Market Overview

Taseko Reports Improving Operating and Financial Results

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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.

VANCOUVER, Oct. 27, 2016 /PRNewswire/ - Taseko Mines Limited (TSX: TKO; NYSE MKT: TGB) ("Taseko" or the "Company") reports the results for the three months ended September 30, 2016.

Third Quarter 2016 Highlights

  • Adjusted EBITDA* increased by $16.9 million to $9.3 million in the third quarter and earnings from mining operations before depletion and amortization* increased by $14.7 million to $11.6 million, as compared to the second quarter of 2016;

  • Taseko had a net loss of $15.6 million or $0.07 per share, as compared to a net loss of $19.4 million or $0.09 per share in the second quarter of 2016;

  • Site operating costs, net of by-product credits* were US$1.58 per pound produced and total operating costs (C1)* were US$1.89 per pound produced, both a significant improvement over the previous quarter's costs of US$1.74 and US$2.07, respectively;

  • Site operating cost per ton milled* was CAD$9.47, an improvement over the second quarter of 2016 result of CAD$9.67;

  • Copper production at Gibraltar was 33.1 million pounds (100% basis), which is an 8% increase over the second quarter of 2016;

  • In September, Gibraltar's molybdenum circuit was restarted and the facility produced 185,000 pounds of molybdenum for the month; and

  • During the quarter, the Company has acquired copper put options for a total of 20 million pounds with maturities between October 2016 and January 2017 at a strike price of US$2.10 per pound.

Russell Hallbauer, President and CEO of Taseko commented, "Copper production in the quarter increased by 8% over the previous quarter as a result of improved throughput, recoveries and copper grade. Gibraltar operated well in the quarter and, due to high productivities with the mining fleet, we began accessing higher grade ore earlier than originally anticipated. As per our previous guidance, we are now into a long stretch of above average copper grades which will benefit Gibraltar's cost structure and operating margins. With the higher head grades, which we started accessing in September and are expected to last well into 2017, copper production and cash flows are anticipated to improve significantly over the next year. Recoveries for the quarter also increased, a result of higher grade ore as well as a continued focus on the grinding and flotation circuits. We expect further recovery improvements over the coming quarters."

*Non-GAAP performance measure. Refer to end of news release.

 

Mr. Hallbauer continued, "Also contributing to Gibraltar's operating margin is the restart of the molybdenum facility, which was idled in mid-2015 due to low molybdenum pricing. Prior to the restart, a number of modifications were made to the molybdenum plant as well as to operating procedures, which are paying dividends already. Even though the facility was just re-commissioned eight weeks ago, it is operating extremely well. In October, molybdenum recoveries have averaged above 50% and the facility has produced 190,000 pounds month-to-date. Additionally, often overlooked is Gibraltar's silver production, which at roughly 250,000 ounces annually is an important component of our overall metal stream. Silver production, along with our improving molybdenum production, provides a significant by-product credit."

"We also have a number of exploration and development initiatives underway. At Gibraltar, we just commenced a 6-hole drill program to better define the copper-gold-silver zone discovery that we recently announced. We do not believe drilling to-date has uncovered the high-grade core of the deposit, so we are excited to complete the next round of drilling. Also, we recently filed a Notice of Work (NOW) at New Prosperity. The main activities to be performed under the NOW are geotechnical drilling, test pitting and mechanical trenching designed to gather information and data which will be used for advancing mine permitting under the British Columbia Mines Act. This work is expected to commence in 2017. Finally, during the third quarter we received the Aquifer Protection Permit for the Phase 1 test facility at our Florence Copper Project. One remaining permit, the Underground Injection Control Permit from EPA, is required to move forward with the test facility. In addition to permitting work at Florence, the technical team has also been making significant progress optimizing the extraction process as well as metallurgical testing. We believe the new data will not only validate the data in the prefeasibility study completed in April 2013, but also improve the economics of the project. I look forward to announcing these results in the coming months," added Mr. Hallbauer. 


