February 19, 2014, Vancouver, BC
- Taseko Mines Limited (TSX: TKO; NYSE MKT: TGB) (“Taseko” or the “Company”) reports the results for the year ended December 31, 2013.
Fourth Quarter & 2013 Highlights
*Non-GAAP performance measure. See end of news release.
- Annual 2013 earnings from mining operations (before depletion and amortization)* were $77.0 million and cash flows from operations were $67.6 million. In the fourth quarter, earnings from mining operations (before depletion and amortization)* were $25.0 million and cash flows from operations were $32.8 million.
- Revenues for 2013 were $290.1 million from the sale of 85.4 million pounds of copper and
0.9 million pounds of molybdenum (Taseko’s 75% share).
- Total production at Gibraltar (100%) for 2013 was 121.4 million pounds of copper and 1.5 million pounds of molybdenum. Production increased by 37%, from 51.3 million pounds of copper in the first half of 2013 to 70.1 million pounds in the second half of the year
- The new Gibraltar concentrator was successfully commissioned and ramped up during the year, reaching targeted milling rates in the fourth quarter.
- Expenditures on the New Prosperity and Aley development projects in 2013 totalled $10.3 million.
- Panel hearings for the New Prosperity project concluded on August 23, 2013. The Review Panel’s report was made public on October 31, 2013. The Government of Canada has 120 days from the publication date to decide if it should grant the necessary authorizations for the project to proceed.
- Realized copper prices for 2013 were US$3.27 per pound, in line with the average London Metal Exchange price of US$3.32.
Russell Hallbauer, President and CEO of Taseko, commented, “With the successful ramp up of the new Gibraltar concentrator complete, we can focus on controlling costs and generating the cash flows that the expansion was predicated on. The benefits of the expansion and reaching steady-state production are apparent in our fourth quarter financial results as both earnings from mining operations and cash flows from operations made a significant step change. Our net operating costs of production steadily declined in 2013, decreasing 26% to US$1.70 per pound, from the fourth quarter of 2012 when commissioning was started. We expect the lower operating costs are not only sustainable, but still have room for improvement as recoveries and mill availability increase toward target. With no major Capital expenditures planned for 2014, Gibraltar cash flow is expected to increase significantly.
Operationally, Gibraltar performed well at the higher mill throughput rates in the second half of 2013. Our operations teams are adapting to the changed operating parameters and increasing their understanding of the new, two line facility. The new molybdenum separation facility, which was commissioned in mid-2013, is still in ramp up, but significant strides were made in the fourth quarter. We will continue to fine tune the circuit in order to achieve the 50% recovery target.”
Mr. Hallbauer continued, “The federal panel reviewing our New Prosperity Project completed its report in October. The report in most respects agrees with our assessment that there would not be significant adverse effects. The risks are modest and the social and economic benefits are enormous. The local governments and many citizens of the region made this very clear throughout the panel process. The Government of Canada has 120 days from the publication of the panel report to make the decision on whether to move the project back to the British Columbia Government, who will provide oversight in the rigorous provincial permitting process.
Work continues on our Aley Niobium Project, specifically in the areas of metallurgy, engineering and environmental studies. Progress has been slower than expected finalizing the process flow sheet but we plan to upgrade the resources announced in March 2012 to a NI 43-101 compliant reserve in the coming months.”
Mr. Hallbauer concluded, “Our balance sheet remains very strong, ending the year with $83 million of cash. With minimal capital spending requirements ahead and Gibraltar generating positive cash flow, we are looking forward to increasing our cash position in 2014.”
*Non-GAAP performance measure. See end of news release.
Fourth Quarter Highlights
- The second line of the Gibraltar concentrator two line facility was completed on time and on budget, and produced first concentrate in March 2013. The new facility has reached design capacity and the focus is now on optimizing copper recovery circuits and improving mechanical availability on both lines;
- Annual copper production at Gibraltar increased to 121.4 million pounds (100% basis) in 2013, a 35% increase over 2012;
- Total sales for 2013 were 113.8 million pounds of contained copper in concentrate (100% basis) 27% higher than 2012. Year-end copper inventories were 10.1 million pounds, which is higher than normal due to poor weather conditions at sea delaying the final 2013 shipment;
- The Gibraltar mining fleet has been expanded to meet the new concentrator’s production capacity resulting in a 35% increase in tonnes mined over 2012;
- Higher copper production and cost efficiency programs at Gibraltar resulted in a significant downward trend in unit production costs during 2013. Total operating costs for 2013 were US$2.27 per pound, a 4% decrease over the US$2.36 per pound for 2012;
- Cash flows from operations were $67.6 million in 2013. This amount was offset by capital expenditures, primarily for the remaining concentrator #2 construction payments and debt service costs of $42.6 million, resulting in a net decrease in cash and equivalents of $52.1 million during the year; and
- Panel hearings for the New Prosperity project concluded on August 23, 2013. The Review Panel’s report was made public on October 31, 2013. The Government of Canada has a maximum of 120 days from the publication date to decide if it should grant the necessary authorizations for the project to proceed.
