Q2 2024 Taseko Mines Ltd Earnings Call

August 1, 2024

Good morning, my name is Ina and I will be your conference operator today.

Unknown Attendee: This time I would like to welcome everyone to Taseko's second quarter earnings conference call.

Unknown Attendee: I would like to welcome everyone to Taseko's 2nd Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Speaker Change: At this time, I would like to welcome everyone to the SECO Second Quarter Earnings Conference Call.

Unknown Attendee: Online something, please don't mute to prevent any back home noise.

Unknown Attendee: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star, then the number 2. Thank you. Mr. Brian Bergot, you may begin your conference.

Unknown Attendee: After the speaker's remarks, there will be a question-and-answer session.

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

Unknown Attendee: If you would like to answer a question during this time, simply press star, then the number one on your telephone keypad. If you would like to enjoy your question, please press star, then the number two.

Speaker Change: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star, then the number 2. Thank you. Mr. Brian Bergot, you may begin your conference.

Brian Bergot: Mr. Brian Bergot, you may begin your conference. Thank you, Ena. Welcome everyone, and thank you for joining to Seaco's second quarter 2024 conference call. The news release and regulatory filing announcing our financial and operational results was issued yesterday after market closed and is available on our website at TasekoMines.com and on Cedar. I am joined today in Vancouver by Taseko's President and CEO, Stuart McDonald, Taseko's Chief Financial Officer, Bryce Hamming, and our COO.

Brian Bergot: Thank you, Ina. Welcome, everyone, and thank you for joining Taseko's second quarter 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 CDAR. 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.

Brian Bergot: Thank you, Ina. Welcome everyone and thank you for joining Toseco's second quarter 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 TosecoMinds.com and on CDAR.

Speaker Change: 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 Copley.

Brian Bergot: I usual before we get into opening remarks by management, I would like to remind our listeners that comments and answers to your questions will continue 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, I encourage you to read the cautionary note that accompanies our second quarter MD&A and the related news release, as well as the risk factors particular to our company.

Brian Bergot: 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, I encourage you to read the cautionary note that accompanies our second quarter MD&A and the related news releases, as well as the risk factors particular to our company.

Speaker Change: 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.

Brian Bergot: For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our second quarter MD&A and the related news release, as well as the risk factors particular to our company.

Brian Bergot: 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. And finally, all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified. While we open the floor to your 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.

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.

And finally, all dollar amounts we will discuss today are in Canadian dollars and less otherwise specified. While you open your 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.

Unknown Attendee: While we open your remarks, we will open the formalized analyst and investors for questions.

Brian Bergot: I'll now turn the call over to Stuart for his remarks. Great. Thanks, Brian.

Stuart McDonald: Great, thanks Brian, and good morning everyone. Thanks for taking the time to join us today to review our second quarter operating and financial results. It's been another eventful quarter and a busy first half, really. We've had a number of significant accomplishments so far this year, including consolidating 100% ownership of our Gibraltar mine and refinancing our bonds. Completing the Florence project financing and then having a very positive start to the construction activities of Florence. More on that in a minute, but I'll start with Gibraltar operations.

Stuart McDonald: Good morning, everyone. Thanks for taking the time to join us today to review our second quarter operating financial results. It's been another eventful quarter and a busy first half, really. We've had a number of significant accomplishments so far this year, including consolidating 100% ownership of our Gibraltar mine, refinancing our bonds, completing Florence project financing, and then having a very positive start to construction activities of Florence. A more than that in a minute, but I'll start with Gibraltar operations. And the mine produced 20 million pounds of copper and 185,000 pounds of molybdenum in the second quarter.

Stuart: Great, thanks Brian and good morning everyone. Thanks for taking the time to join us today to review our second quarter operating and financial results.

Stuart: It's been another eventful quarter and a busy first half really. We've had a number of significant accomplishments so far this year including consolidating 100% ownership of our Gibraltar mine, refinancing our bonds,

completing Florence project financing and then having a very positive start to construction activities of Florence.

Stuart McDonald: The mine produced 20 million pounds of copper and 185,000 pounds of molybdenum in the second quarter. However, production was impacted by the planned downtime in mill number one for the Crush & Move project and for maintenance on the sag mill, and also a strike by the mine's unionized workforce which shut down both mills and the whole site for 18 days in June. All of that downtime resulted in total tons milled being about 25% below nameplate capacity.

And more on that in a minute, but I'll start with Gibraltar operations. And the mine produced 20 million pounds of copper and 185,000 pounds of molybdenum in the second quarter.

Stuart McDonald: Production was impacted by the planned downtime in mill number one for the crush and move project and for maintenance on the SAG mill. And also a strike of the mine's unionized workforce, which shut down both mills and the whole site for 18 days in June. All of that downtime resulted in total tons milled being about 25% below name plate capacity. And that, of course, has a direct knock-on effect to copper production. Copperhead grades averaged 0.23%, which was generally in line with our expectations and copper recoveries for 78%. Slightly below plan due to the inconsistent mill operating time, as well as processing some partially oxidized ore from the upper benches of the connector pit.

Stuart McDonald: Production was impacted by the planned downtime in mill number one for the Crush and Move project.

and for maintenance on the SAG mill and also a strike of the mine's unionized workforce which shut down both mills and the whole site for 18 days in June.

All of that downtime resulted in total tons milled being about 25% below nameplate capacity. And that of course has a direct knock-on effect to copper production.

Stuart McDonald: And that, of course, has a direct knock-on effect on copper production. Copperhead grades averaged 0.23%, which was generally in line with our expectations, and Copper Recoveries were 78%, slightly below plan due to the inconsistent mill operating time as well as processing some partially oxidized ore from the upper benches of the connector pit.

Stuart McDonald: Copperhead grades averaged 0.23%, which was generally in line with our expectations.

Stuart McDonald: And copper recoveries were 78%, slightly below plan due to the inconsistent mill operating time, as well as processing some partially oxidized ore from the upper benches of the connector pit.

