Q3 2024 Taseko Mines Ltd Earnings Call
Speaker Change: Good day, and thank you for standing by. Welcome to the Tecico Mines 3rd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Bergot, Vice President of Investor Relations. Please go ahead.
Brian Bergot: Thank you, Liz. Welcome everyone and thank you for joining TSECO's third quarter 2024 conference call.
Brian Bergot: The news release in regulatory filing announcing our financial and operational results was issued yesterday after market close and is available on our website at tasikominds.com and on CDAR Plus.
Brian Bergot: I am joined today in Vancouver by Toseco's President and CEO, Stuart McDonald, Toseco's Chief Financial Officer, Bryce Hamming, and our COO, Richard Trombley.
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.
Brian Bergot: As such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our third quarter MD&A and the related news release, as well as the risk factors particular to our company.
Brian Bergot: These documents can be found on our website and also on CDER Plus. I would also like to point out that we will use various non-GAAP measures. You can find explanations and reconciliations regarding these measures in the related news release.
Speaker Change: And finally, all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified. Following opening remarks, we will open the phone lines to analysts and investors for questions. I would now like to turn the call over to Stuart for his remarks.
Stuart McDonald: Thank you, Brian. Good morning, everyone. I'm glad you're able to join us today for our review of Taseko's third quarter operational and financial results.
Stuart McDonald: I'll start with our 100% owned Gibraltar mine which had a solid operating performance.
Stuart McDonald: in the period, despite the first few weeks of the quarter being impacted by the planned downtime for major mill repairs in one of our two concentrators.
This maintenance work and the intake crusher move were disrupted by the labour strike in June.
Speaker Change: But in the third week of July, we were able to restart concentrator number one and ramp back up to full capacity.
Speaker Change: Third quarter copper production was 27 million pounds on a head grade of 0.23% copper.
Speaker Change: Although mill availability was below plan for the quarter, we were still able to process 7.6 million tons of ore, which is a good result considering the disruptions.
Speaker Change: Copper recoveries notched a little higher than the previous quarter at 79%, but are still lower than normal due to oxidized ore in the upper benches of the new connector pit.
Speaker Change: So when they are running, the mills have been able to consistently run above the design capacity of 85,000 tonnes a day, which demonstrates the throughput upside we had spoken about previously, and we expect that higher throughput to drive higher copper production in Q4.
Speaker Change: However, the lower mill availability in the third quarter means that we no longer expect to make up the production that was lost during the labour strike in June.
Speaker Change: So we're now forecasting current year production to be between 105 and 110 million pounds compared to our original guidance of 115 million.
Speaker Change: One significant change this quarter was molybdenum production, which increased to more than 400,000 pounds in Q3. That's more than we've produced in any quarter since 2021, and it's being driven by higher moly grades in the new connector pit.
Speaker Change: We expect that to continue going forward and we should be able to get back to producing two million pounds per year or more of moly.
Speaker Change: At today's price of $21 or $22 a pound, that will represent a pretty significant improvement to our cost structure going forward.
Thank you.
Speaker Change: Total site costs of $111 million in the third quarter was similar to previous quarters, except Q2 which was lower due to the mine being shut down for the labor disruption.
Speaker Change: Our C1 cash cost of $2.92 per pound was impacted by a lower allocation of capitalized stripping costs and lower production volumes.
Oh, life of mine average.
Speaker Change: Partially offsetting these higher unit costs was lower off-property costs as we made our initial shipments under the new off-take agreements which have negative TCRCs.
Speaker Change: We expect off-property costs to continue to decline as some of our older off-take agreements at higher TCEs unwind.
Speaker Change: And, in fact, next year we're expecting TCRCs to be close to zero.
Speaker Change: compared to about 17 cents a pound last year in 23.
Speaker Change: Taseko's realized copper price in the third quarter remained a healthy $4.23 per pound and that helped to drive solid financial results in the quarter.
Speaker Change: We generated $48 million of adjusted EBITDA, $55 million of earnings from mining operations, and $65 million of operating cash flow.
Speaker Change: Looking ahead to 2025, we're expecting slightly higher copper grades for the year, higher mill throughput, and also the restart of Gibraltar's SXEW plant which has been idle since 2016.
Speaker Change: Copper production is expected to be in the range of 120 to 130 million pounds from Gibraltar.
and Mollie grades and production will also be higher.
Speaker Change: So we're looking at a strong production year, which is a real positive.
Speaker Change: But I do want to caution that we expect production to be weighted to the second half of the year, as mill feed in the first half will include some lower-grade stockpiled ore.
Speaker Change: Turning over to Florence now where construction activities have really ramped up in recent months and we're very pleased with the progress.
Speaker Change: The SXCW plant is really starting to take shape. We're nearing the end of the bulk concrete pouring for the foundations and pre-assembly and installation of the structural steel is well underway.
Speaker Change: In September, we began installation of process equipment, and as of last week, almost all of the settling tanks have been installed.
Installation of piping for this new equipment has now started.