REVIEW OF OPERATIONS
Gibraltar mine (75% Owned)
- Total sales for the fourth quarter of 2013 were 37.0 million pounds of copper, up 60% over the same quarter last year;
- The trend of declining operating costs per unit continued in the fourth quarter with a total cost per pound produced of US$2.14, compared to US$2.72 in the fourth quarter of 2012;
- Cash flow from operations in the fourth quarter of 2013 was $32.8 million, up 152% from the fourth quarter in 2012; and
- Molybdenum recovery increased to 34.8% in the fourth quarter of 2013 from 17.5% in the third quarter of 2013.
During 2013 Gibraltar completed the ramp up of concentrator #2, which is now operating at design capacity. The new mill moves Gibraltar from a single line 55,000 ton per day plant to a dual line 85,000 ton per day plant, with a corresponding increase in mine fleet to accommodate this additional capacity. A new molybdenum separation facility was also installed, commissioned and is currently undergoing ramp up.
The 2014 focus for Gibraltar will be to increase mechanical availability, optimize copper recovery circuits and advance cost efficiency programs designed to decrease the production cost per pound of copper.
Operating results in the following table are presented on a 100% basis.
*Non-GAAP performance measure. See end of news release.
**2012 numbers have been restated to reflect the adoption of a new accounting policy for capitalized stripping costs. See note 27 of our consolidated financial statements.
Fourth quarter results
In the fourth quarter 2013, Gibraltar mined 21.5 million tons a 20% increase over tons mined in the fourth quarter of 2012 and consistent with the mining rate in the previous quarters of this year. During the quarter, mining operations transitioned into a lower grade portion of the Granite Pit, where the copper grade is approximately 10% lower than the life of mine reserve grade.
Total mill throughput for the fourth quarter was 7.6 million tons, an increase of 82% over tons milled in the fourth quarter 2012. Feed from the stockpile was used to supplement the ore from Granite Pit causing a slight decrease in head grade.
Total copper production for the quarter was 33.5 million pounds, a 58% increase over pounds produced in the fourth quarter of 2012. This significant increase in production was achieved even though recoveries were lower than previous quarters and the combined availability of the two concentrators averaged 86%, below the target of 93.5%.
Molybdenum recoveries were 34.8% for the fourth quarter; much improved over the previous quarter. Molybdenum production for the fourth quarter was 480,000 pounds, an improvement of 69% on the previous quarter and a 115% increase over the fourth quarter of 2012. Commissioning of the new molybdenum plant is ongoing with targeted recoveries at 50%.
A driver of the declining unit cost trend during 2013 is the Company’s continued advancement of cost reduction programs and ongoing optimization of copper recovery circuits. In the fourth quarter of 2013, net operating costs per pound of copper produced were US$1.70, a 11% decrease over the US$1.91 per pound in the third quarter 2013. This decrease was primarily due to increased by-product credits and capitalized stripping, partially offset by lower copper production.
The increase in molybdenum by-product credits was due to the improved performance in the new molybdenum plant. Additionally, the fourth quarter had higher than normal stripping activities, hence capitalized stripping increased yielding a $0.30 per pound produced positive impact on total operating costs.
The impact of increased by-product credits and capitalized stripping was partially offset by a decline in copper production. Production in the fourth quarter was 33.5 million pounds, down 9% from the third quarter primarily due a drop in head grade, which lead to a drop in recovery. The drop in head grade was due to the stockpile feed and ore from the lower grade portion of the Granite pit.
Off-property costs, including transportation, treatment and refining charges, for the fourth quarter of 2013 were $0.44 per pound produced, compared to $0.30 per pound in the previous quarter and $0.42 per pound produced in the fourth quarter of 2012. Off property costs are driven by sales volume and timing of shipments, and as such are subject to fluctuation. The total operating costs, including off-property costs, for the fourth quarter of 2013 were $2.14 per pound produced, comparable to the $2.21 per pound produced in the third quarter of 2013 and down from $2.72 per pound produced in the fourth quarter of 2012.
In 2013, Gibraltar mined 89.4 million tons of material; a 35% increase over tons mined in 2012. The strip ratio of 3.2 was consistent with the 2012 result.
During 2013 Gibraltar milled 24.5 million tons, a 50% increase over the tons milled in 2012. The ramp up of concentrator #2 to full production was completed and the operational focus shifted to optimizing the performance of both concentrators. These initiatives, which focus on copper recoveries, ore blending and mill availability are intended to achieve further increases to copper production and lower unit operating costs.
Copper production in 2013 was 121.4 million pounds, an increase of 35% compared to the prior year production of 89.8 million pounds. Molybdenum production during 2013 was 1.2 million pounds which was consistent with production in 2012.
Gibraltar’s SX/EW plant remained temporarily idle in 2013 and is expected to restart in the spring of 2014.
In 2013, net operating cash costs per pound of copper produced was US$1.89, a 4% decrease over the US$1.96 averaged during the prior-year. The decrease in net operating cash cost in 2013 was primarily driven by the increased copper production realized through bringing Gibraltar concentrator #2 online. The unit cost of maintenance, labour and consumables increased due to the commissioning of the new concentrator. These higher unit costs associated with the commissioning and ramp up period have started to decline in the second half of 2013.