Stuart McDonald: Mining rates were also impacted by the labor disruption, but our strip ratio remained in line with plan. We started accessing initial sulfide ore from the new connector pit, and the transition into that new pit will continue over the next few months. We will be completely out of the Gibraltar pit this fall. Running part of the quarter with only one mill obviously has an impact on unit costs, and our total operating costs are C1 increased to 299 US per pound in Q2. The copper prices were very strong, you know, with a realized price, our realized price of almost 450 a pound in a quarter.

Stuart McDonald: Mining rates were also impacted by the labor disruption, but our strip ratio remained in line with plan. We started accessing initial sulfide ore from the new connector pit, and the transition into that new pit will continue over the next few months, and we will be completely out of the Gibraltar Pit this fall. Running part of the corridor with only one mill obviously has an impact on unit costs, and our total operating costs, or C1, increased to $2.99 per pound in Q2.

Stuart McDonald: Mining rates were also impacted by the labor disruption.

but our strip ratio remained in line with plan.

We started accessing initial sulfide ore from the new connector pit, and the transition into that new pit will continue over the next few months.

Stuart McDonald: will be completely out of the Gibraltar Pit this fall.

Stuart McDonald: Running part of the quarter with only one mil obviously has an impact on unit costs and our total operating costs or C1 increased to $2.99 US per pound in Q2.

Stuart McDonald: The copper prices were very strong, you know, with a realized price, our realized price, of almost $4.50 a pound in a quarter. The strike in June was a disappointing outcome for us, but we're pleased to be able to resolve that with a new three-year union contract and get all operations back to normal in the third week of June. In terms of earnings, it was our first full quarter reflecting 100% ownership of Gibraltar, and we generated $71 million of adjusted EBITDA and $77 million of earnings from mining operations.

Stuart McDonald: The copper prices were very strong, you know, with a realized price, our realized price of almost $4.50 a pound in a quarter.

Stuart McDonald: The striking June was a disappointing outcome for us, you know, but we're pleased to be able to resolve that with the new three-year union contract and get all operations back to normal in the third week of June. In terms of earnings, it was our first full quarter reflecting a hundred percent ownership of Gibraltar, and we generated 71 million of adjusted EBITDA and 77 million of earnings from mining operations. Those numbers included a $26 million insurance recovery related to repairs that were done earlier in the year. Nonetheless, a very good result considering the operational disruptions, and it demonstrates the earnings potential when we get Gibraltar back to full production levels here in the second half of the year.

Stuart McDonald: The strike in June was a disappointing outcome for us, but we're pleased to be able to resolve that with a new three-year union contract and get all operations back to normal in the third week of June.

Stuart McDonald: Those numbers included a $26 million insurance recovery related to repairs that were done earlier in the year. Nonetheless, a very good result considering the operational disruptions, and it demonstrates the earnings potential when we get Gibraltar back to full production levels here in the second half of the year. I'm happy to say that the In-Pit Crusher relocation was successfully completed in early July without any issues. This was a two-year, $50 million project and a major undertaking for our project team, so congratulations to everyone involved. Concentrator number one is back up, and with both mills now running at capacity, we're looking forward to a strong second half.

Stuart McDonald: Those numbers included a $26 million insurance recovery related to repairs that were done earlier in the year.

Stuart McDonald: Nonetheless, a very good result considering the operational disruptions, and it demonstrates the earnings potential when we get Gibraltar back to full production levels here in the second half of the year.

Stuart McDonald: I'm happy to say that the input crusher relocation was successfully completed in early July without any issues. This was a two-year $50 million project and a major undertaking for our project team. So congratulations to everyone involved. Concentrate number one is back up and with both mills now running at capacity, we're looking forward to a strong second half. We obviously lost some production during the strike, but looking at the potential to increase our mining rate slightly in the coming months, and we also believe there are opportunities to push mill throughput to get back some of the lost pounds.

Stuart McDonald: We obviously lost some production during the strike, but we are looking at the potential to increase our mining rates slightly in the coming months, and we also believe there are opportunities to push mill throughput to get back some of the lost pounds. Overall, we expect total copper production for the current year to come in between 110 and 115 million pounds, and that's slightly below our original guidance of 115 million pounds. So that means a 20 to 30% increase in production in the second half over the first half of the year.

Stuart McDonald: Overall, we expect total copper production for the current year to come in between 110 and 115 million pounds, and that's slightly below our original guidance of 115 million pounds. So that means a 20 to 30 percent increase in production in the second half over the first half of the year.

Stuart McDonald: Looking ahead to 2025, it's shaping up to be a good production year, and our concentrate production will be supplemented by additional pounds from the restart of the Gibraltar SXCW plant. That plant was actually built in the 80s and operated for about 13 years, producing on average 6 to 7 million pounds per year. To sequel, then restarted it in 2007 and operated again until 2015. So it's a well-established operation. Over the last few quarters, we've been stacking new oxide or from connector pit onto the old leach pads. By next year, we should have well over 50 million pounds of contained copper on the leach dumps, and we have advanced plans to refurbish the plant over the next year at a cost of around 8 million and expect to be able to restart cathode production in Q2 next year, which is a year ahead of the previous schedule and our previous thinking.

Stuart McDonald: Over the last few quarters we've been stacking new oxide ore from connector pit onto the old leach pads.

Stuart McDonald: By next year, we should have well over 50 million pounds of contained copper on the leach dump, and we have advanced plans to refurbish the plant over the next year at a cost of around $8 million, and we expect to be able to restart calf load production in Q2 next year, which is a year ahead of the previous schedule and our previous thinking.

Stuart McDonald: and expect to be able to restart cathode production in Q2 next year, which is a year ahead of the previous schedule and our previous thinking.

Stuart McDonald: Our updated modeling indicates the plant to provide an additional 4 to 5 million pounds of copper production annually for many years to come. So it's positive news and a great outlook for the mind going forward.