Speaker Change: On the well field, we've completed 40 out of the 90 wells that are planned for the construction phase, and that's in line with our schedule.
Speaker Change: And with four drill rigs now operating, we should see the well completion rates accelerate going forward.
Thank you.
Speaker Change: Also, from a safety and environmental perspective, pleased to report that we've not had any lost time injuries or reportable environmental incidents so far on the project.
Speaker Change: and as we've previously disclosed we expect total costs to come in within 10 to 15 percent of the 232 million estimate.
Speaker Change: And that's the estimate that we published with our technical report in March 2023 based on costing from 2022.
Speaker Change: Overall, I'm pleased with how the first nine months of construction has progressed. Our recruiting and other plans for operational readiness are also progressing well and we remain on schedule for first copper in late 2025. Should be a very exciting year for us ahead.
Speaker Change: We haven't spoken a lot about Yellowhead recently but we are preparing to submit the initial project description and enter into the Provincial and Federal Environmental Assessment process.
Speaker Change: We have a few years of permitting work ahead of us, but this remains a very good project in a top tier jurisdiction.
Speaker Change: As a reminder, the Yellowhead Technical Report from 2020 outlined a project with annual copper production of 180 million pounds over a 25-year mine life.
and with significant gold and silver by-product credits.
that generate a cash cost of $1.67 per pound copper.
Speaker Change: That study now is almost five years old and used a long-term copper price assumption of only $3.10 per pound. So it's due for an update and next year we're planning to update it with current metal prices and costs.
Speaker Change: We'll also be incorporating the recently announced Canadian tax credits for copper mine development, which have the potential to significantly improve that project's economics as well.
Speaker Change: Even though it's still a few years away from being construction ready, there's a lot of value there to be unlocked.
Speaker Change: I'll pass the call to Bryce in a minute to talk about the specifics of our financials, but I do want to emphasize that our balance sheet remains in a strong position.
Speaker Change: with a cash balance of over 200 million Canadian at the end of Q3 and an undrawn credit facility.
Our stock price is up about 80% year-to-date.
Speaker Change: And over the last four months, we utilized our at-the-market equity offering for the first time.
Speaker Change: issuing a total of 12.1 million shares for net proceeds of 37.3 million Canadian.
Speaker Change: The strike at Gibraltar over the summer was unexpected and had an impact on our projected cash flows.
Speaker Change: We are we also expect increased spending on Yellowhead over the next year and will be advancing some growth initiatives at Gibraltar including restart of the SXCW plant and studies on sulfide leaching
Speaker Change: So the extra cash from the ATM will allow us to move forward on these initiatives and still maintain a solid cash balance through the Florence bill.
With that, I'll turn it over to Bryce.
Thank you.
Bryce Hamming: Thanks Stuart. It was a fairly straightforward quarter but I'll provide some additional accounting and financial details. We posted gap earnings of nil per share but on an adjusted basis we had net income of three cents per share.
Speaker Change: or $8.2 million. A couple of key notable items to mention. First off, $4 million of costs were incurred to complete the primary Crusher relocation project, including the demolition of the old station. Under IFRS, these costs are expensed.
Speaker Change: While the physical move of the Crusher was done in the second quarter, final tie-ins
and that demolition were completed this quarter.
Speaker Change: We also had $13 million in non-cash accretion on our care booth.
Speaker Change: earn out liability and for Florence royalty obligations. That accretion rises due to the rising copper price trend and also the more positive outlook for copper prices in the years ahead based on bank consensus forecasts.
Speaker Change: We also had $3 million in marked marks on our derivative adjustment on the Mitsui stream.
Speaker Change: So we consider these items unrealized and one-off and is not reflecting the underlying operational performance so they are adjusted in determining the company's adjusted earnings.
Speaker Change: So financial performance in the quarter was strong. We had adjusted EBITDA 48 million in earnings from MIME Ops
Speaker Change: and that was just on sales volumes of 26 million pounds. Our realized copper price for the quarter was $4.23 in line with the average for the LME for the quarter and it was down a bit from last quarter. Copper prices when they hit just peaked at $5 in May.
Total study spending at Gibraltar was $111 million.
Speaker Change: in the third quarter and that's that's really in line with previous quarters before the strike in Q2. Capitalized stripping in the third quarter was modest at only $3.6 million so that was down from $10.7 million in Q2 as ore is now being fed from the connector pit into the mills.
Speaker Change: Unit costs in the third quarter were $2.92 per pound, slightly lower than the previous quarter, mainly due to an increase in copper production but also a decrease in off-property costs due to our first shipments under our new off-take agreements at the negative TCRCs that Stuart just mentioned.
Speaker Change: TCRCs, generally speaking, make up about one-half of our off-property costs, and we expect to pay no net overall TCRCs in 2025. So that's a major savings to our operating costs going forward.
Speaker Change: Cash flow from operations in the third quarter was $65 million. We benefited from both stable operating margins and also $26 million in funds associated with the insurance recovery which was taken to earnings in the second quarter and was received this quarter.
