October 29, 2014
This release should be read with the Company’s Financial Statements and Management Discussion & Analysis (“MD&A”), available at www.tasekomines.com and filed on www.sedar.com. Except where otherwise noted, all currency amounts are stated in Canadian dollars. Taseko’s 75% owned Gibraltar Mine is located north of the City of Williams Lake in south-central British Columbia. Production volumes stated in this release are on a 100% basis unless otherwise indicated. |
October 29, 2014, Vancouver, BC - Taseko Mines Limited (TSX: TKO; NYSE MKT: TGB) (“Taseko” or the “Company”) reports the results for the three months ended September 30, 2014.
Highlights
Russell Hallbauer, President and CEO of Taseko commented, “As we previously disclosed, costs and operations in the third quarter were impacted by scheduled maintenance and pit wall instability in the main working area of the Granite Pit resulting in increased mining and contractor costs. In terms of operating costs, by mid-October we had completed all planned, major maintenance on our mining fleet. These maintenance costs, while infrequent in nature, directly impact our operating costs and therefore the quarterly profitability of the company. The Gibraltar mining fleet has now been redeployed to higher productivity upper benches, the mining contractor has been released and all major shovel maintenance has been completed. We expect to resume normal expenditure levels going forward.”
*Non-GAAP performance measure. See end of news release.
Mr. Hallbauer continued, “Our engineering team at Gibraltar has been managing through a challenging time with the reduced shovel availability and then in the third quarter the instability of the Granite Pit high wall. The type of wall movement experienced in the Granite Pit is not uncommon and just something we need to manage. We now have a short-term plan in place that preserves a healthy operating margin, at today’s copper price, and will get the mine back on the long-range mine plan within the next 12 months. While these types of issues are unfortunate, they are a part of mining. It is how a company manages these issues that sets them apart from others.”
“With $93 million cash on hand at the end of the third quarter, our company remains financially strong. We will manage our cash resources in a conservative fashion during this period of uncertain commodity prices and unstable financial markets. Additionally, we have copper put options in place for more than half of our share of production for the fourth quarter, at US$2.75 per pound, and the first quarter of 2015, at US$3.00 per pound, ensuring a minimum revenue stream during this period. We will continue to look for opportunities to extend the hedges further into 2015.”
“In September, the British Columbia Environmental Assessment office issued a Section 10 Order, initiating the BC environmental assessment process for our Aley Niobium Project. In October, the Canadian Environmental Assessment Agency accepted Aley’s Project Description and initiated a 20-day public reporting period, which concludes October 30. Per CEAA 2012, The Province of British Columbia has requested substitution, whereby the BC process would be an appropriate substitute over a federal environmental assessment process. We expect the decision on substitution to be made in November.” concluded Mr. Hallbauer.
HIGHLIGHTS
Financial Data | Three months ended September 30, |
Nine months ended September 30, |
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(Cdn$ in thousands, except for per share amounts) | 2014 | 2013 | Change | 2014 | 2013 | Change |
Revenues | 93,714 | 66,799 | 26,915 | 306,017 | 195,140 | 110,877 |
Earnings from mining operations before depletion and amortization* | 7,077 | 19,515 | (12,438) | 53,181 | 52,031 | 1,150 |
Earnings (loss) from mining operations | (5,855) | 9,842 | (15,697) | 16,266 | 27,648 | (11,382) |
Net earnings (loss) | (20,937) | 120 | 21,057 | (27,457) | (25,083) | (2,374) |
Per share - basic (“EPS”) | (0.11) | 0.00 | (0.11) | (0.14) | (0.13) | (0.01) |
Adjusted net earnings (loss)* | (11,221) | (1,851) | (9,370) | (16,103) | (14,861) | (1,242) |
Per share - basic (“adjusted EPS”) * | (0.06) | (0.01) | (0.05) | (0.08) | (0.08) | - |
EBITDA * | (7,148) | 15,173 | (22,321) | 25,046 | 12,678 | 12,368 |
Adjusted EBITDA * | 2,385 | 12,545 | (10,160) | 36,196 | 26,308 | 9,888 |
Cash flows provided by (used for) operations | 22,366 | 13,619 | 8,747 | 59,218 | 34,796 | 24,422 |
HIGHLIGHTS - CONTINUED
Operating Data (Gibraltar - 100% basis) | Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 |
Copper contained in concentrate and copper cathode |
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Production (million pounds Cu) | 35.4 | 38.5 | 34.5 | 33.5 | 36.7 |
Sales (million pounds Cu) | 38.1 | 38.7 | 40.0 | 37.0 | 26.6 |
Inventory (million pounds Cu) | 1.6 | 4.1 | 4.4 | 10.1 | 13.6 |
Per unit data (US$ per pound) * |
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Operating costs of production* | $2.60 | $2.11 | $2.19 | $1.88 | $1.95 |
By-product credits | (0.25) | (0.35) | (0.21) | (0.18) | (0.04) |
Net operating costs of production * | $2.35 | $1.76 | $1.98 | $1.70 | $1.91 |
Off-property costs | 0.40 | 0.36 | 0.50 | 0.44 | 0.30 |
Total operating costs * | $2.75 | $2.12 | $2.48 | $2.14 | $2.21 |
*Non-GAAP performance measure. See page19 of this MD&A.