Stuart McDonald: Our updated modeling indicates the plant could provide an additional four to five million pounds of copper production annually for many years to come. So it's positive news and a great outlook for the mine going forward. Moving to Florence, construction of a commercial facility is advancing on schedule, and construction activity really ramped up in the second quarter. We now have over 200 contractors at the site, in addition to our owner's team and site management.

Stuart McDonald: So it's positive news and a great outlook for the mine going forward.

Stuart McDonald: Moving to Florence, construction of the commercial facility is advancing on schedule. Construction activity really ramped up in the second quarter. We now have over 200 contractors at site, in addition to our owner's team at site management. Well field drilling has gone according to plan so far, with 18 wells completed at the end of June. We had two rigs drilling the production wells during the second quarter, and we added a third drill in July. Now assessing the need for potentially adding a fourth. At the plant site, construction focused on earthworks and pouring the concrete foundations for the SXPW plant and related infrastructure like tank containment systems. Construction capex in the second quarter was 37 million US, and 55 million year-to-date.

Stuart McDonald: Well field drilling has gone according to plan so far, with 18 wells completed at the end of June. We had two rigs drilling production wells during the second quarter, and we added a third drill in July, now assessing the need for potentially adding a fourth. At the plant site, construction focused on earthworks and pouring the concrete foundations for the SXPW plant and related infrastructure like tank containment systems. Construction CapEx in the second quarter was $37 million U.S. and $55 million year-to-date.

Stuart McDonald: In the next few months, earthworks will be complete and we expect to begin mechanical installations and structural work on the SX. We've recently added some construction photos to the Florence section of our website, and I'd encourage everyone to keep an eye on that. We'll be adding more in the coming months, so you can follow our progress. But pretty exciting to see things happening on the ground, so it's great. On the recruiting side, we've been very successful at building the permanent operating team for the project. We'll eventually have about 170 full-time staff and operators for the commercial production phase.

Stuart McDonald: In the next few months, earthworks will be complete, and we expect to begin mechanical installations and structural work on the SX. We've recently added some construction photos to the Florence section of our website, and I'd encourage everyone to keep an eye on that, and we'll be adding more in the coming months so you can follow our progress. It's pretty exciting to see things happening on the ground, so it's great.

Stuart McDonald: On the recruiting side, we've been very successful at building the permanent operating team for the project. We'll eventually have about 170 full-time staff and operators for the commercial production phase. Right now, we've hired, so far, about 70 of those positions. Florence is in the middle of the Great Copper Belt in central Arizona. There are a lot of highly qualified candidates already living in the region, and we have a very innovative, exciting mining project that's getting a lot of attention.

Stuart McDonald: Right now we've hired so far, hired about 70 of those positions. Florence is in the middle of a great copper belt in central Arizona. There's a lot of highly qualified Canada that's already living in the region. And we have a very innovative, exciting mining project that's getting a lot of attention. So there's a lot of interest and applicants for all of our job searches and postings. That's all going very well. I was actually down in Florence not too long ago. It had an opportunity to see the progress and meet some of the new team members of the Florence team.

Stuart McDonald: Florence is in the middle of the Great Copper Belt in central Arizona. There's a lot of highly qualified candidates already living in the region.

Stuart McDonald: And we have a very innovative, exciting mining project that's getting a lot of attention.

Stuart McDonald: So there's a lot of interest in applicants for all of our job searches and postings, and that's all going very well. I was actually down in Florence not too long ago and had an opportunity to see the progress and meet some of the new team members on the Florence team.

Stuart McDonald: So there's a lot of interest in applicants for all of our job searches and postings. That's all going very well.

Stuart McDonald: And yeah, very impressive with everything that's taking place on site. It's a great project. It is happening, supported by an experienced and dynamic team, and we're now less than 18 months away from first copper. As we've talked about in the past, we believe Taseko is in a very unique position with a low-cost copper project in the Tier 1 jurisdiction and now so close to first production. Despite the pullbacks in prices over the last couple of months, we believe that the medium to long-term fundamentals for copper have never been stronger.

Stuart McDonald: And yeah, very impressive with everything that's happened taking place on site. This is a great project happening, supported by an experienced and dynamic team, and we're now less than 18 months away from first copper.

Stuart McDonald: Happening, supported by an experienced and dynamic team, and we're now less than 18 months away from first copper.

Stuart McDonald: As we've talked about in the past, we believe Taseco is in a very unique position with a low-cost copper project to mature one jurisdiction and now so close to first production. Despite the pullbacks in prices over the last couple of months, we believe that the medium to long-term fundamentals for copper have never been stronger. It continues to be very little in the way of new copper supply available to come online in the next five years. We saw some significant financial flows into and then out of the copper markets over the last six months. And I think the matter of time before we have a real supply deficit, and then the financial players will really move, and it's going to be interesting at that time to see where prices go.

Stuart McDonald: As we've talked about in the past, we believe Taseko is in a very unique position with a low-cost copper project in the Tier 1 jurisdiction, and now so close to first production.

Stuart McDonald: There continues to be very little in the way of new copper supply available to come online in the next five years. We saw some significant financial flows into and then out of the copper markets over the last six months. And I think it's a matter of time before we have a real supply deficit, and then the financial players will really move, and it's going to be interesting at that time to see where prices go.

Stuart McDonald: We saw some significant financial flows into and then out of the copper markets over the last six months and I think it's a matter of time before we have a real supply deficit and then the financial players will really move and it's going to be interesting at that time to see where prices go.

Stuart McDonald: The short-term predictions are always difficult, and that's why we continue to keep our price protection program in place. To remind everyone, we have a minimum price of 375 a pound protected for the rest of this year and a minimum price of four dollars a pound protected for all of next year. These are copper collars, but the ceiling prices are high and provide Taseco with a lot of pricing upside over the next 18 months.

