Taseko Mines Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2024

There are 7 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Taseko Mines Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Bergo, Vice President of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, Liz. Welcome, everyone, and thank you for joining Taseko's Q3 2024 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 at tasekomines.com and on SEDAR Plus. I am joined today in Vancouver by Taseko's President and CEO, Stuart McDonald Taseko's Chief Financial Officer, Bryce Hamming and our COO, 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. As such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our Q3 MD and A and the related news release as well as the risk factors particular to our company. These documents can be found on our website and also on Cedar Bluffs. I would also like to point out that we will use various non GAAP measures during the call.

Speaker 1

You can find explanations and reconciliations regarding these measures in the related news release. And finally, all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified. Following opening remarks, we will open the phone lines to analysts and investors for questions. I would now like to turn the call over to Stuart for his remarks.

Speaker 2

Thank you, Brian, and good morning, everyone. I'm glad you're able to join us today for our review of Taseko's 3rd quarter operational and financial results. I'll start with our 100 percent owned Gibraltar mine, which had a solid operating performance in the period, despite the 1st few weeks of the quarter being impacted by the planned downtime for major mill repairs in 1 of our 2 concentrators. This maintenance work and the in pit crusher move was disrupted by the labor strike in June. But in the 3rd week of July, we're able to restart concentrator number 1 and ramp back up to full capacity.

Speaker 2

3rd quarter copper production was £27,000,000 on a head grade of 0.23 percent copper. Although mill availability was below plan for the quarter, we were still able to process 7,600,000 tons of ore, which is a good result considering the disruptions. Copper recoveries notched a little higher than the previous quarter at 79%, but are still lower than normal due to oxidized ore in the upper benches of the new connector pit. So when they are running, the mills have been able to consistently run above the design capacity of 85,000 tons a day, which demonstrates the throughput upside we had spoken about previously. And we expect that higher throughput to drive higher copper production in Q4.

Speaker 2

However, the lower mill availability in the Q3 means that we no longer expect to make up the production that was lost during the labor strike in June. So we're now forecasting current year production to be between £105,000,000 £110,000,000 compared to our original guidance of £115,000,000 One significant change this quarter was molybdenum production, which increased to more than £400,000 in Q3. That's more than we've produced in any quarter since 2021. And it's being driven by higher moly grades in the new connector pit. We expect that to continue going forward and we should be able to get back to producing £2,000,000 per year or more of moly.

Speaker 2

At today's price of $21 or $22 a pound, that will represent a pretty significant improvement to our cost structure going forward. Total site costs of $111,000,000 in the Q3 was similar to previous quarters, except Q2, which was lower due to the mine being shut down for the labor disruption. Our C1 cash cost of US2.92 dollars per pound was impacted by a lower allocation of capitalized stripping costs and lower production volumes, low life of mine average. Partially offsetting these higher unit costs was lower off property costs as we made our initial shipments under the new offtake agreements, which have negative TCRCs. We expect off property costs to continue to decline as some of our older offtake agreements at higher TCs unwind.

Speaker 2

And in fact, next year, we're expecting TCRCs to be close to 0 compared to about $0.17 a pound last year in 2023. Taseko's realized copper price in the 3rd quarter remained a healthy $4.23 per pound and that helped to drive solid financial results in the quarter. We generated $48,000,000 of adjusted EBITDA, dollars 55,000,000 of earnings from mining operations and $65,000,000 of operating cash flow. Looking ahead to 2025, we're expecting slightly higher copper grades for the year, higher mill throughput and also the restart of Gibraltar's SIPW plant, which has been idle since 2016. Copper production is expected to be in the range of £120,000,000 to £130,000,000 from Gibraltar.

Speaker 2

And moly grades and production will also be higher. So we're looking at a strong production year, which is a real positive. But I do want to caution that we expect production to be weighted to the second half of the year as mill feed in the first half will include some lower grade stockpile ore. Turning over to Florence now, where construction activities have really ramped up in recent months, and we're very pleased with the progress. The SX EW plant is really starting to take shape.

Speaker 2

We're nearing the end of the bulk concrete pouring for the foundations and pre assembly and installation of the structural steel is well underway. In September, we began installation of process equipment and as of last week almost all of the settling tanks have been installed. Installation of piping for this new equipment has now started. On the well field, we've completed 40 out of the 90 wells that are planned for the construction phase, and that's in line with our schedule. And with 4 drill rigs now operating, we should see the well completion rates accelerate going forward.

Speaker 2

Also from a safety and environmental perspective, pleased to report that we've not had any lost time injuries or reportable environmental incidents so far on the project. Year to date, we've spent $97,000,000 on construction capital. And as we've previously disclosed, we expect total costs to come in within 10% to 15% of the $232,000,000 estimate. And that's the estimate that we published with our technical report in March 2023 based on costing from 2022. Overall, I'm pleased with how the 1st 9 months of construction has progressed.