Gibraltar mine (75% Owned)
Operating results in the following table are presented on a 100% basis.
Operating Data (100% basis) | Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 |
Tons mined (millions) | 32.5 | 30.2 | 25.9 | 21.5 | 22.6 |
Tons milled (millions) | 7.8 | 7.7 | 7.0 | 7.6 | 6.8 |
Strip ratio | 3.0 | 3.1 | 2.8 | 3.9 | 2.6 |
Copper concentrate |
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Grade (%) | 0.267 | 0.285 | 0.290 | 0.270 | 0.315 |
Recovery (%) | 83.3 | 85.3 | 84.6 | 81.7 | 85.9 |
Production (million pounds Cu) | 34.5 | 37.6 | 34.5 | 33.5 | 36.7 |
Sales (million pounds Cu) | 37.1 | 38.1 | 40.0 | 37.0 | 26.6 |
Inventory (million pounds Cu) | 1.4 | 3.9 | 4.4 | 10.1 | 13.6 |
Copper cathode |
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Production (million pounds) | 0.9 | 0.9 | - | - | - |
Sales (million pounds) | 1.0 | 0.6 | - | - | - |
Molybdenum concentrate |
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Grade (%) | 0.011 | 0.011 | 0.009 | 0.010 | 0.012 |
Recovery (%) | 38.0 | 41.4 | 42.5 | 34.8 | 17.5 |
Production (thousand pounds Mo) | 654 | 667 | 566 | 480 | 284 |
Sales (thousand pounds Mo) | 708 | 731 | 589 | 499 | 110 |
Per unit data (US$ per pound) * |
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Operating costs of production* | $2.60 | $2.11 | $2.19 | $1.88 | $1.95 |
By-product credits * | (0.25) | (0.35) | (0.21) | (0.18) | (0.04) |
Net operating costs of production * | $2.35 | $1.76 | $1.98 | $1.70 | $1.91 |
Off-property costs | 0.40 | 0.36 | 0.50 | 0.44 | 0.30 |
Total operating costs * | $2.75 | $2.12 | $2.48 | $2.14 | $2.21 |
*Non-GAAP performance measure. See page end of news release.
Gibraltar concentrators operated at their combined design capacity of 85,000 tons per day in the third quarter of 2014. Total mill throughput for the second quarter was 7.8 million tons, an increase of 14% over tons milled in the third quarter 2013. Total copper production for the quarter was 35.4 million pounds, a 9% decrease from the third quarter of 2013, and 8% decrease from the second quarter of 2014.
Third quarter copper production was impacted by a high wall stability issue in the Granite pit which affected the quarterly development sequence and resulted in lower than forecasted head grades. Although the pit high wall movement was relatively minor, in order to ensure the safety and integrity of mine operations the fleet was redeployed to an alternative mine sequence. This resulted in the deferral of the planned 2014 high grade ore which was replaced by lower grade ore. The lower head grades also negatively impacted copper recoveries in the third quarter.
REVIEW OF OPERATIONS - CONTINUED
A total of 32.5 million tons were mined in the third quarter, a 43% increase over the third quarter of 2013 and an 8% increase over the second quarter of 2014. This mining rate was achieved despite major maintenance on a shovel, for a period of two weeks, representing 25% of the Gibraltar shovel capacity.
The Company is currently reviewing alternative mine plans for 2015 to address the lower than budgeted waste stripping in 2014, due to shovel availability issues in the first half of this year, and the delayed ore release resulting from the pit wall movement.
Molybdenum production for the third quarter of 2014 was 654,000 pounds, a 230% increase over the third quarter of 2013. Molybdenum recoveries were 38.0% for the third quarter and management continues to focus on improving molybdenum recoveries to achieve the design recovery of 50%.