Stuart McDonald: Short-term predictions are always difficult, and that's why we continue to keep our price protection program in place. To remind everyone, we have a minimum price of $3.75 a pound protected for the rest of this year and a minimum price of $4 a pound protected for all of next year. These are copper collars, but the sealing prices are high and will provide Taseko with a lot of pricing upside over the next 18 months. Just one more topic before I pass the call over to Bryce, just regarding our Yellowhead project. Certainly, let's not forget about it.

Stuart McDonald: Just one more topic for I pass the call over to Bryce just regarding our Yellowhead project. Certainly, let's not forget about it. It's a large open pit copper project in a great location, just north of Kamloops, BC. We updated the feasibility study a few years ago, which outlined a project that will produce an average of 180 million pounds of copper a year over a 25-year mine life. That would make it one of the largest copper mines in North America. We're getting ready to initiate the EA process. In connection with that, we've recently opened a project office to support community engagement.

Stuart McDonald: Just one more topic before I pass the call over to Bryce, just regarding our Yellowhead project.

Stuart McDonald: It's a large open pit copper project in a great location just north of Kamloops, BC. We updated the feasibility study a few years ago which outlined a project that will produce an average of 180 million pounds of copper a year over a 25-year mine life. That would make it one of the largest copper mines in North America.

Stuart McDonald: Certainly, let's not forget about it. It's a large open pit copper project in a great location just north of Kamloops, B.C.

Stuart McDonald: We're getting ready to initiate the EA process, and in connection with that, we've recently opened a project office to support community engagement. And we're also doing a small field program this year, which includes geotech drilling and test pitting to gather data that we're going to use going forward as we move through the permitting process. So on that note, I'm going to pass the call over to Bryce, who can provide some more color on our financial...

Speaker Change: That would make it one of the largest copper mines in North America.

Stuart McDonald: We're getting ready to initiate the EA process.

Stuart McDonald: In connection with that, we've recently opened a project office to support community engagement.

Stuart McDonald: Then we're also doing a small field program this year, which includes geotech drilling and test-pitting to gather data that we're going to use going forward as we move through permitting.

Stuart McDonald: And we're also doing a small field program this year which includes geotech drilling and test pitting to gather data that we're going to use going forward as we move through permitting.

Bryce Hamming: So, on that note, I'm going to pass the call over to Bryce, who can provide some more color on our financials. Thanks, Stuart, and yes, there were a few counting. We went off events during the second quarter, making it somewhat complicated from the counting standpoint.

Stuart McDonald: So on that note, I'm going to pass the call over to Bryce, who can provide some more color on our financials.

Bryce Hamming: Thanks, Stuart. And yes, there were a few counting and one-off events during the second quarter, making it somewhat complicated from the counting standpoint. So I'll start by explaining these further. We posted a gap net loss of $11 million, but on an adjusted basis, we derived an adjusted net income of $30.5 million, 10 cents a share. So some notable key items that were expensed in the quarter for GAAP over and above our usual unrealized derivative in FX losses.

Bryce Hamming: So start with explaining these further. We posted a gap net loss of $11 million dollars. But on an adjusted basis, we drive the adjusted net income of $30.5 million, ten cents a share.

Bryce Hamming: We posted a gap net loss of $11 million, but on an adjusted basis we derived an adjusted net income of $30.5 million, or $0.10 a share.

Bryce Hamming: So some notable key items that were expense in the quarter for Gap over and above are usual unrealized derivative and FX losses. These additional items that we adjusted in our adjusted earnings were just going to list here. So the first was the 10.4 million in other operating costs that we incurred in Q2 that were related to the cost for the actual physical move of the primary pressure. Those are expense under honor for us, although they relate to the overall capital project. And then we also had site care maintenance while the operations were suspended in June for that 18-day strike that we had.

Bryce Hamming: So some notable key items that were expensed in the quarter for GAAP over and above our usual unrealized derivative in FX losses

Bryce Hamming: These additional items that we adjusted for in our adjusted earnings were, I've got a list here. So the first was the $10.4 million in other operating costs that we incurred in Q2 that related to the cost of the actual physical move of the primary crusher. Those are expensed under IFRS, although they relate to the overall capital project.

Bryce Hamming: in other operating costs that we incurred in Q2 that related to the cost for the actual physical move of the primary crusher. Those are expensed under IFRS, although they relate to the overall capital project.

Bryce Hamming: And then we also had site care and maintenance while the operations were suspended in June. We also had $8 million in inventory costs that were written up back in March when we acquired the remainder of Caribou. And when we sold or processed them in the current quarter, we charged that right up to the cost of sales and had higher costs, which we reversed in our adjusted earnings. We also had $10.5 million in accretion on our Caribou liability for our deferred consideration and for our Florence royalty obligations, which arose due to the rising copper trends as well as the more positive outlook for copper prices in the years ahead.

Bryce Hamming: And then we also had site care and maintenance while the operations were suspended in June for that 18-day strike that we had.

Bryce Hamming: We also had 8 million in inventory costs that were written up back in March when we acquired the remainder of Care Booth. And when we sold or processed those in the current quarter, we charged that right up to cost of sales and had higher costs, which we reversed in our adjusted earnings. We also had 10.5 million in accretion on our terrible liability for our deferred consideration and for our Florence royalty obligations. And that arose due to the rising copper trends as well as the more positive outlook for copper prices in the years ahead. And we also had a 10 million at one time call premium that we paid on our bond refinancing, as well as a 3 million write off of our deferred financing costs related to the 20-26 notes.

Bryce Hamming: We also had $8 million in inventory costs that were written up back in March when we acquired the remainder of Caribou.

Bryce Hamming: We also have $10.5 million in accretion on our caribou liability.

Bryce Hamming: for our Deferred Consideration and for our Quarren's Royalty Obligations and that arose due to the rising copper trends as well as the more positive outlook for copper prices in the years ahead.

