New Prosperity Project
On January 14, 2015 the British Columbia Minister of Environment granted the Company a five-year extension to the Environmental Assessment Certificate.
The Company will host a telephone conference call and live webcast on Thursday, August 13 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 August 20, 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 71746324.
For further information contact: Brian Bergot, 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.
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Three Months ended June 30, |
Six Months ended June 30, |
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(Cdn$ in thousands, unless otherwise indicated) — 75% basis | 2015 | 2014 | 2015 | 2014 |
Cost of sales | 89,241 | 93,973 | 159,055 | 190,182 |
Less Depletion and amortization | (12,257) | (13,331) | (22,565) | (23,983) |
Net change in inventory | (1,653) | (3,113) | 5,408 | (11,735) |
Less offsite costs: |
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Treatment and refining costs | (10,497) | (7,287) | (17,267) | (14,989) |
Transportation costs | (5,239) | (4,012) | (8,856) | (10,524) |
Site operating costs | 59,595 | 66,230 | 115,775 | 128,951 |
Less by-product credits: |
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Molybdenum | (2,212) | (10,084) | (4,810) | (15,174) |
Silver | (1,035) | (1,047) | (1,739) | (2,059) |
Site operating costs, net of by-product credits | 56,348 | 55,099 | 109,226 | 111,718 |
Total copper produced (thousand pounds) | 29,857 | 28,858 | 51,130 | 54,764 |
Total costs per pound produced | 1.89 | 1.90 | 2.14 | 2.03 |
Average exchange rate for the period (CAD/USD) | 1.23 | 1.09 | 1.24 | 1.10 |
Site operating costs, net of by-product credits (US$ per pound) | 1.54 | 1.76 | 1.73 | 1.86 |
Site operating costs, net of by-product credits | 56,348 | 55,099 | 109,226 | 111,718 |
Add off property costs: |
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Treatment and refining costs | 10,497 | 7,287 | 17,267 | 14,989 |
Transportation costs | 5,239 | 4,012 | 8,856 | 10,524 |
Total operating costs | 72,084 | 66,398 | 135,349 | 137,231 |
Total operating costs (US$ per pound) | 1.97 | 2.12 | 2.14 | 2.28 |
Adjusted net earnings
Adjusted net earnings remove the effect of the following transactions from net earnings as reported under IFRS
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 reflective of the underlying operating results for the reporting periods presented.
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Three months ended June 30, |
Six months ended June 30, |
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($ in thousands, except per share amounts) | 2015 | 2014 | 2015 | 2014 |
Net earnings (loss) | 4,017 | 2,628 | (21,189) | (6,520) |
Unrealized loss (gain) on derivatives | 490 | 2,660 | 2,241 | (84) |
Unrealized foreign exchange (gain) loss | (3,047) | (7,198) | 18,422 | 1,282 |
Write down of marketable securities | - | 419 | - | 419 |
Estimated tax effect of adjustments | 141 | (681) | (307) | 22 |
Adjusted net earnings (loss) | 1,601 | (2,172) | (833) | (4,881) |
Adjusted EPS | 0.01 | (0.01) | (0.00) | (0.03) |
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:
While some of the adjustments are recurring, gains/losses on the sale of marketable securities do not reflect the underlying performance of the Company’s core mining business and are not necessarily indicative of future results. Furthermore, unrealized gains/losses on derivative instruments, foreign currency translation gains/losses and changes in the fair value of financial instruments are not necessarily reflective of the underlying operating results for the reporting periods presented.
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Three months ended June 30, |
Six months ended June 30, |
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($ in thousands, except per share amounts) | 2015 | 2014 | 2015 | 2014 |
Net earnings (loss) | 4,017 | 2,628 | (21,189) | (6,520) |
Add: |
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Depletion and Amortization | 12,277 | 13,380 | 22,611 | 24,115 |
Amortization of stock based compensation | 1,144 | 478 | 1,350 | 2,561 |
Interest expense | 6,247 | 6,535 | 12,609 | 13,182 |
Interest income | (167) | (942) | (824) | (2,064) |
Income tax expense (recovery) | 2,441 | 1,257 | (594) | 920 |
EBITDA | 25,959 | 23,336 | 13,963 | 32,194 |
Adjustments: |
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Unrealized (gain)/loss on derivative instruments | 490 | 2,660 | 2,241 | (84) |
Write-down of marketable securities | - | 419 | - | 419 |
Unrealized foreign exchange (gain) loss | (3,047) | (7,198) | 18,422 | 1,282 |
Adjusted EBITDA | 23,402 | 19,217 | 34,626 | 33,811 |
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.
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Three months ended June 30, |
Six months ended June 30, |
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(Cdn$ in thousands, except per share amounts) | 2015 | 2014 | 2015 | 2014 |
Earnings from mining operations | 14,010 | 13,334 | 6,031 | 22,121 |
Add: |
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Depletion and amortization | 12,257 | 13,331 | 22,565 | 23,983 |
Earnings from mining operations before depletion and amortization | 26,267 | 26,665 | 28,596 | 46,104 |
Site operating costs per ton milled
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Three months ended June 30, |
Six months ended June 30, |
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((Cdn$ in thousands, except per share amounts) | 2015 | 2014 | 2015 | 2014 |
Direct mining and processing costs (included in cost of sales) | 59,595 | 66,230 | 115,775 | 128,951 |
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Tons milled (thousands) (75% basis) | 6,028 | 5,800 | 11,841 | 11,066 |
Site operating costs per ton milled | $9.89 | $11.42 | $9.78 | $11.65 |
CAUTION REGARDING FORWARD-LOOKING INFORMATION
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.
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.