Northern Miner: Taseko expects ‘money-maker’ Florence Copper’s draft permit this monthJune 04, 2021
One of the top contenders to bring new copper pounds to market in the medium term is Taseko Mines (TSX: TKO; NYSE-AM: TGB; LSE: TKO), operator of the 75%-owned Gibraltar open-pit mine in British Columbia, company president Stuart McDonald tells The Northern Miner.
The Vancouver-based company is awaiting a final permit decision by the U.S. government’s Environmental Protection Agency (EPA) on its Florence Copper in-situ recovery project in Arizona.
The mining executive, who says Florence Copper “will be a money-maker at any copper price,” notes that based on the company’s ongoing dialogue with the EPA, the agency is due to issue the draft underground injection control (UIC) permit before the end of June.
“We are in a strong financial position and ready to move into a construction program at Florence in the coming months,” McDonald says in an interview.
Once the draft permit has been issued, there will be a 30-day public comment period with a public hearing scheduled towards the end, similar to the Arizona state process that Taseko completed last year.
After the public comment period, the EPA will review and respond to the comments received before granting the final UIC permit, if warranted.
“While this permitting process has moved more slowly than expected, we know that it is moving forward, and we are closing in on having a fully permitted and financed top-tier copper project,” says McDonald. “Detailed engineering and procurement preparation has been advancing, and we will be in very good shape to begin construction upon receipt of the UIC, which we expect sometime in the third quarter of this year.”
In March, the Arizona Court of Appeals cleared the project for development after the nearby Town of Florence fought tooth and nail against the project out of fear it will pollute scarce water resources. The ruling, announced on March 23, upheld the company’s right to mine its private property within the town and also awarded the company US$1.7 million in legal costs.
An employee takes notes at a Florence Copper observation well. Credit: Taseko Mines.
The Arizona Development of Environmental Quality has already granted one of the two essential permits (the aquifer protection permit) necessary for commercial operations. That permit was received in August 2020.
Florence, about halfway between Phoenix and Tucson, is being developed in two phases. A $25 million production test facility was built in the first phase, including 24 injection, recovery and monitoring wells and an SX/EW plant, which commenced operation in December 2018.
McDonald says production at the test facility was wound down about midway through 2020, defining the results as “better than expected.”
Phase 2 transitions the project to commercial production and involves an expanded wellfield and SX/EW plant that is slated to produce an average of 85 million lb. of copper a year over 20 years at a cost of US$1.13 per lb. copper over the life of the mine.
The initial capex for phase two is US$227 million.
At US$4,700 per ton of installed capacity, Florence Copper is one of the lowest capital intensity copper projects in the world. At a base price of US$3.00 per lb. of copper, the full-scale project has an after-tax net present value of US$680 million at a 7.5% discount rate.
With the addition of Florence, McDonald says Taseko’s attributable annual copper production will grow by 85% to about 185 million lb. copper.
Florence Copper has measured and indicated resources of 429 short tons grading 0.33% copper for 2.8 billion lb. of copper and another 63 million tons grading 0.24% copper for 300 million lb. of contained metal.
McDonald says Taseko is also keen to move forward with its permitting-stage Yellowhead project, 150 km northeast of Kamloops in B.C. He suspects the market is attributing “very little to no value” for the asset, which, according to a January 2020 technical report, entails a 90,000 tonne per day open-pit copper mine with a 25-year mine life.
Yellowhead would produce more than 4.4 billion lb. of copper, 440,000 oz. of gold and 19 million oz. of silver. Total pre-production capex has been estimated at $1.3 billion.
Yellowhead has measured and indicated resources of 1.29 billion tonnes grading 0.25% copper, 0.028 gram gold per tonne and 1.2 grams silver per tonne and another 109 million inferred tonnes grading 0.24% copper, 0.026 gram gold and 1.2 grams silver.
Last year Taseko’s Gibraltar mine, the second-largest open-pit copper mine in Canada, produced 123 million lb. of copper. The company expects the mine to produce about 125 million lb. of copper in 2021.
Mining is advancing in the Pollyanna pit at Taseko’s cornerstone Gibraltar mine in British Columbia. Credit: Taseko Mines.
According to McDonald, Gibraltar produced 22 million lb. of copper and 530,000 lb. of molybdenum in the March quarter, which was “slightly below expectations.”
However, as mining advances in the Pollyanna pit, management expects improved grades and copper production in the second quarter and “much higher grade and production levels” in the second half of the year. This is likely to result in lower operating costs per pound and improved earnings.
“At current copper prices, we are forecasting operating margins of over $200 million for the remainder of 2021, which would put us in a position to fully fund construction of the commercial facility at Florence without a joint venture partner, if we choose to do so,” says McDonald.
The company’s cash balance on March 31 was $197 million.
Taseko is also protecting itself against a potential copper price slide. In March, Taseko extended its copper price protection strategy by purchasing put options covering 41 million lb. of copper at a strike price of US$3.75 per lb. for the second half of 2021.
In lockstep with the record-trending copper price, Taseko’s equity trading in Toronto had just about doubled to $2.36 per share in the year to date, giving it a market capitalisation of about $662 million.