Q4 2023 Taseko Mines Ltd Earnings Call

<unk> fourth quarter and year end earnings conference call.

All lines have been placed on mute to prevent any background noise.

First speakers remarks, there will be question and answer session. If you 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. <unk> you may begin your conference.

Thank you.

Welcome everyone and thank you for joining <unk> fourth quarter and full year 2023.

The news release and regulatory filings announcing our financial and operational results was issued yesterday.

It is available on our website at <unk> dot com as well as on SEDAR.

I'm joined today in Vancouver back to <unk>, President and CEO, Stuart Mcdonald, <unk>, Chief Financial Officer, Bryce Hamming, and our CFO Richard <unk>.

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 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 fourth quarter MD&A and the related news release as well as the risk factors particular into 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 opening opening remarks, we will open the phone lines to analysts and investors for questions.

Now ill turn the call over to Stuart for his remarks.

Thanks, Brian Good morning, everyone and thank you for taking the time to join US for <unk> year end and Q4 earnings call. It's definitely an exciting and busy time for our company and.

And today I can provide an update on recent Gibraltar results and also Florence construction activities.

I will then pass the call over to Bryce for some additional detail on the financials and our financial results and our recent financing.

Financing initiatives at Florence.

But let's start with Gibraltar as Q4 was another strong production quarter and a great finish to the year.

The mine produced 34 million pounds of copper on average grades of two 7%. It is a great result, and we definitely benefited from the higher grade higher quality ore in the bottom of the Gibraltar pit.

Actually the results could have even been better if not for slightly lower mill throughput, which averaged 83000 tons per day.

That's slightly below plan due to lower mill availabilities in the quarter as we prepared for the scheduled maintenance in January.

With a strong production and a higher capital strip allocation led to lower unit operating costs <unk>.

<unk> cash costs for the fourth quarter were $1 91, a pound.

Looking at the year as a whole Gibraltar produced 123 million pounds at a <unk> cost of $2 37, a pound.

That production number is a significant increase over 2022 and also above our annual guidance.

Certainly 2023 was a tale of two halves with lower grades in the first half and higher production in the second half.

But for the full year copper head grade averaged two 5%.

Which is right in line with our reserve grade and with that we're able to generate a $190 million of adjusted EBITDA.

That's indicative of what the mine can achieve in an average year with our realized copper price of $3 84 per pound.

And it really bodes well for the coming years, where we expect higher pricing.

For 2024, the Gibraltar pit will continue to be the main source of mill feed until the middle of the year when we transitioned to the connector pit, where we've been stripping now for over a year.

We expect a smooth transition to the new connector pit, which will then be the main source of mill feed for the next five years.

We previously disclosed two mill downtime that are going to impact production in 2024, we've.

We've already completed one of those are major component replacement of mill number two.

Which was planned to be a two week down and we successfully completed that ahead of schedule in January.

The capital cost of the new mill equipment should be covered by insurance and we're also pursuing an insurance claim for the loss production.

Those discussions are ongoing but it could be a significant insurance recovery in the range of $20 million or higher and we are aiming to finalize that claim in the next few months.

The second mill downtime will occur in the second quarter. This year when mill number one will be shut down for about three weeks to allow for the relocation of the in pit crusher and other maintenance.

That crusher currently sits on top of the connector horizontal and we've got about $10 million of Capex left to complete the move that's a project that we've been working on now for nearly two years at a total cost of $50 million.

These two mill downtime, resulting in about seven to 8 million pounds of loss copper production in 2024, and after taking that into account, we expect to produce about 115 million pounds of copper for this year.

So thats very similar to last year's annual guidance, although we expect a more stable quarterly production profile this year.

2025 should be a much better production years, we won't have the mill downtime in grades will also increase as we get deeper into the connector pit.

So moving on Florence, now and that was certainly a major permitting milestones we achieved in Q4 with permits now in hand, the project has transitioned into the construction phase.

In recent months the focus has been on site prep and civil work to prepare for well field drilling as well as procurement and negotiation of key contracts.

There are two key aspects to the development of the commercial facility, we need to drill the initial well field for the ramp up and Thats about 90 wells to be drilled during the construction phase.

And we need and we need to build the Sx EW plant and surface infrastructure.

The oilfield drilling is already underway and the plant construction will begin in the second quarter.

We will be using four drill rigs for the initial well field, which should be complete and ready for injection in the third quarter of 2025.

Both three months ahead of the Sx EW plant commissioning.

