Taseko Mines Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 4, 2023

There are 7 speakers on the call.

Operator

Morning, ladies and gentlemen. At this time, I would like to welcome everyone to Taseko's First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank Mr.

Operator

Burkart, you may begin your conference.

Speaker 1

Thank you, Sergio. Welcome, everyone, and thank you for joining Taseko's Q1 2023 conference call. The news release and regulatory filing announcing our financial and operational results was issued yesterday after market close And is available on our website attasekomines.com and on SEDAR. I am joined today in Vancouver by Taseko's President and CEO, Stuart McDonald Taseko's Chief Financial Officer, Bryce Hamming and our Senior VP of Operations, Richard Tremblay. As usual, before we get into opening remarks by management, I would like to remind our listeners that our comments and answers to your questions will contain forward looking information.

Speaker 1

This information by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our Q1 MD and A and the related news release as well as I would also like to point out that we will use various non GAAP measures during the call. You can find explanations and reconciliations regarding these measures in the related news release. Following opening remarks, we'll open the phone lines to analysts and investors I will now turn the call over to Stuart for his remarks.

Speaker 2

Okay. Thank you, Brian, and good morning, everyone.

Speaker 3

Welcome to

Speaker 2

our quarterly conference call. And the Q1 of 2023 was a busy one for the company, and we have a number of topics to cover on the call today. In mid March, we closed the acquisition of an additional 12.5 percent interest in Gibraltar. In late March, we issued an updated Florence technical report, which incorporates operating results from the test facility And through the quarter, we've continued to make good progress on Florence permitting and financing initiatives. But before we get to that, I'd like to start with a recap of 1st quarter earnings in Gibraltar operations.

Speaker 2

Copper prices climbed to an average of Just over $4 a pound in the quarter, up from the $3.65 average in the Q4 of last year. The strong pricing and £27,000,000 of copper sales $36,000,000 of adjusted EBITDA $28,000,000 of operating cash flow in the Q1. And Bryce can provide some additional financial details in a minute. From an operating point of view, Gibraltar copper production of £25,000,000 was below plan due to unexpected mill downtime and some operational issues with In simple terms, we milled 7,000,000 tons of ore in the quarter and we should be closer to 8,000,000 tons milled, Which is the rate we were running at for the second half of last year prior to the weather related issues in December. The issues have been resolved and April mill throughput was above design capacity where it should be.

Speaker 2

And on a positive note, Mining activity has progressed on plan into the Gibraltar pit where we are very well set up now in the larger more continuous ore zones. Head grade averaged 0.22 percent for the quarter, which was right on plan. Although recoveries of copper and molybdenum were impacted by the inconsistent mill performance. We expect to see improvements there with more stable concentrator operations. The Gibraltar pit will provide all of our mill feed this year and waste stripping in the connector pit is ramping up.

Speaker 2

We've also mined some initial oxide ore out of the top of the connector pit, which has been added to leach pad stockpiles. With this new source of oxide ore, we're now looking And we expect to be producing copper cathode again in either 2024 or 2025. We've also made a decision to defer the move of the in pit crusher, which was planned to occur in August and will now be deferred to June next year. This is a result of a maintenance shutdown that's required for a major repair on the SAG mill in concentrator number 1. Rather than having the concentrator shutdown for And then again for the SAG mill repair next year, we've been able to develop a mine and maintenance plan that coincides and means just one shutdown.

Speaker 2

By allowing by aligning the repair work with the crusher move, we minimize the overall downtime. And for the current year, it allows us to recover some of the mill run time That we lost in the Q1. So we're maintaining the original production guidance of £115,000,000 plus or minus 5% of copper for the year. I want to now take a minute to talk about our acquisition of the 12.5% interest in Gibraltar, Which closed in mid March, increasing our stake in the mine from 75% to 87.5%. The acquisition price includes minimum payments of CAD60 1,000,000 and potential contingent payments of up to CAD57 1,000,000 which depend on future copper prices and revenues.

Speaker 2

The payments are spread over 5 years and there are no contingent payments if the copper price falls below $3.50 a pound. We think it's a well structured deal. It's accretive for Taseko relative to Gibraltar's current NPV. It gives us immediate production growth or at least growth in our attributable copper production. And the deferred payment terms allow us to focus our financial resources on Florence, which we're readying for construction and we expect will provide Additional production growth for us in 2025.