In the third quarter of 2014, net operating costs per pound of copper produced were US$2.35, a 34% increase over the US$1.76 per pound in the previous quarter. This increase was primarily driven by the changes to the mine sequence as a result of the high wall stability issue in the Granite pit which resulted in lower copper grade mined in the quarter. Lower head grades and copper production volumes will negatively impact unit costs as the majority of operating costs are fixed. The revised mine sequence also resulted in longer ore hauls and increased haulage costs, and higher cost contractor equipment was utilized to maintain mine production. A planned $5.1 million shovel overhaul expenditure and contract waste mining also impacted operating costs in the third quarter. By-product credits were lower compared to the previous quarter due to the decline in the molybdenum price.
The Gibraltar mining fleet has now been redeployed to higher productivity upper benches, the mining contractor has been released and all major shovel maintenance had been completed by mid-October. The Company expects to resume normal expenditure levels going forward.
Off property costs, including transportation, treatment and refining charges, for the third quarter of 2014 were $0.40 per pound produced, compared to $0.30 per pound produced in the third quarter of 2013. Off property costs are driven by sales volumes, and therefore off property costs per pound produced fluctuates based on differences between production and sales volumes.
The total operating costs, including off-property costs, for the third quarter of 2014 were $2.75 per pound produced, a 24% increase over the same quarter last year.
Taseko will host a conference call on Thursday, October 30, 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 in Canada and the United States, or (970) 315-0461 internationally. Accompanying presentation slides will be available to download at tasekomines.com. Alternatively, the live webcast can be accessed at tasekomines.com. |
For further information on Taseko, please see the Company’s website www.tasekomines.com or contact:
Brian Bergot, Vice President, Investor Relations - 778-373-4533 or toll free 1-877-441-4533
Russell Hallbauer
President and CEO
NON-GAAP PERFORMANCE MEASURES
This document includes certain non-GAAP performance measures that do not have a standardized meaning prescribed by IFRS. These measures may differ from those used by, and may not be comparable to such measures as reported by, other issuers. The Company believes that these measures are commonly used by certain investors, in conjunction with conventional IFRS measures, to enhance their understanding of the Company’s performance. These measures have been derived from the Company’s financial statements and applied on a consistent basis. The following tables below provide a reconciliation of these non-GAAP measures to the most directly comparable IFRS measure.
Net operating costs of production
Total costs of sales include all costs absorbed into inventory, as well as treatment and refining costs and transportation costs. Operating costs of production is calculated by removing net changes in inventory and depletion and amortization from cost of sales. Net operating costs of production is calculated by removing by-product credits and offsite costs from the operating costs of production. Net operating costs of production per pound are calculated by dividing the aggregate of the applicable costs by copper pounds produced. Total operating costs per pound is the sum of net operating costs of production and offsite costs divided by the copper pounds produced. By-product credits are calculated based on actual sales of molybdenum and silver during the period divided by the total pounds of copper produced during the period. These measures are calculated on a consistent basis for the periods presented.
Adjusted net earnings
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Three Months ended September 30, |
Nine Months ended September 30, |
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(Cdn$ in thousands, unless otherwise indicated) — 75% basis | 2014 | 2013 | 2014 | 2013 |
Cost of sales | 99,569 | 56,957 | 289,751 | 167,492 |
Less Depletion and amortization | (12,932) | (9,673) | (36,915) | (24,383) |
Net change in inventory | (5,141) | 16,881 | (16,876) | 21,442 |
Operating costs of production | 81,496 | 64,165 | 235,960 | 164,551 |
Less by-product credits: |
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Molybdenum | (5,834) | (480) | (21,008) | (5,732) |
Silver | (884) | (717) | (2,943) | (2,436) |
Less offsite costs: |
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Treatment and refining costs | (6,696) | (3,674) | (21,685) | (11,171) |
Transportation costs | (4,175) | (4,787) | (14,700) | (12,517) |
Net operating costs of production | 63,907 | 54,507 | 175,624 | 132,695 |
Total copper produced (thousand pounds) | 24,979 | 27,495 | 79,743 | 65,974 |
Net operating costs of production (CAD per pound) | 2.56 | 1.98 | 2.20 | 2.01 |
Average exchange rate for the period (CAD/USD) | 1.0889 | 1.0383 | 1.0968 | 1.0235 |