This allows time for pre leaching of the initial ore blocks, so that when the Sx EW plant is ready we are pregnant leach solution to begin played in copper in the fourth quarter next year.

As we announced in January we've added a few months to the original 18 month schedule, which we believe reduces execution risk and allows us to spread our spending over an extra quarter, where we can benefit from Gibraltar cash flow in 2025, which as I said, it's going to be a strong production year.

So we're not racing here, it's a disciplined approach with a focus on delivering and on budget project and maintaining a strong balance sheet.

We recently signed a fixed price contract for the construction of the plant and surface infrastructure.

And that cost represents roughly 40% of the remaining spend and it is now locked in.

We continue to see some inflationary pressure and it's possible, we'll see some modest escalation on our published Capex number, but we think that will be very manageable.

In the rest of our business and at our other projects, we remain disciplined and we're not planning any other significant capex this year.

At yellow head, we continued to advance important community discussions ahead of permitting.

And that new prosperity, we've recently extended our stance Hill agreement again.

And the dialog continues with the goal of finalizing a resolution this year.

So we have lots on the go but the key focus is on execution of Florence.

An exciting time for the company and in less than two years, we'll be adding 85 million pounds of low cost copper production.

80% production growth in the near term.

With that I'll turn it over to price now for some additional finance commentary.

Thank you Stuart I will now expand on the financial performance for the fourth quarter and year as well as some financing updates for Florence as Stuart mentioned strong fourth quarter copper production and sales resulted in an overall great finish to the 2023 year.

Revenue for the quarter was $154 million and for 2023 annual revenue was $525 million. It was the highest quarterly and annual revenue we've ever reported as a company.

This was due to a steady copper price around 385 per pound.

Sales volumes at 121 million pounds of copper and increasing our ownership in Gibraltar by 17% with the acquisition of Caribou last March from soldiers.

Total site costs in the fourth quarter were 111 million a slight increase from the third quarter for the year total site costs were 431 million and were higher than in 2000 to two.

<unk> 2022, mainly due to increased repairs and maintenance costs labor costs, and partially offset by lower diesel.

Diesel costs and input costs and grinding media.

On a cost per pound basis cost in 2023 were $2 37 per pound at 20% decrease from last year, mainly due to higher copper production.

Adjusted EBITDA of $190 million in cash flow from operations.

$151 million were also significantly higher than in 2022, 74% and 86% respectively.

Adjusted net income of $44 million or <unk> 15 per share and GAAP earnings of <unk> $83 million or 29 per share. We're also dramatically higher than the previous year GAAP earnings included a $46 million gain that we recognized on the purchase of caribou.

The difference in the fair value of assets, we acquired from soldiers being that 12, 5% of Gibraltar and the present value of what we estimate.

The consideration payable will be which has a contingent element the contingent payments to assume just based on Gibraltar copper revenues over the next five years and none of their their payments bear any interest.

In total payments are capped at 117 million. So we believe this will be a very accretive transaction to CECO. The accounting gain is not included in adjusted earnings or adjusted EBITDA from.

From an operational financial and growth perspective, it was a very successful year for CECO from Gibraltar.

As Stuart already mentioned the in pit Crusher relocation project will be completed by mid 2024 at a cost of approximately $10 million remaining.

There are no other major capital projects planned at Gibraltar for this year.

We ended 2023 with a healthy $176 million of available liquidity $26 million higher than at the end of the third quarter and this includes $97 million of cash.

We closed our Sx EW equipment facility with bank of America in the quarter and subsequent to year end. We closed two of the previously announced financing transactions for Florence in late January we closed the Mitsui copper stream and they funded the first $10 million of their $50 million transaction with us with the remaining amounts due on a quarterly basis.

Yes.

Last month, we also closed a $50 million royalty with Taurus, well known credit fund moving into the royalty space and the entirety of those funds are received by to CECO in early February.

With $175 million U S. Now committed from four different parties, plus our $80 million revolving credit facility financing is well in hand for the <unk> construction plus. The addition of future cash flows from Gibraltar over the next two years in the near term cash flows remain protected at Gibraltar with <unk>.

Copper puts of $3 25 per pound and they're in place to the end of June this year and as copper prices rise. We continue to watch the market and look for opportunities to extend our price protection into the back half of this year and into 2025.

The price of copper has held up well considering the backdrop of macro news and global events and seems to be gathering the most interest in the industry at the moment, where the price of copper is today at around $3 90 per pound, our Gibraltar mine should generate strong cash flow in the medium to long term fundamentals remain exceptionally bullish and point to much higher copper pricing in the years ahead.

