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A key component of Taseko's growth strategy is the expansion and modernization of its wholly owned Gibraltar mine. The goal is to create a mid-tier cost mine that will be able to generate positive cash flows at all points of the copper price cycle.
Mine Expansion
Gibraltar is undergoing a major, two-phase expansion and modernization of the concentrator, which was originally built in 1971. The first phase, announced in the spring of 2006 (link to press release) and expected to be complete by the end of 2007, is an expansion of the current grinding circuit as well as a complete replacement of the flotation recovery system. The grinding capacity will be increased by adding a large, Semi Autogenous Grinding (SAG) mill to the front end of the concentrator, which will also improve the efficiency of the present mill and crushing system. The original flotation recovery system is being replaced by 10 state-of-the-art, very large flotation cells. By the end of 2007, the phase 1 expansion will be complete and the daily mill capacity will be increased to 46,000 tons per day, with the capability to produce 100 million pounds of copper and 1.3 million pounds of molybdenum annually.
The second phase of the expansion, announced in May, will allow the new SAG mill to process 55,000 tons per day by increasing capacity in other circuits in the concentrator. The expansion project will include the addition of a pebble crusher, tailings pumping system, regrind mill, cleaner flotation cells, pressure filters and driers. Phase 2 is targeted for completion by the end of 2008.
Upon completion, Gibraltar's average annual production is expected be 120 million pounds of copper and 1.4 million tons of molybdenum. This additional throughput will also reduce the long-term operating costs at Gibraltar. Both phases of the expansion and modernization, plus additional equipment and associated infrastructure, is estimated to cost approximately C$130 million. There are very few mining companies that have the ability to add incremental capacity at such a low capital cost.
Extending Mine Life
In 2006, a 61,500 foot exploration drilling program was carried out to better define current mineral resources and to test for additional mineralization at depth. The drilling program successfully met these objectives and, in addition, encountered copper and molybdenum grades at depth that are significantly higher than the average 0.30% copper and 0.008% molybdenum grades mined over the past 10 years of operation at Gibraltar.
Based on these positive results, the drilling program has been extended through the spring of 2007 with the goal of further increasing Gibraltar's reserves.
Taseko announced in December 2006 a 40% increase in proven and probable reserves in the Granite Lake deposit. Under present mine operating parameters of 36,000 tons milled per day, these additional reserves extend the mine life to 21 years. Upon completion of the mill expansion in December 2007 to 46,000 tons per day, Gibraltar mine life will be approximately 16 years.
The current Reserves and Resources are detailed below:
Gibraltar Reserves and Resources at October 2006
|
Cut-off |
Tons
(millions) |
Cu
(%) |
Mo
(%) |
Copper
(B lbs) |
| Proven & Probable¹ |
Sulphide 0.20% Cu |
256 |
0.318 |
0.010 |
1.6 |
| Proven & Probable |
Oxide 0.10% ASCu |
17 |
0.148 |
|
|
| Measured & Indicated |
0.16% to 0.20% Cu |
611 |
0.280 |
0.008 |
3.4 |
¹Reported by Gibraltar mine staff under supervision of J. McManus, P.Eng., December 2006
Re-Starting Low Cost SX-EW Plant
At the end of 2006, the refurbishment of the Solvent Extraction and Electrowinning (SX-EW) plant at Gibraltar was completed and commissioning began. First cathode was produced in January and approximately 1.3 million pounds of copper cathode was produced by mid-year.
The SX-EW plant, which had been idle since 1998, is capable of producing seven million pounds of LME Grade cathode copper per year. This process uses oxidized copper ore which has been stockpiled since Gibraltar re-started operations in October 2004.
Operations
The following table is a summary of the operating statistics for fiscal 2006 compared to fiscal 2005.
|
Fiscal 2006 |
Fiscal 2005 |
| Total tons mined (millions)¹ |
38.4 |
40 |
| Tons of ore milled (millions) |
10.9 |
11.5 |
| Stripping ratio |
2.44 |
2.31 |
| Copper grade (%) |
0.285 |
0.314 |
| Molybdenum grade (%MoS2) |
0.015 |
0.017 |
| Copper recovery (%) |
79.1 |
76.2 |
| Molybdenum recovery (%) |
41.2 |
23.1 |
| Copper production (millions lb) |
49.1 |
54.8 |
| Molybdenum production (thousands lb) |
821 |
427 |
| Copper production costs, net of by product credits², per lb of copper |
US$1.25 |
US$0.87 |
| Off property costs for transport, treatment (smelting & refining) & sales per lb of copper |
US$0.25 |
US$0.28 |
| Total cash costs of production per lb of copper |
US$1.50 |
US$1.15 |
1 Total tons mined includes sulphide ore, oxide ore, low grade stockpile material, overburden, and waste rock which were moved from within pit limit to outside pit limit during the period.
2 The by-product credit is based on pounds of molybdenum and ounces of silver sold. Unit costs were lower in fiscal 2005 because molybdenum prices and pounds of copper produced were higher.
A Potential Copper Refinery
The Company has continued to look for ways to sustain the mine through the lower parts of the copper price cycles. A full feasibility study for a new copper refining facility for the site was completed in 2001-2002. The copper refinery, based on a process developed by Cominco Engineering Services Ltd. (CESL), would produce copper cathode from copper concentrates from the existing mill facilities at Gibraltar. There are several advantages to the copper refinery, including its "hydrometallurgical" process that is more environmentally friendly than traditional smelting techniques. However, it also eliminates the need to ship copper concentrates to foreign smelters, significantly reducing operating costs. Studies indicate the long-term total cash costs to produce a pound of copper would be reduced by up to US$0.20 per pound.
At the time, the Company considered building and commissioning the refinery coincidently with re-opening the mine. However, with the increasing deficit in the concentrate market in 2003-2004, there was a near-term opportunity to re-start the operation as a conventional concentrate producer. In early 2004, Taseko formed a joint venture with Ledcor CMI Ltd. to buy new mining equipment and to re-commission and operate the mine. Now that production is underway in an excellent copper price environment, the opportunity to develop the copper refinery is being re-considered.
Background
Located in south-central British Columbia, near the city of Williams Lake, the 36,000 ton per day mine was originally developed in 1972 by Placer Development, the predecessor to Placer Dome. Due to high metal prices, the Gibraltar mine repaid its capital cost in less than two years. In 1996, Placer re-focused on gold and sold its interest in Gibraltar to Westmin Resources, which was subsequently taken over by Boliden. The mine was later closed in 1998 when copper prices dropped to $0.61 per pound. A year later, Taseko acquired the mine, mill and mining equipment and placed the mine on standby while awaiting an increase in copper prices. Gibraltar's core staff maintained the mine on standby until operations resumed in 2004, amid strong market conditions for both copper and molybdenum.
The Gibraltar mine site covers approximately 109 square kilometers and consists primarily of 251 mineral claims and 30 mining leases. It contains seven separate mineralized zones. There is well-developed infrastructure and the property is accessible by a combination of highways and paved roads. It is also close to a rail network that provides service for shipment of copper concentrates through the Pacific Ocean port of North Vancouver. The mine is a 45-minute drive from local communities that provide goods, services and personnel.
Forward Looking Statements
The above information includes certain statements that may be deemed "forward-looking statements". Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. For more information on the risks inherent in the Company's business, Investors should review the Company's annual Form 20-F filing with the United States Securities Commission and its home jurisdiction filings that are available at www.sedar.com.
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