 

HIGHLIGHTS

Financial Data

Three months ended September 30,

Nine months ended September 30,

(Cdn$ in thousands, except for per share amounts)

2016

2015

Change

2016

2015

 Change

Revenues

55,964

80,067

(24,103)

169,237

227,886

(58,649)

Earnings from mining operations before depletion and amortization*

11,566

20,083

(8,517)

8,098

48,679

(40,581)

Earnings (loss) from mining operations

(4,501)

5,963

(10,464)

(35,617)

11,994

(47,611)

Net loss

(15,610)

(17,722)

2,112

(36,509)

(38,911)

2,402


Per share - basic ("EPS")

(0.07)

(0.08)

0.01

(0.16)

(0.18)

0.02

Adjusted net loss*

(10,423)

(1,586)

(8,837)

(48,264)

(2,419)

(45,845)


Per share - basic ("adjusted EPS")*

(0.05)

(0.01)

(0.04)

(0.22)

(0.01)

(0.21)

EBITDA*

4,064

3,395

669

7,208

17,358

(10,150)

Adjusted EBITDA*

9,285

19,514

(10,229)

(2,849)

54,140

(56,989)

Cash flows provided by (used for) operations

(7,493)

19,629

(27,122)

(15,810)

49,836

(65,646)

                                                                                                                                                                                                                                                                                                    

Operating Data (Gibraltar - 100% basis)

Three months ended September 30,

Nine months ended September 30,


2016

2015

Change

2016

2015

 Change

Tons mined (millions)

21.5

27.4

(5.9)

69.2

72.4

(3.2)

Tons milled (millions)

7.4

7.5

(0.1)

22.1

23.3

(1.2)

Production (million pounds Cu)

33.1

40.9

(7.8)

92.6

109.1

(16.5)

Sales (million pounds Cu) 

29.8

40.5

(10.7)

90.6

107.8

(17.2)

*Non-GAAP performance measure. Refer to end of news release.

 

REVIEW OF OPERATIONS

Gibraltar mine (75% Owned)







Operating Data (100% basis)


Q3 2016

Q2 2016

Q1 2016

Q4 2015

Q3 2015

Tons mined (millions)


21.5

26.2

21.5

21.3

27.4

Tons milled (millions)


7.4

7.2

7.5

7.3

7.5

Strip ratio


1.0

2.4

1.7

2.4

2.3

Site operating cost per ton milled (CAD$)


$9.47

$9.67

$9.59

$9.41

$10.36

Copper concentrate








Grade (%)


0.259

0.252

0.228

0.269

0.308


Recovery (%)


85.9

84.1

84.4

84.9

87.4


Production (million pounds Cu)


33.1

30.6

28.8

33.1

40.5


Sales (million pounds Cu)


29.8

30.3

30.5

33.7

40.5


Inventory (million pounds Cu)


5.4

2.1

1.9

3.4

3.9

Silver (in copper concentrate)








Production (thousand ozs Ag)


67

62

58

65

92


Sales (thousand ozs Ag)


54

59

57

63

90

Copper cathode








Production (million pounds)


-

-

-

-

0.4


Sales (million pounds)


-

-

-

-

0.6

Molybdenum concentrate








Production (thousand pounds Mo)


185

-

-

-

85


Sales (thousand pounds Mo)


103

-

-

-

233

Per unit data (US$ per pound produced)*








Site operating costs*


$1.64

$1.77

$1.81

$1.55

$1.45


By-product credits*


(0.06)

(0.03)

(0.03)

(0.03)

(0.03)

Site operating, net of by-product credits*


$1.58

$1.74

$1.78

$1.52

$1.42

Off-property costs


0.31

0.33

0.33

0.33

0.34

Total operating costs (C1)*


$1.89

$2.07

$2.11

$1.85

$1.76

*Non-GAAP performance measure. Refer to end of news release.

OPERATIONS ANALYSIS

Third quarter results

During the third quarter of 2016, Gibraltar milled 7.4 million tons of ore.  A total of 21.5 million tons were mined during the quarter, and 3.3 million tons of ore was added to stockpile which resulted in a strip ratio of 1.0 for the period.  Backfilling of a mined out section of the Granite Pit commenced in mid-March and resulted in highly productive short waste hauls through to the middle of the third quarter.  Earlier in the year, a decision was made to take advantage of the higher productivities and mine additional waste tons instead of idling equipment. The additional waste stripping provided access to higher grade ore earlier than originally planned, and copper head grade for the month of September was 0.28%.

