Q3 2023 Taseko Mines Ltd Earnings Call
Okay.
Good morning, My name is Allen now I'll be your conference operator today at.
At this time I would like to welcome everyone to <unk> third quarter earnings Conference call.
All lines have been plays on mute to prevent any background noise. After the Speakers' remarks, there will be a question and answer session.
He would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question. Please press Star then the number two.
Thank you Mr.
Mr Burgo, Vice President of Investor Relations you May begin your conference.
Thank you operator, welcome everyone and thank you for joining <unk> third quarter 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 at <unk> Dot com as.
As well as on SEDAR.
I am joined today by <unk>, President and CEO Stuart Mcdonald.
<unk> Chief Financial Officer, Bryce Hamming.
Our Chief operating Officer, Richard Drumly.
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. 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.
Courage you to read the cautionary note that accompanies our third quarter MD&A and the related news release as well as the risk factors particular to our company.
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 and the related news release and finally, all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified.
Following <unk> opening remarks, we will open the phone lines to analysts and investors for questions I will now turn the call over to Stuart for his remarks.
Great. Thank you, Brian and welcome everyone to our third quarter earnings call. It's been a very busy three months since our last call, but we've been able to make some great strides forward with our business. We had a very strong we have very strong operating results at Gibraltar.
Solid earnings as well this quarter, but I'll start.
With our most exciting news and Thats, our permitting success at Florence.
As we announced earlier this week the EPA confirm that no appeals have been received in our final UIC permit is now effective.
It's a great result for us and a testament to the work our project team has done over the last 10 years.
We can methodically worked our way through a very rigorous and detailed permitting process technically derisked the project with successful test facility operations.
And at the same time, we've been able to build a strong community support that we enjoy today.
And in this day and age to be able to permit a project with no substantive opposition or appeals as I said, it's a great result.
And a big milestone for our company.
So we're moving forward, we're at Florence site yesterday with our board of directors reviewing our construction plans.
Next steps will be site preparation and clearing for the well field expansion.
And that work will start in the next few weeks.
Drilling contractors are planned to be on site in drilling early in the new year.
Also working to finalize key vendor contracts and our construction team is going out for firm quotes on the remaining equipment and materials that need to be procured.
We're moving forward in a disciplined way and.
And aware of the inflationary risks and uncertain markets that we're in today.
So we aren't racing to complete construction, we're focused on delivering the project on budget and ensuring that we have the right financing package in place.
We previously said that we're targeting to raise $100 million U S. At the project level, consisting of debt and a royalty.
We've made very good progress on those discussions and we're now very close to getting firm commitments in place.
And we should be able to provide additional details on that in the near future.
And we're expecting to be able to close those financings early in the new year.
Before the drilling commences in a construction spending starts to ramp up.
At that point, we would have 175 million U S of <unk>.
<unk> funding for Florence construction. In addition to our current available liquidity of about $110 million.
Florence's profile as a low carbon U S. Based copper producer continues to generate a lot of interest from potential customers investors and other miners.
A few months ago. The U S Department of energy identified copper as a critical material.
This opens up the possibility of tax incentives for the project and our preliminary review indicates we could potentially benefit from a tax credit as high as 30% on the Sx EW copper processing infrastructure at Florence.
The only to apply and be accepted but this has potential to be a very meaningful piece of funding available to us in 2025.
As we've said in the past we have a very unique opportunity here at low impact and low cost projects now fully permitted and a tier one jurisdiction.
And we're looking forward to realizing that value over the next couple of years.
Markets markets everywhere are challenged right now.
We've seen copper prices impacted recently as well.
But 2025 looks like a great time to be bringing on a new project.
Turning to Gibraltar now.
Very strong production quarter as.
As we indicated on last quarter's call. We have made good progress advancing mining deeper into the Gibraltar pit.
And we are now well established in the bottom of that pit.
With that setup in place the mine delivered excellent results this quarter with copper production of over 35 million pounds and see one cash cost of $2 20 per pound U S.
Copper grades improved as expected averaging two 6% for the period.
Mining benefited from a large continuous mineralized zones and a softer ore resulted in mill throughput over 87000 tonnes per day, which is above design capacity.