Bryce Hamming: And we also had a $10 million one-time call premium that we paid on our bond refinancing, as well as a $3 million write-off of our deferred financing costs related to the 2026 notes. So we consider all those items as either not reflecting the underlying operational performance of our business, extraordinary or unrealized, and definitely not indicative of future operating results. Therefore, we adjusted them.

Bryce Hamming: So we consider all those items as either not reflecting the underlying operational performance of our business, extraordinary, or unrealized and definitely not indicative of future operating results. So, therefore, we adjusted them. So financial performance in the quarter was strong. We had adjusted the EBDA of 71 million in earnings for mineoffs before depletion of 77 million sale volumes. We're strong at 23 million pounds at the 100% to see goes account. Now that we own 100%, it exceeded our production. You're able to draw down inventory by 2.4 million. We also benefited from a strong copper price in the quarter.

Bryce Hamming: So financial performance in the quarter was strong. We had adjusted EBITDA of $71 million in earnings from mine operations. Before depletion of 77 million sales volumes, we're strong at 23 million pounds. That's 100% of Taseko's account now that we own 100%, and it exceeded our production.

Bryce Hamming: So financial performance in the quarter was strong. We had adjusted EBITDA of $71 million in earnings from mine-offs.

Bryce Hamming: We were able to draw down inventories by 2.4 million. We also benefited from a strong copper price during the quarter. We realized just shy of $4.50 a pound, and that was 60 cents higher quarter over quarter from Q1, and nearly 20% higher than the same quarter last year in 2023. So one notable positive impact on financial performance was the $26 million insurance claim that Stuart mentioned. We did finalize that in June with the adjuster, and we recorded it in the second quarter, and we had mentioned that on previous calls.

Bryce Hamming: We realized just shy of 450 a pound, and that was 60% or, sorry, 60 cent higher quarter of recorder from Q1 and nearly 20% higher than the same quarter last year in 2023.

Bryce Hamming: We also benefited from a strong copper price in the quarter. We realized just shy of $4.50 a pound, and that was 60 cents higher quarter over quarter from Q1, and nearly 20% higher than the same quarter last year in 2023.

Bryce Hamming: So, when notable positive impact on financial performance was the 26 million insurance claim that Stuart mentioned, we did finalize that in June with the adjuster and we recorded it in the second quarter, and we had mentioned that on previous calls. Given Gibraltar's, their only producing asset, we carry business interruption insurance on top of our property insurance, and that protects our gross profits. Should any of our milling or machinery at Gibraltar's mine break down, and so we're working with our adjusters. We determined that Gibraltar would have produced an additional 8 million copper pounds last year if not for a component that we needed to replace and mill to.

Bryce Hamming: One notable positive impact on financial performance was the $26 million insurance claim that Stuart mentioned. We did finalize that in June with the adjuster and we recorded it in the second quarter and we had mentioned that on previous calls.

Bryce Hamming: Given Gibraltar is our only producing asset, we carry business interruption insurance on top of our property insurance, and that protects our gross profits should any of our milling or machinery at the Gibraltar mine break down. And so, working with our adjusters, we determined that Gibraltar would have produced an additional 8 million copper pounds last year if not for a component that we needed to replace in mill 2. This insurance is being received as we speak; we've received about 30% of it already in July, and we expect the rest of it in the third quarter. Total site spending at Gibraltar was $91 million in the second quarter, and that's $20 million lower than the previous quarter and our general run rate. This is mainly due to the 18-day labor strike.

Bryce Hamming: Given Gibraltar is our only producing asset, we carry business interruption insurance on top of our property insurance and that protects our gross profits.

Bryce Hamming: Should any of our milling or machinery at the Gibraltar mine break down. And so we're working with our adjusters. We determined that Gibraltar would have produced an additional 8 million copper pounds last year if not for a component that we needed to replace and mill to.

Bryce Hamming: This insurance is being received as we speak. We've received about 30% of it already in July, and we expect the rest of it in the third quarter. Total site spending at Gibraltar was 9.1 million in the second quarter, and that's 20 million more than the previous quarter and our general run rate. This is mainly due to the 18-day labor strike during those two last weeks in June. We significantly reduced our cost at the Gibraltar mine as we put it on temporary care and maintenance. Going forward, we expect Gibraltar's total stake cost to revert back to more normal levels, which are usually between a hundred to a hundred and ten million Canadian per quarter, including capitalized strength.

Bryce Hamming: This insurance is being received as we speak. We've received about 30% of it already in July and we expect the rest of it in the third quarter.

Bryce Hamming: Total site spending at Gibraltar was $91 million in the second quarter, and that's $20 million lower than the previous quarter.

Bryce Hamming: and our general run rate. This is mainly due to the 18-day labour strike. During those two and a half weeks in June, we significantly reduced our cost at the Gibraltar mine as we put it on temporary care and maintenance. Going forward, we expect Gibraltar's total slate costs to revert back to more normal levels.

Bryce Hamming: During those two and a half weeks in June, we significantly reduced our cost at the Gibraltar mine as we put it on temporary care and maintenance. Going forward, we expect Gibraltar's total site costs to revert back to more normal levels, which are usually between $100 million to $110 million Canadian per quarter, including capitalized strip. Unit costs in the second quarter were $2.99 per pound.

Bryce Hamming: which are usually between 100 to 110 million Canadian per quarter, including capitalized strip.

Bryce Hamming: Unit cost in the second quarter were 2.99 per pound. Biggest driver at the increase from prior quarter was obviously lower copper production, and that should decrease obviously in the third quarter as production increases, as store outlined. Starting in the third quarter, we'll also benefit from the new copper offtake agreements we signed. They have extremely low TCRC, the treatment and refining charges we pay to work our customers on some of these contracts and are even negative. This lot of notable impact on our C1 costs, reducing our off-site costs by 15 cents or more per pound produced.