Copper recovery increased in the third quarter to 85.9% as a result of improved operating practices and higher head grade. Copper recovery continues to be an area of focus for management.

Site operating cost per ton milled* was CAD$9.47 in the third quarter of 2016 which is in line with the previous three quarters. Cost control initiatives implemented during 2015, including mine plan modifications to reduce waste stripping requirements, workforce reductions and vendor initiatives, have continued to benefit operating costs in 2016.

Site operating costs per pound produced* decreased to US$1.58 in the third quarter of 2016 from US$1.74 in the second quarter of 2016 primarily as a result of increased copper production. 

Long-term contracts for ocean freight and treatment and refining costs contributed to reduced off-property costs of US$0.31 per pound produced, down from US$0.34 per pound in the third quarter of 2015. The Company's off-property costs are driven by sales volumes rather than production and sales volumes were lower than production volumes in the third quarter of 2016.

Total operating costs (C1) per pound* decreased to US$1.89 from US$2.07 in the second quarter of 2016 as a result of increased copper production.

GIBRALTAR OUTLOOK 

Gibraltar's copper production for the year is expected to be in the range of 130 to 140 million pounds.  Average head grade is expected to be approximately 0.30% for the fourth quarter, and the higher head grade is expected to continue into 2017.

Overall, Gibraltar has achieved a stable level of operations consistent with the updated reserve model published in 2015 and the Company continues to focus on further improvements to operating practices to reduce unit costs. Total operating costs per pound produced (C1)* are also expected to decline as copper head grade and copper production increases. During September 2016, the molybdenum circuit at Gibraltar was successfully restarted, and will result in increased by-product credits in future periods.

The Canadian dollar is expected to remain at a substantial discount to the US dollar, and a weak Canadian dollar would contribute to improved operating margins at Gibraltar as approximately 80% of mine operating costs are paid in Canadian dollars.

*Non-GAAP performance measure. Refer to end of news release.

REVIEW OF PROJECTS 

Taseko's strategy has been to grow the Company by leveraging cash flow from the Gibraltar Mine to assemble and develop a pipeline of projects. We continue to believe this will generate the best, long-term returns for shareholders. Our development projects are located in British Columbia and Arizona and represent a diverse range of metals, including gold, copper and niobium. In light of current market conditions, the Company has taken a prudent approach and minimized spending on development projects. Total expenditures on projects in the third quarter of 2016 consisted of $1.4 million at the Florence Copper project, $0.5 million on New Prosperity, and $0.4 million on the Aley Project. 

Florence Copper Project

The Florence Copper project is currently in the final stages of permitting for the Production Test Facility ("PTF"). The PTF will include a well field comprised of thirteen (four injection and nine recovery) commercial scale production wells and numerous monitoring, observation and point of compliance wells, and also an integrated demonstration scale solvent extraction and electrowinning plant.

The Company has continued to work with the Arizona Department of Environmental Quality ("ADEQ") in connection with the amendment to the Temporary Aquifer Protection Permit ("APP"), and with the U.S. Environmental Protection Agency in connection with the Underground Injection Control ("UIC") permit. These are the two remaining permits required for construction and operation of the PTF. On August 2, 2016, Company announced the receipt from the ADEQ of the APP permit. This permit was issued following a public comment period earlier this year, and confirms the ADEQ has completed its substantive review and is satisfied with the conditions under which the PTF can operate. The timing of the UIC permit is somewhat uncertain; however, the Company's expectation is that this last required permit will be forthcoming shortly.

In addition to permitting work, the Company's technical team has been making significant progress optimizing the extraction process as well as metallurgical testing. We believe the new data will not only validate the data in the prefeasibility study completed in April 2013, but also improve the economics of the project.