With that I'll now turn it back to the operator for any questions.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your telephone keypad should you wish to cancel your request. Please press star followed by that too.

We are using a speakerphone please lift the handset before pressing any Keith one moment. Please for your first question.

Our first question comes from the line of Craig Hutchinson from TB. Please go ahead.

Hi, Good morning, guys. Thanks for taking my questions.

Hey, good morning first question.

Question is regards to Gibraltar.

I guess I wasn't expecting a level of capitalized stripping in Q4, I know you guys are still doing some stripping with.

Cards to the connector pick can you give us any sense on.

What type of capitalized stripping we should assume for.

'twenty 'twenty four and assume it will be mostly front end weighted.

Yeah, Hey, Craig its price, yes, thats right, we did have a higher level in Q4 and <unk>.

Part of that was due to the fact that we.

We started stripping activities again in connector.

Quite slow there in the summer months.

No.

I think as far as this year, we still are obviously doing.

Fair bit of capitalized stripping to open up the connector zone and I think it should be generally in line with what we saw last year as we.

To begin mining in the upper benches there of connector.

That sort of in the range of sort of $50 million is kind of our run rate on capitalized strip.

$50 million and weighted to the front half of the year Okay.

How about sustaining.

Yes, we don't have a lot of sustaining I think thats also going to be kind of ordinary last year, we had of course a.

The station work on that.

Craft for the Crusher move.

That's a $50 million project that we spent about $40 million and as I mentioned, we've got about $10 million to go so that will be mostly in Q2, leading up to June when its actually moved.

Other than that it's just.

Mary component.

Okay.

I mean, you guys are putting some stockpiles ahead of them.

A potential restart of the Sx EW plant.

Context in terms of how meaningful that would be kind of pounds, a year youre million pounds, a year you would be targeting.

And that would be starts.

Yes.

It's something in the range of 5 million pounds, a year of Sx EW plant might be what we're looking at.

Current current expectation is that would restart.

In 2026.

And of course, it's a.

It's a seasonal <unk>.

<unk> operation there it doesn't run through the winter months, so kind of Q2 Q3.

Yes, so we're stacking oxide ore from the upper benches of the connector pit and.

Need to build up a critical massive.

Of ore on the pad in order to justify the justify their restart but it's coming.

Okay.

Great if I could switch gears to deploy just curious how the staffing is going obviously, it's very tight labor markets.

Maybe a follow up question.

Can you give us a sense of how much of the original Capex budget is still remaining I know you mentioned that you are seeing some inflationary pressures.

Just give us a sense of.

We entered 2023, how much of the budget still remains to be spent on a cash basis.

Yeah.

Richard you want to address staffing yeah, So Craig Richard here on the staffing side things.

Things have gone actually quite well continue to get significant interest in the market given the location of the operation in the new.

Commercial operation, that's being put together so quite happy with the level of interest as we go out into the market and recruit the team for.

For our commercial operations. So we've had great success, so far and everything shows that indicates that that will continue for us. So we're quite happy with that.

So so on the on your second part of your question there Craig on the Capex.

Stuart here, yes, the $232 million number that we published last March.

We haven't really spent much of that yet I think most of the spending that.

That we did on Capex last year was was.

Final installments on the on the long lead items that we committed to the previous to the technical report so that.

232 remaining numbers still a reasonable number.

We have obviously in the last two months started a little bit of spending against that budget, but its still pretty close.

As I mentioned in my.

My opening remarks, there there is there is some.

Potential for a little bit of a little bit of inflation on that number it's something we're watching closely.

Obviously, the fixed price contract.

With the general contractor and mitigate some of that risk, but yes its.

Something we're keeping a close eye on and as we get later into the year 2024 here I think we will will probably.

I'll provide a little more color on where we're at but at this stage kind of no nothing material to.

To report in terms of a new capex estimate or anything like that.

That's kind of where we are.

Okay. Thanks, guys best of luck.

Thanks.

Thank you once again should you wish to ask a question. Please press Star then the number one on your telephone keypad.

Once again that is star one to ask a question.

Okay.

There are no further question at this time. Please proceed.

Okay. Thank you very much everyone for joining our call and we will talk to you in May for our Q1 earnings call and in the meantime, if there are questions feel free to reach out to any of us. Thank you.

Yes.

Thank you, ladies and gentlemen that does conclude our conference for today. Thank you all for participating you may now disconnect.

Sure.