Bryce Hamming: The biggest driver of the increase from the prior quarter was obviously lower copper production, and that should obviously decrease in the third quarter as production increases, as Stuart outlined. Starting in the third quarter, we'll also benefit from the new copper offtake agreements we signed. They have extremely low TCRC, the treatment and refining charges we pay to our customers on some of these contracts that are even negative. This will have a notable impact on our C1 costs, reducing our offsite costs by 15 cents or more per pound produced.

Bryce Hamming: Unit costs in the second quarter were $2.99 per pound. The biggest driver of the increase from the prior quarter was obviously lower copper production, and that should decrease obviously in the third quarter as production increases as Stuart outlined.

Bryce Hamming: Starting in the third quarter, we'll also benefit from the new copper offtake agreements we signed. They have extremely low TCRC, the treatment and refining charges we pay to our customers. On some of these contracts, they're even negative.

Bryce Hamming: This will have a notable impact on our C1 costs, reducing our off-site costs by 15 cents or more per pound produced.

Bryce Hamming: Cash flow from operations was impacted by the downtime in Q2, but we still generated 35 million in the quarter, which was higher than the same period in 2023 due to the higher copper prices, but also we drew down the finishing inventory.

Bryce Hamming: Cash flow from operations was impacted by the downtime in Q2, but we still generated $35 million in the quarter, which was higher than the same period in 2023. That's due to the higher copper prices, but we also drew down the finished inventory. In June, we submitted a concept paper to the U.S. Department of Energy for a tax credit under Section 48C. We believe Florence Copper may qualify as a critical mineral processing facility given that we will be producing finished copper cathodes for use in the United States.

Bryce Hamming: In June, we submitted a concept paper to the U.S. Department of Energy for a tax credit under Section 48C. We believe Florence Copper may qualify as a critical mineral processing facility given that we will be producing finished copper cathode for use in the United States. We expect to hear back from the DOE later this month at the end of August and whether it will be eligible for it, and then the application will hear later in the year. The award itself would be in early 2025. The credit is transferable, and we can monitor that this incentive funding could further assist with funding our Florence spend in 2025.

Bryce Hamming: In June, we submitted a concept paper to the U.S. Department of Energy for a tax credit under Section 48C.

Bryce Hamming: We believe Florence Copper may qualify as a Critical Mineral Processing Facility given that we will be producing finished copper cathode for use in the United States. We expect to hear back from the DOE later this month, at the end of August, and whether we'll be eligible for it. And then the application we'll hear later in the year.

Bryce Hamming: We expect to hear back from the DOE later this month, at the end of August, and whether we'll be eligible for it, and then the application we'll hear later in the year. The award itself would be in early 2025.

Bryce Hamming: The credit is transferable, and we can monetize it. This incentive funding could further assist with funding our Florence spending in 2025. Last but not least, while we spoke a bit about it last quarter, was our bond refinancing. That was an important refinancing transaction that did not close until this second quarter. So the impact of that $500 million refinancing, which is now due in 2030 and pushes our debt maturity out, was included in our second quarter financial results, as well as our cash position.

Bryce Hamming: The award itself would be in early 2025. The credit is transferable and we can monetize it. This incentive funding could further assist with funding our Florence spend in 2025.

Bryce Hamming: Last but not least, while we spoke a bit about it last quarter with our bond refinancing that was not closed until this second quarter. So the impact of that 500 million refinancing, which is now due in 2030 and pushes our debt maturity out, was included in our second quarter financial results as well as our cash position. So factoring that, as well as the 10 million we've received from its suite on their installments. We ended the quarter with a cash position of $100.99 million Canadian, and we have available liquidity over 300 million, and we factoring our 80 million undrawn revolving credit facility.

Bryce Hamming: Last but not least, while we spoke a bit about it last quarter, was our bond refinancing. That was an important refinancing transaction that did not close until this second quarter.

Bryce Hamming: So the impact of that $500 million refinancing, which is now due in 2030 and pushes our debt maturity out, was included in our second quarter financial results, as well as our cash position.

Bryce Hamming: So, factoring that as well as the $10 million we've received from Mitsui on their installments, we ended the quarter with a cash position of $199 million Canadian, and we have available liquidity of over $300 million when we factor in our $80 million in undrawn revolving credit facility. So, from a liquidity and funding perspective, we're in a very comfortable position as we continue the construction spend at Florence over the coming quarters

Bryce Hamming: So factoring that, as well as the $10 million we've received from Mitsui on their installments, we ended the quarter with a cash position of $199 million Canadian. And we have available liquidity of over $300 million when we factor in our $80 million in undrawn revolving credit facility.

Unknown Attendee: So, from a liquidity and funding perspective, we're in a very comfortable position as we continue the construction spend that Florence over the coming quarters. And with that, I'll turn it over to the operator for questions. Thank you.

Bryce Hamming: So from a liquidity and funding perspective, we're in a very comfortable position as we continue the construction spend at Florence over the coming quarters. And with that, I'll turn it over to the operator for questions. Thank you.

Unknown Attendee: And with that, I'll turn it over to the operator for questions. Thank you. Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Unknown Attendee: 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 device. You will hear a three-tone prompt technology request. Questions will be taken in the order received. Should you wish to cancel the request, please press star, followed by the two. If you are using your speaker phone, please leave the handset before pressing any keys. One moment, please, for your first question.

Unknown Attendee: 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 1 on your telephone keypad. You will hear a three-tone tone acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Craig Hutchison from TD Cowen; please go ahead.

Unknown Attendee: 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 1 on your telephone keypad.

Unknown Attendee: You will hear a three-tone tone acknowledging a request. Questions will be taken in the order received. Should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question.

Craig Hutchison: Your first question comes in the line of Craig Hutchison from TD Cowen. Please go ahead.