New Prosperity Project

On February 12, 2016, Taseko announced that it had filed a civil claim in the BC Supreme Court against the Canadian federal government. The claim seeks damages in relation to the February 25, 2014 decision concerning the New Prosperity Project in that the Government of Canada and its agents failed to meet the legal duties that were owed to Taseko and that in doing so they caused and continue to cause damages, expenses and loss to Taseko.

On July 20, 2016, Taseko announced that the British Columbia Environmental Assessment Office is proceeding with Taseko's request to amend the environmental assessment certificate for its New Prosperity Project. In addition, Taseko has filed a Notice of Work ("NOW") with the Ministry of Energy & Mines which will allow the Company to gather information to advance mine permitting under the British Columbia Mines Act. Taseko looks forward to working with the six local Tsilhqot'in First Nation bands as represented by the Tsilhqot'in National Government on the consultative and substantive aspects of the NOW as per the terms in the 2012 settlement agreement.

The Company will host a telephone conference call and live webcast on Friday, October 28 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 November 4, 2016 and can be accessed by dialing (855) 859-2056 in Canada and the United States, or (404) 537-3406 internationally and using the passcode 79693414.

Russell Hallbauer
President and CEO

No regulatory authority has approved or disapproved of the information in this news release.


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 and site operating costs, net of by-product credits

Total costs of sales include all costs absorbed into inventory, as well as transportation costs. Site operating costs is calculated by removing net changes in inventory and depletion and amortization and transportation 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 (net of treatment costs) 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 
September 30,

Nine Months ended
 September 30,

(Cdn$ in thousands, unless otherwise indicated) – 75% basis

2016

2015

2016

2015

Cost of sales

60,465

74,104

204,854

215,892

Less:






Depletion and amortization

(16,067)

(14,120)

(43,715)

(36,685)


Net change in inventory

12,076

2,779

9,156

8,187


Transportation costs

(3,544)

(4,415)

(11,149)

(13,271)

Site operating costs

52,930

58,348

159,146

174,123

Less by-product credits:






Molybdenum

(508)

(304)

(508)

(5,114)


Silver

(1,128)

(1,010)

(2,970)

(2,749)

Site operating costs, net of by-product credits

51,294

57,034

155,668

166,260

Total copper produced (thousand pounds)

24,838

30,710

69,426

81,840

Total costs per pound produced

2.06

1.86

2.24

2.03

Average exchange rate for the period (CAD/USD)

1.30

1.31

1.32

1.26

Site operating costs, net of by-product credits (US$ per pound)

1.58

1.42

1.69

1.61

Site operating costs, net of by-product credits

51,294

57,034

155,668

166,260

Add off-property costs:






Treatment and refining costs

6,187

9,432

18,266

26,699


Transportation costs

3,544

4,415

11,149

13,271

Total operating costs

61,025

70,881

185,083

206,230

Total operating costs (C1) (US$ per pound)

1.89

1.76

2.02

2.00

 

Adjusted net earnings (loss)

Adjusted net earnings (loss) remove the effect of the following transactions from net earnings as reported under IFRS:

  • Unrealized gains/losses on derivative instruments;
  • Unrealized foreign currency gains/losses; and
  • Non-recurring transactions, including related tax adjustments.

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.





Three months ended
September 30,

Nine months ended
September 30,

($ in thousands, except per share amounts)

2016

2015

2016

2015

Net loss

(15,610)

(17,722)

(36,509)

(38.911)


Unrealized (gain) loss on derivatives

50

(64)

1,041

2,177


Unrealized foreign exchange (gain) loss

5,090

15,764

(16,587)

34,186


Write-down of marketable securities

-

419

-

419


Other non-recurring expenses*

81

-

5,489

-


Estimated tax effect of adjustments

(34)

17

(1,698)

(290)

Adjusted net loss

(10,423)

(1,586)

(48,264)

(2,419)

Adjusted EPS

(0.05)

(0.01)

(0.22)

(0.01)

* Other non-recurring expenses includes legal and other advisory costs associated with the special shareholder meeting, the proxy contest and related litigation, and other non-recurring financing costs.