By-product credits in 2013 were affected by the lower recoveries and the declining molybdenum price. Molybdenum recoveries are increasing as the commissioning of the new plant continues and are now trending towards the 50% target.
Off-property costs, including transportation, treatment and refining charges, for 2013 were $0.38 per pound produced, compared to $0.40 per pound in 2012. Off property costs are driven by sales volume and timing of shipments, and as such are subject to fluctuation. The total operating costs, including off-property costs, for 2013 were $2.27 per pound produced, down from $2.36 per pound produced in 2012.
REVIEW OF PROJECTS
New Prosperity project
On September 20, 2012, the Environmental Impact Statement (EIS) was submitted to the three-member Review Panel established for the federal environmental assessment of the project. Following submission of additional information requested by the panel, public hearings were conducted in Williams Lake and surrounding First Nation communities from July 22 to August 23, 2013. The panel subsequently prepared their report and submitted it to the Federal Minister of the Environment on October 31, 2013.
The panel report found that the proposed project is not likely to cause significant adverse environmental effects in respect of 33 different areas but found significant adverse environmental effects were likely in relation to three
areas; (i) water quality in Fish Lake and Wasp Lake, (ii) fish and fish habitat in Fish Lake, wetlands and riparian ecosystems, and (iii) Tsilhqot’in current use of lands for traditional purposes, cultural heritage and archaeological/historical resources.
On November 29, 2013 the Company commenced a federal judicial review, seeking to set aside certain findings of the panel report. The Company is asking the court for a declaration that certain panel findings relating to seepage and water quality be set aside, and that the Panel failed in certain respects to comply with principles of procedural fairness.
The Government of Canada is required to make a decision on the Project by February 28, 2014.
The current focus on the Aley niobium project is upgrading the resources announced in March 2012 to a NI 43-101 compliant reserve. Work is continuing on metallurgical flow sheets, engineering and environmental studies.
Taseko will host a conference call on Thursday, February 20, 2014 at 11:00 a.m. Eastern Time (8:00 a.m. Pacific) to discuss these results. The conference call may be accessed by dialing (877) 303-9079, or (970) 315-0461 internationally. Accompanying presentation slides will be available to download at tasekomines.com. Alternatively, a live and archived webcast will also be available at tasekomines.com. The conference call will be archived for later playback until February 27, 2014 and can be accessed by dialing (855) 859-2056 in Canada and the United States, or (404) 537-3406 internationally and using the passcode 53762148.
For further information contact: Brian Bergot, Investor Relations - 778-373-4554, toll free 1-800-667-2114
President and CEO
2013 Annual Results
No regulatory authority has approved or disapproved of the information contained in this news release.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This document contains “forward-looking statements” that were based on Taseko’s expectations, estimates and projections as of the dates as of which those statements were made. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “outlook”, “anticipate”, “project”, “target”, “believe”, “estimate”, “expect”, “intend”, “should” and similar expressions.
Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. These included but are not limited to:
- uncertainties and costs related to the Company’s exploration and development activities, such as those associated with continuity of mineralization or determining whether mineral resources or reserves exist on a property;
- uncertainties related to the accuracy of our estimates of mineral reserves, mineral resources, production rates and timing of production, future production and future cash and total costs of production and milling;
- uncertainties related to feasibility studies that provide estimates of expected or anticipated costs, expenditures and economic returns from a mining project;
- uncertainties related to our ability to complete the mill upgrade on time estimated and at the scheduled cost;
- uncertainties related to the ability to obtain necessary licenses permits for development projects and project delays due to third party opposition;
- uncertainties related to unexpected or ongoing judicial or regulatory proceedings;
- changes in, and the effects of, the laws, regulations and government policies affecting our exploration and development activities and mining operations, particularly laws, regulations and policies;
- changes in general economic conditions, the financial markets and in the demand and market price for copper, gold and other minerals and commodities, such as diesel fuel, steel, concrete, electricity and other forms of energy, mining equipment, and fluctuations in exchange rates, particularly with respect to the value of the U.S. dollar and Canadian dollar, and the continued availability of capital and financing;
- the effects of forward selling instruments to protect against fluctuations in copper prices and exchange rate movements and the risks of counterparty defaults, and mark to market risk;
- the risk of inadequate insurance or inability to obtain insurance to cover mining risks;
- the risk of loss of key employees; the risk of changes in accounting policies and methods we use to report our financial condition, including uncertainties associated with critical accounting assumptions and estimates;
- environmental issues and liabilities associated with mining including processing and stock piling ore; and
- labour strikes, work stoppages, or other interruptions to, or difficulties in, the employment of labour in markets in which we operate mines, or environmental hazards, industrial accidents or other events or occurrences, including third party interference that interrupt the production of minerals in our mines.
For further information on Taseko, investors should review the Company’s annual Form 40-F filing with the United States Securities and Exchange Commission www.sec.gov and home jurisdiction filings that are available at www.sedar.com.
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