Craig Hutchison: to take my questions. All right, Craig. A couple of questions on Gibraltar. Just the recovery has been trending lower for the last few quarters, and I know it's partly due to the connector pit, but can you give us some guidance in terms of, you know, what the kind of recoveries look like going forward? Is it going to be similar to what we saw in Q2, or is that impacted by the disruptions caused by the labor strike?

Craig Hutchison: Your first question comes from the line of Craig Hutchison from TD Cowen. Please go ahead. Hi, good morning guys.

Craig Hutchison: Hi, good morning, guys. I'm just taking my question. A couple of questions in Gibraltar. Just the recovery has been trending lower for the last few quarters, and I know it's partly due to the connector pit, but can you give some guidance in terms of what the kind of recovery is going for?

Craig Hutchison: Thanks for taking my question. Morning, Craig.

Craig Hutchison: A couple of questions in Gibraltar, just the recovery has been trending lower for the last few quarters, and I know it's partly due to the connector pit, but can you give us some guidance in terms of what the recovery looks like going forward, is it going to be similar to what we saw in Q2, or is that impacted by the disruptions with the labor strikes?

Richard Tremblay: Is it going to be similar to what we saw in Q2, or is that impacted by the instructions with the labor strikes?

Richard Tremblay: Hi, Craig Richard here. I know you're right. The recoveries have been impacted by the move into connector pit, and similar to what we've seen in other, when we transitioned to other mining areas. The ore at the top of the deposit is more of a transition in nature, and Connector Pit has higher degrees of oxidation. So, as we mine through that ore, we'll continue to see the recoveries improve as we go forward and get back in more in line with what we've seen in the past when we're into the heart of the ore zones.

Richard Tremblay: Yeah, hi Craig, Richard here. Yeah, I know you're right, the recoveries have been impacted by the move into the connector pit and similar to what we've seen in other when we transition to other mining areas. The ore at the top of the deposit is more of a transition in nature, and the connector pit has higher degrees of oxidation. So as we mine through that ore, we'll continue to see the recoveries improve as we go forward and get back more in line with what we've seen in the past when we get into the heart of the ore zones.

Richard Tremblay: Yeah, hi, Craig Richard here.

Craig Hutchison: Yeah, I know you're right, the recoveries have been impacted by the move in the connector pit and similar to what we've seen when we transitioned to other mining areas.

Richard Tremblay: The ore at the top of the deposit is more of a transition in nature, and a connector pit has higher degrees of oxidation, so as we mine through that ore, we'll continue to see the recoveries improve as we go forward and get back and more in line with what we've seen in the past when we're into the heart of the ore zones.

Richard Tremblay: Okay, and maybe as a follow-up, to get to your guidance, the 110 to 115, what should we be assuming here for throughput and grades for the backup this year? I know you've lost some throughput in the beginning of July, just completing the work you guys were doing there, but, you know, should we assume your backup is a full design 85,000 times a day and kind of 0.24% copper grades for the backup this year? Yeah, I think I think certainly had had a little bit of, obviously, continued downtime in the first part of July. But since call and centrator number one came back online, you know, it ramped up for a week or so, but it's been running very well.

Unknown Attendee: and Gray to the back half this year. I know you had lost some throughput in the beginning of July just completing the work you guys were doing there.

Unknown Attendee: had a little bit of continued downtime in the first part of July, but since concentrator number one came back online, you know, it ramped up for a week or so, but it's been running very well. And yeah, we see good opportunity there to potentially push throughput over 85,000 tons a day for the next couple quarters. So yeah, pretty optimistic on the throughput side. The rate, generally, I think, you know, should stay fairly consistent with what you saw in the first half. I think the opportunity obviously comes from having continuous mill operating time, and with both mills repaired and running well, there should be, you know, yeah, there should be good upside on the throughput.

Richard Tremblay: And, yeah, we see good opportunity there to potentially push throughput over 85,000 times a day for the next couple of quarters. So, yeah, pretty optimistic on the throughput side. Great, generally, I think, you know, should stay fairly consistent with what you saw in the first half. I think the opportunity, obviously, comes from having continuous mill operating time, and with both mills repaired and running well, we should be, you know, should be good good upside on the throughput. So, we've given it; we've given a range we don't like to be too precise and are in our, the different components of the guidance, but, you know, that's hopefully that's helpful.

Unknown Attendee: Thank you. And then just on the SXCW, I can come back online next year. Does that make sense in terms of what the cash costs are at this point for that kind of level of protection?

Unknown Attendee: Thank you. And then just on the F-X-E-W, good to start coming back online this year, any sense in terms of what the cash costs are at this point for that kind of other protection? I mean, something in the range of two bucks a pound is what we're seeing. Obviously, you know, not dissimilar from the rest of the operation based on what we're seeing at this point.

Speaker Change: And then just on the SXCW, any sense in terms of what the cash costs are at this point for that kind of level of protection?

Unknown Attendee: Okay. One last question for you. Just on Florence, you mentioned the potential to get credits from the U.S. government. Yeah, are we talking about what sort of level of credit we're talking about, like 30% of the cost of the FXCW facility to kind of give it the magnitude of what it could potentially be?

Unknown Attendee: Okay, then the one last question for me, just on the floor, as you mentioned, the potential to get the crisis in the US government. You know, are we talking, what's your level of crisis we're talking about? Like 30% of the cost of the FXW facility and kind of give us a magnitude of what it could potentially be? Yeah, we're looking at that closely. Craig, I think the real question is how much of it is eligible, and then what rate is the tax credit? I think conservatively, like we're probably looking at about a $20 million credit based on our spend.

Unknown Attendee: Yeah, are we talking, what's the level of credits we're talking about, like 30% of the cost of the FXCW facility, and can you kind of give us a magnitude of what it could potentially be?

Unknown Attendee: Yeah, we're looking at that closely. Craig, I think the real question is how much of it is eligible, and then what rate is the tax credit. I think conservatively, like we're probably looking at about a $20 million credit based on our spend. That's based on a 6% tax credit rate. There is the ability for it to go as high as 30%. So it could be up to five times that. But exactly where we land on that, we'll probably have better guidance on and in Q3, once we've submitted the application.