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:

  • Unrealized gains/losses on derivative instruments;
  • Unrealized foreign exchange gains/losses; and
  • Non-recurring transactions.

While some of the adjustments are recurring, other non-recurring expenses 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.






Three months ended
 September 30,

Nine months ended
 September 30,

($ in thousands, except per share amounts)

2016

2015

2016

2015

Net loss

(15,610)

(17,722)

(36,509)

(38,911)

Add:






Depletion and amortization

16,066

14,140

43,799

36,751


Amortization of stock-based compensation

253

293

2,300

1,643


Finance expense

7,964

6,881

21,979

19,490


Finance income

(279)

(290)

(787)

(1,114)


Income tax expense (recovery)

(4,330)

93

(23,574)

(501)

EBITDA

4,064

3,395

7,208

17,358

Adjustments:






Unrealized (gain) loss on derivative instruments

50

(64)

1,041

2,177


Unrealized foreign exchange (gain) loss

5,090

15,764

(16,587)

34,186


Write-down of marketable securities

-

419

-

419


Other non-recurring expenses*

81

-

5,489

-

Adjusted EBITDA

9,285

19,514

(2,849)

54,140


* Other non-recurring expenses includes legal and other advisory costs associated with the special shareholder meeting, the proxy contest and related litigation, and other non-recurring financing costs.

 

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
 September 30,

Nine months  ended
 September 30,

(Cdn$ in thousands, except per share amounts)

2016

2015

2016

2015

Earnings (loss) from mining operations

(4,501)

5,963

(35,617)

11,994

Add:






Depletion and amortization

16,067

14,120

43,715

36,685

Earnings from mining operations before depletion and amortization

11,566

20,083

8,098

48,679

 

Site operating costs per ton milled



Three months  ended
 September 30,

Nine months  ended
 September 30,

(Cdn$ in thousands, except per share amounts)

2016

2015

2016

2015

Site operating costs (included in cost of sales)

52,930

58,348

159,146

174,123






Tons milled (thousands) (75% basis)

5,587

5,631

16,611

17,472

Site operating costs per ton milled

$9.47

$10.36

$9.58

$9.97

 

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:

  • uncertainties and costs related to the Company's exploration and development activities, such as those associated with continuity of mineralization or determining whether mineral resources or reserves exist on a property;
  • uncertainties related to the accuracy of our estimates of mineral reserves, mineral resources, production rates and timing of production, future production and future cash and total costs of production and milling;
  • uncertainties related to feasibility studies that provide estimates of expected or anticipated costs, expenditures and economic returns from a mining project;
  • uncertainties related to the continuing availability of capital and financing;
  • uncertainties related to the ability to obtain necessary licenses permits for development projects and project delays due to third party opposition; 
  • uncertainties related to unexpected judicial or regulatory proceedings; 
  • changes in, and the effects of, the laws, regulations and government policies affecting our exploration and development activities and mining operations, particularly laws, regulations and policies;
  • changes in general economic conditions, the financial markets and in the demand and market price for copper, gold and other minerals and commodities, such as diesel fuel, steel, concrete, electricity and other forms of energy, mining equipment, and fluctuations in exchange rates, particularly with respect to the value of the U.S. dollar and Canadian dollar, and the continued availability of capital and financing;
  • the effects of forward selling instruments to protect against fluctuations in copper prices and exchange rate movements and the risks of counterparty defaults, and mark to market risk;
  • the risk of inadequate insurance or inability to obtain insurance to cover mining risks;
  • the risk of loss of key employees; the risk of changes in accounting policies and methods we use to report our financial condition, including uncertainties associated with critical accounting assumptions and estimates;
  • environmental issues and liabilities associated with mining including processing and stock piling ore; and
  • labour strikes, work stoppages, or other interruptions to, or difficulties in, the employment of labour in markets in which we operate mines, or environmental hazards, industrial accidents or other events or occurrences, including third party interference that interrupt the production of minerals in our mines.

For further information on Taseko, investors should review the Company's annual Form 40-F filing with the United States Securities and Exchange

SOURCE Taseko Mines Limited

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