Speaker 2

At the end of March, we filed a new 40three-1 101 technical report For the Florence project, it had been 6 years since the previous technical report and a lot of work has gone into the project since then. The test facility, which operated for 18 months, has provided our technical teams with a huge amount of data, which has been used to refine operating models. Detailed engineering has been substantially completed, which has allowed us to advance discussions with key contractors and obtain vendor quotes. And that recent cost information was included in the updated cash flow and economics. We've been in an inflationary environment for the last couple of years and we wanted to wait So we were close to the construction start date to update the CapEx.

Speaker 2

The result of all this work is a significantly derisked project that continues to have robust economics. We estimate that we have about $230,000,000 of CapEx remaining to be spent. The project NPV is USD930,000,000 with a 47% IRR after tax. So it really is a unique The permitting process is advancing on the final permit needed before we can begin construction. We talk regularly with the EPA and continue to receive positive messages about their progress And continue to expect the final UIC permit to be issued in the next few months.

Speaker 2

So it's a waiting game, but we know we're close to the end, and I believe patience is going to be rewarded Although spending and commitments related to the project have dropped off significantly as long lead items are already procured And much of that equipment is already on-site. One final topic before I pass it over to Bryce. Last night, we announced And at the money or an ATM equity offering for up to $50,000,000 This facility will allow Taseko to issue new equity from time to time at our discretion, if and when we feel it's appropriate. We don't have any immediate plans to use it, but we view it as a prudent tool to have in place as we head into the Florence project later this year. In addition, we continue to evaluate a number of other Florence financing options, including royalties and a project level loan.

Speaker 2

So we're pretty excited about what's in store here in the next few months. It's an exciting time for Taseko as we get closer to commercial production at Florence. And with that, I'll turn it over to Bryce for some additional commentary on the quarter, and then we'll open up the lines for questions.

Speaker 3

Thank you, Stuart. Good morning, everyone. I'll provide a few more details on our financial results for the quarter. Copper sales in the Q1 were £27,000,000 on a 100% basis, £2,000,000 higher than production As we were able to ship additional tonnes and lower inventory at quarter end, the average realized copper price for the quarter was $4.02 per pound, which was a 10% increase over the 4th quarter. This resulted in $116,000,000 of revenues in the Q1.

Speaker 3

Total site costs in the quarter were higher by $7,000,000 over the 4th quarter. The biggest variance of the increase came from higher diesel costs. Diesel prices are declining. They're currently about $0.40 per liter lower than last year. So that will help on our 2023 costs going forward compared to 2022 if oil prices remain low.

Speaker 3

We did also have increased maintenance costs in the mill in Q1, Some other one off mining cost increases for explosives and tires, and there were also some costs associated with clearing the TSF pipelines following the freeze up in December In January. Given this, we should see total site costs decrease in the quarters ahead compared to Q1. The increased mining rates with focus on stripping the connector pit also resulted in higher capitalized stripping for the period. In the Q1, dollars 13,000,000 of stripping costs were capitalized Compared to $4,000,000 in the 4th quarter, all the tons in the connector pit that we've been mining are waste with the exception of about 800,000 tons of oxide ore that were mined and are placed on the leach pads. Byproduct credits from moly, Sales continue to benefit from the recent moly price strength.

Speaker 3

The average price of moly in the quarter was $33 per pound, Which resulted in a byproduct credit of $0.37 per pound produced. In recent weeks, the price of moly has subsided And it's still at a sustainable level about $21 per pound. C1 costs in Q1 of $2.82 per pound were slightly higher, but generally in line with 4th quarter, the unit cost increase is attributed to the minor decrease in production and the higher one off costs I mentioned earlier. Given less volatility in the foreign exchange rate and copper prices, our GAAP earnings in the Q1 of $4,400,000 or $0.02 per share was similar to our Adjusted earnings of $5,100,000 With softer copper prices in the last few days, it's good to emphasize we have price protection in place for the balance of 2023. We have copper price production of $3.75 per pound for £52,000,000 of production.

Speaker 3

Capital spending in the Q1 was $25,000,000 at Gibraltar and $10,000,000 at Florence. At Gibraltar, work on the crusher move was restarted in the Q1 With about $7,000,000 being spent, with the crusher being deferred to next year now, we will see some deferral of the CapEx for Jib Into 2024, which we estimate could be up to $10,000,000 of capital spending being deferred. We ended the quarter with $102,000,000 of cash and we had approximately $150,000,000 of available liquidity at March 31. I will close with emphasizing our significant transaction this quarter, which was the incremental 12.5% interest in Gibraltar we acquired from Sogits on March 15. So the Q1 results reflect only a small portion or an adjustment for this additional ownership for the last 15 days of the quarter.