Unknown Attendee: That's based on a 6% tax credit rate. There's ability for it to go as high as 30%, so it could be up to five times that. But exactly where we land on that, we'll probably have better guidance on it.

Unknown Attendee: tax credit rate there's there's ability for it to go as high as 30% so it could be up to five times that but exactly where we land on that will probably have better guidance on it in in Q3 once we've we've submitted the application

Unknown Attendee: In Q3, once we've submitted the application. Okay.

Unknown Attendee: Thanks, so guys, I'll turn you over to the next. Thanks, Greg.

Unknown Attendee: Okay.

Unknown Attendee: Thank you.

Ben Davis: Thank you. And your next question comes in the line of Ben Davis from Panmure Liver Room. Please go ahead.

Benjamin Davis: And your next question, cast on the line up, Ben Davis, from Ben Murrow Liberum. Please go ahead.

Speaker Change: Thank you. And your next question comes from the line of Ben Davis from Panmure Liver Room. Please go ahead.

Benjamin Davis: Great. Thanks, guys. Thanks for the call.

Benjamin Davis: A couple of questions from me. Simple one, firstly just on the wage agreement. Did that cover the whole workforce? And then secondly, another one on just kind of system inventories of a bit of a drawdown with more sales and production over the past couple of quarters. Do you expect to rebuild those, and at what pace kind of going forward? Thanks.

Ben Davis: Thanks guys, thanks for the call. A couple of questions from me. A simple one, firstly just on the wage agreement. Did that cover the whole workforce? And then secondly, another one on just kind of system inventories. A bit of a drawdown with more sales and production over the past couple of quarters.

Ben Davis: Do you expect to rebuild those and at what pace kind of going forward? Thanks

Stuart McDonald: Hi Ben, it's Stuart speaking here. Generally, on the workforce. On the inventory side, yeah, on finished goods, we had a bit of a drawdown this quarter. I suppose that some of the mill downtime allowed us to move out a little bit of extra inventory perhaps, but not unusually low inventory yet at quarter end. So we should see something in those ranges continue for the future. Yeah. So there will be no surprises coming, I don't think, in terms of finished goods inventory in the next few quarters.

Stuart McDonald: Hi, Ben. It's Stuart's taking here. Generally on the workforce, I mean, these are roughly 750 employees at the mine and roughly 550 of those are in the union. So the new contract applies to that 550 portion of the total. Yeah, so we're happy to get that deal behind us. That'll be in place for the next three years.

Stuart McDonald: Hi Ben, it's Stuart speaking here. Generally on the on the workforce...

Speaker Change: I mean, these are rough numbers, roughly 750 employees at the mine and roughly 550 of those are in the union. So the new contract applies to that 550 portion of the total.

Bryce Hamming: On the inventory side, yeah, on finished goods, we had a bit of a drawdown this quarter. I suppose some of the middle downtime allowed us to move out a little bit of extra inventory graphs. But not unusually low inventory at quarter end, so we should see something in those ranges continue for the future. Yeah, so nothing, nothing, no surprises coming. I don't think in terms of finished goods inventory in the next few quarters.

Stuart McDonald: allowed us to move out a little bit of extra inventory perhaps, but not unusually low inventory at quarter end, so we should see

Unknown Attendee: Okay, great. That's helpful.

Unknown Attendee: Great, that's helpful. And actually, just following up on the SXEW, so cash costs, hopefully around the $2 mark, but with the restart, was the thinking about basically securing enough ore, or was that also a price equation within that as well?

Unknown Attendee: And actually just following up on the SXEW. So cash costs, hopefully, around the two buck mark.

Richard Tremblay: But yeah, with the restart was the thinking about basically curing enough all, was that also a price equation within that as well?

Unknown Attendee: Sorry, Ben.

Richard Tremblay: Richard here. The question was, what's triggering the restart? Yeah, exactly. Is this just now you've rebuilt stockpile sufficiently that it now makes economic sense to do every start of the SXCW? Yeah, that's correct.

Speaker Change: Yeah, exactly. Is this just now you've rebuilt stockpiles sufficiently that it now makes economic sense to do a restart of the SXCW?

Unknown Attendee: Yeah, that's correct. The connector pit releases a significant portion of oxide ore that's now been placed on the dump and allows it to be economical now to restart the plant because we've basically replenished the leach pads. Got you. Okay.

Richard Tremblay: The Connector Pit releases a significant portion of oxide ore that's been, you know, now been placed on the dump and allows it's economic now to restart the plant because we've basically replenished the lead shafts. Gotcha. Okay, great.

Unknown Attendee: Okay, great. That's all for me. Thanks.

Unknown Attendee: That's that's all for me. Thanks.

Unknown Attendee: Gotcha. Okay, great. That's all for me. Thanks.

Unknown Attendee: Thank you.

Unknown Attendee: Thank you. That concludes our question and answer session. I will now hand the call back to Taseko management for any closing remarks. Okay.

Unknown Attendee: That concludes your question and answer session. I will now hand go back to the SQL management for any closing remarks.

Unknown Attendee: Okay, thank you very much everyone for joining our call, and we'll talk to you again next quarter. Enjoy the rest of the summer. Bye now.

Stuart McDonald: Okay, thank you very much, everyone, for joining our call, and we'll talk to you again next quarter. And enjoy the rest of the summer.

Stuart McDonald: Okay, thank you very much everyone for joining our call and we'll talk to you again next quarter and enjoy the rest of the summer.

Unknown Attendee: That concludes our conference today. Thank you for participating, and we all disconnect. You

Unknown Attendee: That concludes our conference today. Thank you for participating. You may all disconnect.

Speaker Change: Bye now.

Q2 2024 Taseko Mines Ltd Earnings Call

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