The ore quality also led to improved copper recoveries in the mill, 85% for the quarter, which is a good result.
Total site costs was $102 million Canadian which is generally in line with recent quarters and we benefited from a 60% increase in moly sales, which generated a byproduct of <unk> 23 per pound of copper.
Through three quarters, Gibraltar minus produced 88 million pounds of copper and we're well on track to achieve our original production guidance of 115 million pounds, plus or minus 5%.
We are hopeful to be on the plus side of that number.
The Gibraltar pit will continue to be the primary source of mill feed through to the middle of next year, and then we'll transition to or from the new connector pit for the second half of next year.
We should continue to see good daily mill throughput from both pits.
But metal production will be affected by some planned mill downtime two significant downtime are planned.
Number two will be down for two weeks in Q1.
And mill number one will be down for about three weeks in the second quarter and that's for the crusher move in a major maintenance activity and email number one.
Yeah.
So that will certainly have some impact on production next year, but taking that into account, we generally expecting 2020 for copper production to be similar to this year.
We're still working through some details and we'll be able to give some more specific guidance with our year end results in February.
With that I'll now turn the call over to price for some additional commentary on our financials.
Thanks, Stuart good morning, everyone. It indeed was a great quarter for Gibraltar and this is reflected in our financial performance revenue in the third quarter was the highest of CECO has ever recorded at $144 million.
From the sale of 32 million pounds of copper.
Higher sales volume our increased ownership in Gibraltar, a steady realized price of $3 to three per pound and a weaker Canadian dollar or the drivers of the record revenue.
We also had at least 5 million pounds of excess concentrate inventory due to the Vancouver Port strike in July at the end of September we will sell that copper in Q4 and should be back to more and more and more normal levels by year end. So we should see another great earnings quarter to finish the year.
For October we produced over 11 million pounds of copper. So we continue to be on track.
Total <unk> costs were $102 million in the third quarter, a $3 million decrease from the second quarter, but generally in line with our previous quarters in guidance, even though our mining rates in the quarter were lower than the previous quarters diesel consumption was 3% higher due to the longer loaded halls out of the Gibraltar pit and these diesel prices.
<unk> also increased and were 11% higher compared to Q2.
The moly byproduct byproduct credit in the quarter was 23 per pound significantly higher than the second quarter as a result of much higher moly production and sales as well as a higher realized moly price of $23 per pound.
Lower site costs higher production and increased.
Moly byproduct credit resulted in a 17% decrease in <unk> cost from $2 66 per pound in the second quarter to $2 20 per pound in the third quarter.
Lower cost and strong sales drove adjusted EBITDA of $63 million for the quarter.
GAAP earnings for the quarter were 900000.
Or nil per share and adjusted net earnings after removing unrealized foreign exchange and derivative losses were $20 million.
Or <unk> <unk> per share.
In the third quarter of $18 million was spent at Florence compared to $13 million in the second quarter.
Year to date, we have capitalized $45 million of development costs at Florence.
Spending was up this quarter due to some additional procurement for the commercial facility and increased cost for our <unk> program.
At Gibraltar work continued on the in pit crusher.
And the electrical substation relocation projects with 7 million spent in the quarter.
Work is wrapped up for the year now, leaving approximately $9 million to be spent in the second quarter next year on that project when the primary crushers moved.
We ended the quarter with approximately $150 million Canadian of available liquidity, including $82 million of cash.
Last week, we received the first 20 million U S tranche from the $25 million Bank of America equipment loan commitment for Florence, which closed after the quarter end. So it is not included in that liquidity number.
We will then work next on closing the Mitsui transaction in the coming months. We have also significantly advanced with Endeavour financial our financial adviser on project Finance and they are working on additional Florence project level financings and.
We will be making further announcements on those in the coming weeks.
We are looking for up to $100 million of additional funding as Stuart mentioned.
And that in royalties and we have the ability to do more at the Florence project given its relatively.
It is relatively unencumbered at the moment with robust economics and that if we need to.
The operation of the Pts facilities, not only allowed us to obtain the permits for Florence, but has also made the project bankable.
Just to finish up the price of copper has declined in recent weeks, but now sitting in the.