Cashflow from
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Speaker Change: The financing activities included that amount, and it also included $23 million from the issuance of 7.8 million shares under the ATM program.
Speaker Change: At Florence, we're now getting into peak construction spending quarters. In the third quarter, we spent $42 million on the commercial production facility.
Speaker Change: That was an increase of $6 million over the second quarter, and then to the end of the third quarter, we've now spent a total of $97 million U.S. Looking ahead to our heavy construction period, we will spend about $20 million U.S. a month for the next two quarters before spending tails off.
Speaker Change: Just to expand upon Stuart's comments on liquidity, our cash position at the end of the third quarter was $209 million, and then subsequent to the quarter end, we also amended our revolving credit facility with National Bank and ING, extending the maturity, which was set to mature in mid-2026 out to the end of 2027.
Speaker Change: We also increased it by $30 million U.S. so that its overall size is now $110 million U.S. That facility today is completely undrawn, so we have pro forma liquidity of approximately $360 million Canadian with this higher facility size.
The other significant initiative we announced with Florence Construction
Speaker Change: The update we provided a few weeks ago was our submission to the US Department of Energy's qualified
Speaker Change: Advanced Energy Project Credit Program, that's under 48C, Subterra F.E. As a critical materials project producing domestic U.S. copper, we believe Florence Copper is a prime candidate for this program.
Speaker Change: The tax credit we have applied for is for up to $110 million U.S. and is expected to be awarded in just a couple months from now, in mid-January.
Speaker Change: Even if only a partial award is granted, this could be an additional source of funding for us later next year and into 2026. With that, I'll turn it back to you, Operator, and open it up for questions. Thank you.
Speaker Change: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, please press star 1 one again. Please stand by while we compile the Q&A roster.
and the other one.
Our first question comes from Alex Bedwani with Canaccord Genuity.
Thank you. Bye-bye.
Speaker Change: Hi all, thanks for taking my question. Just a couple from me today. So the first one is I'm just trying to get a sense of what the throughput is going to look like in Q4. So what was the exit rate in Q3 for September for example?
Speaker Change: And then the second thing is just related to the oxidization of the ore in the upper benches connector. Is that going to continue through to Q1 or do you see that sort of subsiding in Q4?
Thank you for watching!
Stuart McDonald: Yeah, I mean, Alex. Hi, Alex. It's Stuart here. I'll start. In terms of mill throughput, I mean, what we've seen in the last...
Speaker Change: couple of two three months here we've been running over design capacity as I mentioned in the range of 88, 89 thousand tons a day.
Speaker Change: There is upside potential on that. We'll see how it goes.
Those are opportunities that we're always thinking about.
Speaker Change: It's Richard here. On the transition ore, as we continue to mine deeper, we'll continue to see improved or reduced oxidation of the ore that we're mining, and we'll continue to see performance improve.
as we progress through fourth quarter and into next year.
Speaker Change: Okay and and what's the what's the reason for the running over design capacity? Is it just the softness of the AURIC connector at the moment?
Speaker Change: yeah so I didn't get that last part of that question yeah the question was why are we able to run over design capacity and it does yeah it goes to the softness of the oring connector exactly what we're seeing is that or is
Speaker Change: is similar to what we had in Integral to Pit. Okay, thanks guys, appreciate that.
Thanks for watching!
Speaker Change: Our next question comes from a line of Nicholas Clark with TD Cowan.
Thanks for watching!
Speaker Change: Thanks, Operator. Hi, Stuart. Hi, team. Nick Clark here on for Credit Couch as soon. Just a quick question, if I could, on Florence. I understand
Thank you.
Speaker Change: Commitment, ballpark, I mean we're up in the range of 75% committed at this point.
Yeah.
. . .
Speaker Change: Great. Okay. Thank you. That's helpful. And then just one more on.
Speaker Change: on one of your growth projects. I know we don't talk about it too much, but New Prosperity, you guys mentioned in your release that you are hoping to get a First Nations agreement at that project by the end of this year. If that is successful, what will be the next steps for that project going forward?
Thanks for watching!
Speaker Change: Yeah, I mean, it obviously is heavily, you know, the future of that project is heavily dependent on the negotiations that we're in now, which are kind of confidential. We've signaled that we're still aiming to, or hopefully we'll have a deal by the end of the year, obviously.
Speaker Change: Here in BC we've had a provincial election in October, which has kind of disrupted that schedule a month or two, you know, but we're still hopeful we'll get a deal of some kind and yeah be able to in the longer term, I think, you know...
Speaker Change: remain optimistic that at some point we'll be able to move that forward but there's no clear no clear schedule or no clear plans at this point so I would call I would describe it as a longer dated option for shareholders
Speaker Change: Great. Okay, thanks Stuart. I appreciate the color and good luck guys in Q4.
Thanks.
I mean...
Speaker Change: That concludes today's question and answer session. I'd like to turn the call back to CECO management for closing remarks.
Speaker Change: Okay, thank you very much everyone for joining and if you have any other questions you know where to reach us and otherwise we'll talk to you next quarter. Thanks.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.
and Stuart.