Speaker 2

Our recruiting and other plans for operational readiness are also progressing well, and we remain on schedule for 1st copper in late 2025. It should be a very exciting year for us ahead. We haven't spoken a lot about Yellowhead recently, but we are preparing to submit the initial project description and enter into the provincial and federal environmental assessment process. We have a few years of permitting work ahead of us, but this remains a very good project in the top tier jurisdiction. As a reminder, the Yellowhead technical report from 2020 outlined a project with annual copper production of £180,000,000 over a 25 year mine life and with significant gold and silver byproduct credits that generate a cash cost of $1.67 per pound copper.

Speaker 2

That study now is almost 5 years old and used a long term copper price assumption of only $3.10 per pound. So it's due for an update and next year we're planning to update it with current metal prices and costs. We'll also be incorporating the recently announced Canadian tax credits for copper mine development, which have the potential to significantly improve that project's economics as well. Even though it's still a few years away from being construction ready, there's a lot of value there to be unlocked. I'll pass the call to Bryce in a minute to talk about the specifics of our financials, but I do want to emphasize that our balance sheet remains in a strong position with a cash balance of over CAD 200,000,000 at the end of Q3 and an undrawn credit facility.

Speaker 2

Our stock price is up about 80% year to date. And over the last 4 months, we utilized our asset market equity offering for the first time, issuing a total of 12,100,000 shares for net proceeds of CAD 37,300,000. The strike at Gibraltar over the summer was unexpected and had an impact on our projected cash flows. We also expect increased spending on Yellowhead over the next year and will be advancing some growth initiatives at Gibraltar, including restart of the SX EW plant and studies on sulfide leaching. So the extra cash from the ATM will allow us to move forward on these initiatives and still maintain a solid cash balance through the Florence build.

Speaker 2

With that, I'll turn it over to Bryce.

Speaker 3

Thanks, Stuart. It was a fairly straightforward quarter, but I'll provide some additional accounting and financial details. We posted GAAP earnings of $0.01 per share, but on an adjusted basis, we had net income of $0.03 per share or $8,200,000 Couple of key notable items to mention. First off, dollars 4,000,000 of costs were incurred to complete the primary crusher relocation project, including the demolition of the old station. And under IFRS, these costs are expensed.

Speaker 2

While the physical move of the crusher was

Speaker 3

done in the Q2, final tie ins and that demolition were completed this quarter. We also had $13,000,000 in non cash accretion on our Caribou earn out liability and for our Florence royalty obligations. That accretion rises due to the rising copper price trend and also the more positive outlook for copper prices in the years ahead based on bank consensus forecasts. We also had $3,000,000 in mark to marks on our derivative adjustment on the Mitsui stream. So we consider these items unrealized and one off and is not reflecting the underlying operational performance.

Speaker 3

So they are adjusted in determining the company's adjusted earnings. So financial performance in the quarter was strong. We had adjusted EBITDA of $48,000,000 in earnings from mine ops before depletion and amortization of 55,000,000 dollars and that was just on sales volumes of £26,000,000 Our realized copper price for the quarter was $4.23 in line with the average for the LME for the quarter and it was down a bit from last quarter. Copper prices when they hit just peaked at $5 in May. Total site spending at Gibraltar was $111,000,000 in the Q3 and that's really in line with previous quarters before the strike in Q2.

Speaker 3

Capitalized stripping in the Q3 was modest at only $3,600,000 so that was down from $10,700,000 in Q2 as ore is now being fed from the connector pit into the mills. Unit costs in the Q3 were $2.92 per pound, slightly lower than the previous quarter, mainly due to an increase in copper production, but also a decrease in off property costs due to our first shipments under our new offtake agreements at the negative TCRCs that Stuart just mentioned. TCRCs, generally speaking, make up about 1 half of our off property costs, and we expect to pay no net overall TCRCs in 2025. So that's major savings to our operating costs going forward. Cash flow from operations in the Q3 was $65,000,000 We benefited from both stable operating margins and also $26,000,000 in funds associated with the insurance recovery, which was taken to earnings in the 2nd quarter and was received this quarter.

Speaker 3

Cash flow from the financing activities included that amount and it also included $23,000,000 from the issuance of 7,800,000 shares under the ATM program. At Florence, we're now getting into peak construction spending quarters. In the Q3, we spent $42,000,000 on the commercial production facility. That was an increase of $6,000,000 over the 2nd quarter. And then to the end of the Q3, we've now spent a total of $97,000,000 Looking ahead to our heavy construction period, we will spend about $20,000,000 a month for the next two quarters before spending tails off.