Speaker 3

We will continue to proportionately consolidate this 12.5 percent ownership into our earnings going forward alongside our 75% interest. Future quarters will be reported on a full 87.5% basis. So everything else equal, our historical Gibraltar financial Performance can be grossed up 17% to be comparable on a like for like basis with our future quarters. As disclosed in our notes and financials, Including this pro form a earnings from January 1 from Cariboo from the additional 12.5% interest in Jib we now own, That would have resulted in revenue of $131,000,000 for the quarter and net income of $6,500,000 would have increased our EBITDA by about $5,000,000 for the period On a pro form a basis. With that, I'll turn it over to the operator for questions.

Speaker 3

Thank you.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your questions will be pulled in the order they are received. One moment please for your first question. Your first question comes from Alex Brantzeny from Bank of America.

Operator

Please go ahead.

Speaker 4

Good day, guys. Just a couple of questions for me. The first one is regarding dilution. So there still seems to be a way to go to get The ore back to the reserve grade. How is the progress going on this front?

Speaker 4

And how comfortable are you now that we're a third of the way into the second quarter? And then the second question is regarding the sustainability of producing above The nameplate capacity of the plant, how many quarters do you think that that can continue for, assuming that you've gone through April above 85,000 tonnes a day level.

Speaker 5

Yes. Good morning. It's Richard Tremblay here. Regarding the dilution, Yes, we're comfortable. We're through the issues that kind of plagued us in 2022.

Speaker 5

The site team has done a lot of technical work and As adjusted operating kind of practices and policies to ensure we're properly reflecting what we're going to be milling, so comfortable with that. And then regarding your second question on throughput, the crusher issues that impacted us in Q1 have been resolved and Do feel confident and expect throughput to be at or above design capacity for the remainder of the year.

Speaker 4

Okay. That's great. Thank you, Richard.

Operator

Thank you. Your next question comes from Alex Deranciu from Stifel. Please go ahead.

Speaker 6

Hi, good morning guys. My question is just on the oxide ore that you're talking about mining here. Is this ore that's currently classified as waste? I'm just trying to think from a cost perspective, if this is already captured in your stripping costs or how do we Go about thinking about this and just if you can provide some sort of quantum of potential production in the future that you might see from this.

Speaker 2

Hi, Alex. It's Stuart here. Yes, no, the oxide we knew we know there is oxide ore on the top of the connector pit. It's been part of the long term mine plan that we would be mining that ore And restarting the plant either next year or the year after. So definitely part of the plan.

Speaker 2

Yes, I don't know Richard if that was Surprise to get into it a little bit earlier than you expected or that was pretty much in line with plan?

Speaker 5

No, it's pretty much in line with the plan. That's correct. Yes.

Speaker 6

Okay. So these are I mean, I guess these aren't tons that or maybe they are tons you're chasing these tons or you need to mine them anyways to get to the sulfide underneath the better way of thinking about it, right?

Speaker 2

That's right. Yes. We need to mine down through it. It's a new mining zone. So we're mining down through the oxide and we'll get Next year, we'll actually start to get sulfide ore and mill feed out of the connector pit.

Speaker 2

Okay.

Speaker 6

And can you remind me how much capacity your SX EW plant has and What sort of production you might get from these tonnes?

Speaker 5

Yes. In terms of annual production from the SX EW plant, We're estimating in the £5,000,000 a year range.

Speaker 6

Okay. I'm guessing that would continue probably just really only for a few years or a couple of years anyways and then until you Go to another phase where you may encounter more oxides again?

Speaker 5

Yes, that's correct. We would continue to run SX EW plant as long as it's economic and we have enough fresh ore oxide ore going to the stockpile to keep it Producing a suitable grade to feed the plant.

Speaker 6

Okay. That's it for me. Thanks.

Operator

Thank you. Mr. Bergaupt, there are no further questions at this time. You may proceed.

Speaker 2

Okay. Thank you very much everyone for joining and we will talk to you next quarter. Thanks.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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Taseko Mines Q1 2023
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