360 to $3 70 range, but thanks to our price protection program, we will receive a minimum price of $3 75 per pound through the end of the year for most of our production. We have also recently extended our price protection into 2024, we have purchased put option contracts for 21 million pounds from January to March with a strike of $3 25 per <unk>.
<unk>.
And this was undertaken to prevent any copper price surprises just given the uncertainty in the world at the moment.
We will look to add more to that in the coming months to cover more of 2024 as we prepare for construction.
With that I'll turn it over to the operator for questions.
Operator.
Okay.
Thank you ladies and gentlemen, we will now begin the question and answer session.
If you have a question. Please press star one on your Touchtone phone.
You will hear us reach on prompt acknowledging acknowledging your request and your questions will be pulled in the order they are received.
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One moment. Please for your first question.
Your first question.
<unk>.
It comes from.
Craig Hutchison of TD Securities.
Your line is already open.
Hi, Good morning, guys. Thanks for taking my question.
Yes.
Good morning, guys.
Good morning, you mentioned.
A couple of things I wanted to clarify you mentioned there is a potential tax credit for Florence.
I'm not mistaken you said it was a potential source of funding in 2025 can you just maybe elaborate on that and something you could potentially monetize if you get that credit.
Yes, that's our understanding based on the preliminary work. We've done is if there is potentially a 30% tax credit there.
It is related to our capex.
On the processing infrastructure. So obviously the main piece being the Sx EW plant.
And on top of that Yeah. As you said there is potential to actually monetize that.
Tax rules allow for that so.
Yes early days, but a good opportunity and I think a result of of the Doe.
Bringing in copper and as a critical minerals over the summer so good good opportunity for us.
Okay that's interesting.
Maybe just on Gibraltar you guys are on track to get your guidance for the year can you provide any clarity just in terms of Q4.
On kind of grades you see.
Being are you still sort of the bottom of the pit.
And then just some clarity perhaps on.
Capitalized stripping for the next couple of quarters. It was quite low in this quarter. Thanks.
Yes, good morning, Craig Richard here Gray.
<unk> in Q4 are going to be.
Slightly lower than Q3, but very much in line with.
Kind of how we've operated in in Q3 by the slightly lower.
And then capitalized stripping we.
We do see an increase in capitalized stripping in Q4 is.
We're deploying more shovels in the connector pit and getting that pit ready for future release.
Yes.
Okay, great. Thanks, guys.
Yeah.
Your next question comes from Alex <unk> of Canaccord Genuity. Your line is already open.
Hi, Good morning, guys. Thanks for taking the questions.
The first question is just how quickly can the working capital build on one of the over the next quarter, obviously, it was about $34 million Canadian.
Much of that do you think will unwind with the sales now that the port issues have been resolved.
And so the second question for the second half of next year from connected what can you tell us about the ore hardness.
And the great as it compares to what you're currently mining from Gibraltar, just trying to get a sense of throughput levels and Greg.
Okay.
Yes, it's price maybe I'll take the first part of that question just with the working capital we had excess inventory at the end of the quarter.
We're expecting we'll be through that.
By the end of November so we should realize.
Sales of excess copper inventory into the Q4 results and be at more normal levels for the end of the year at this stage.
And then the second part of the question for connector pit Richard here.
Yes.
In terms of ore hardness. It is of the ore from connector pit is showing that it's more similar to the <unk> pit or a little bit harder, but still quite soft compared to other ores that we process on the property.
Previously.
And then great wise as we start.
We will see a little bit lower grade than what we're currently processing, but then it will increase.
As we get deeper similar to the same sequence we've experienced historically.
Okay very clear.
Last one if I may what is the strip ratio is going to look like.
For the next quarter or the next three quarters as you finish up at Gibraltar.
Strip ratios with an extra quarter actually.
Continue to be quite low given.
Hum.
Being at the bottom of the pit and in essentially in a very low strip ratio area with the <unk>.
The amount of ore available to mine.
Alright, very good thank you guys.
Thanks.
There are no further question at this time I would hand over the call to the management team. Please proceed.
Great. Okay. Thanks, everyone for dialing in and we will talk to you again in February at our next earnings call. Thanks very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.
Yeah.
Yeah.