Speaker 3

Just to expand upon Stuart's comments on liquidity, our cash position at the end of the Q3 was $209,000,000 and then subsequent to the quarter end, we also amended our revolving credit facility with National Bank and ING, extending the maturity, which was set to mature in mid-twenty 26 out to the end of 2027. We also increased it by US30 million dollars so that its overall size is now US110 million dollars That facility today is completely undrawn. So we have pro form a liquidity of approximately CAD360 million with this higher facility size. The other significant initiative we announced with Florence Construction, the update we provided a few weeks ago was our submission to the U. S.

Speaker 3

Department of Energy's Qualified Advanced Energy Project Credit Program that's under 48C SubparagraphE As a critical materials project producing domestic U. S. Copper, we believe Florence Copper is a prime candidate for this program. The tax credit we have applied for is for up to US110 $1,000,000 and is expected to be awarded in just a couple of months from now in mid January. Even if only a partial award is granted, this could be an additional source of funding for us later next year and into 2026.

Speaker 3

With that, I'll turn it back to you, operator, and open it up for questions. Thank you.

Operator

Our first question comes from Alex Badwani with Canaccord Genuity.

Speaker 4

Hi all. Thanks for taking my question. Just a couple from me today. So the first one is I'm just trying to get a sense of what the throughput is going to look like in Q4. So what was the exit rate in Q3 for September, for example?

Speaker 4

And then the second thing is just related to the oxidization of the ore in the upper benches connector. Is that going to continue through to Q1 or is do you see that sort of subsiding in Q4?

Speaker 2

Yes, I mean, Alex, hi Alex, it's Stuart here. I'll start. In terms of mill throughput, I mean, what we've seen in the last couple of 2, 3 months here, we've been running over design capacity, as I mentioned, in the range of 88, 89,000 tons a day. There is upside potential on that. We'll see how it goes.

Speaker 2

But those are opportunities that we're always thinking about. Yes, and sorry, what was the other answer?

Speaker 5

On the transition ore, so just it's Richard here. On the transition ore, so that we'll

Speaker 3

as we continue

Speaker 5

to mine deeper, we'll continue to see improved kind of reduced oxidation of the ore that we're mining and we'll continue to see performance improve as we progress through Q4 and into next year.

Speaker 4

Okay. And what's the reason for the running of the design capacity? Is it just the softness of the Orec connector at the moment?

Speaker 5

Yes. Sorry, I didn't get the last part of that question.

Speaker 2

Yes. The question was why are we able to run over design capacity? And it does yes, it goes to the softness of the ore and connector, exactly. What we're seeing is that ore is similar to what we had in Gibraltar pit. Yes.

Speaker 5

That's right.

Speaker 4

Okay. Thanks guys. Appreciate that.

Operator

Our next question comes from the line of Nicholas Clark with TD Cowen.

Speaker 6

Thanks, operator. Hi, Stuart. Hi, team. Nick Clark here on for Craig Hutchison. Just a quick question, if I could, on Florence.

Speaker 6

I understand that the budget is still tracking within that 10% to 15% estimate of the 232. I'm just wondering if you could ballpark a figure for us on what percentage of that overall expected budget has been committed at this point?

Speaker 2

Commitment ballpark, I mean, we're up in the range of 75% committed at this point.

Speaker 6

Great. Okay. Thank you. That's helpful. And then just one more on one of your growth projects.

Speaker 6

I know we don't talk about it too much, but that new prosperity you guys mentioned in your release that you are hoping to get a First Nations agreement at that project by the end of this year. If that is successful, what will be the next steps for that project going forward?

Speaker 2

Yes, I mean, it obviously is heavily the future of that project is heavily dependent on the negotiations that we're in now, which are kind of confidential. And we've signaled that we're still aiming to are hopeful we'll have a deal by the end of the year. Obviously, here in BC, we've had a provincial election in October, which has kind of disrupted that schedule a month or 2. But we're still hopeful we'll get a deal of some kind and, yes, be able to in the longer term, I think, remain optimistic that at some point we'll be able to move that forward. But there's no clear schedule or no clear plans at this point.

Speaker 2

So I would describe it as a longer dated option for shareholders.

Speaker 6

Great. Okay. Thanks Stuart. Appreciate the color and good luck guys in Q4.

Speaker 2

Thanks.

Operator

That concludes today's question and answer session. I'd like to turn the call back to Taseko Management for closing remarks.

Speaker 2

Okay. Thank you very much everyone for joining. And if you have any other questions, you know where to reach us. And otherwise, we'll talk to you next quarter. Thanks.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Powered by Quartr
Earnings Conference Call
Taseko Mines Q3 2024
00:00 / 00:00