Net operating costs of production (US$ per pound) | 2.35 | 1.91 | 2.00 | 1.97 |
Net operating costs of production | 63,907 | 54,507 | 175,624 | 132,695 |
Add offsite costs: |
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Treatment and refining costs | 6,696 | 3,674 | 21,685 | 11,171 |
Transportation costs | 4,175 | 4,787 | 14,700 | 12,517 |
Total operating costs | 74,778 | 62,968 | 212,009 | 156,383 |
Total operating costs (US$ per pound) | 2.75 | 2.21 | 2.42 | 2.32 |
NON-GAAP PERFORMANCE MEASURES - CONTINUED
Adjust net earnings
Adjusted net earnings remove the effect of the following transactions from net earnings as reported under IFRS:
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Three months ended September 30, |
Nine months ended September 30, |
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(Cdn$ in thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 |
Net (loss) earnings | (20,937) | 120 | (27,457) | (25,083) |
Unrealized loss (gain) on derivatives | (713) | 1,263 | (797) | (5,552) |
Unrealized foreign exchange (gains)/losses | 9,341 | (4,120) | 10,623 | 5,633 |
Write down of marketable securities | 366 | 229 | 785 | 13,979 |
Non-recurring other expenses (income) | - | - | - | (430) |
Curis acquisition costs | 539 | - | 539 | - |
Estimated tax effect of adjustments | 183 | 657 | 204 | (3,408) |
Adjusted net earnings (loss) | (11,221) | (1,851) | (16,103) | (14,861) |
Adjusted EPS | (0.06) | (0.01) | (0.08) | (0.08) |
EBITDA and adjusted EBITDA
EBITDA represents net earnings before interest, income taxes, and depreciation. EBITDA is presented because it is an important supplemental measure of our performance and is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, many of which present EBITDA when reporting their results. Issuers of “high yield” securities also present EBITDA because investors, analysts and rating agencies consider it useful in measuring the ability of those issuers to meet debt service obligations. The Company believes EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense goes down as deductible interest expense goes up; depreciation is a non-cash charge.
Adjusted EBITDA is presented as a further supplemental measure of the Company’s performance and ability to service debt. Adjusted EBITDA is prepared by adjusting EBITDA to eliminate the impact of a number of items that are not considered indicative of ongoing operating performance.
Adjusted EBITDA is calculated by adding to EBITDA certain items of expense and deducting from EBITDA certain items of income that are not likely to recur or are not indicative of the Company’s future operating performance consisting of:
NON-GAAP PERFORMANCE MEASURES - CONTINUED
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Three months ended September 30, |
Nine months ended September 30, |
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(Cdn$ in thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 |
Net earnings (loss) | (20,937) | 120 | (27,457) | (25,083) |
Add: |
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Depreciation | 12,953 | 9,759 | 37,068 | 24,738 |
Amortization of stock based compensation | 616 | 646 | 3,177 | 2,214 |
Finance expense | 6,766 | 5,941 | 19,948 | 13,995 |
Interest income | (1,015) | (1,286) | (3,079) | (4,726) |
Income tax expense (recovery) | (5,531) | (7) | (4,611) | 1,540 |
EBITDA | (7,148) | 15,173 | 25,046 | 12,678 |
Adjustments: |
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Unrealized loss (gain) on derivatives | (713) | 1,263 | (797) | (5,552) |
Unrealized foreign exchange (gains)/losses | 9,341 | (4,120) | 10,623 | 5,633 |
Write-down of marketable securities | 366 | 229 | 785 | 13,979 |
Non-recurring other expenses (income) | - | - | - | (430) |
Curis acquisition costs | 539 | - | 539 | - |
Adjusted EBITDA | 2,385 | 12,545 | 36,196 | 26,308 |
Earnings from mining operations before depletion and amortization
Earnings from mining operations before depletion and amortization is earnings from mining operations with depletion and amortization added back. The Company discloses this measure, which has been derived from our financial statements and applied on a consistent basis, to provide assistance in understanding the results of the Company’s operations and financial position and it is meant to provide further information about the financial results to investors.
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Three months ended September 30, |
Nine months ended September 30, |
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(Cdn$ in thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 |
Earnings from mining operations | (5,855) | 9,842 | 16,266 | 27,648 |
Add: |
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Depletion and amortization | 12,932 | 9,673 | 36,915 | 24,383 |
Earnings from mining operations before depletion and amortization | 7,077 | 19,515 | 53,181 | 52,031 |
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:
No regulatory authority has approved or disapproved of the information contained in this news release.
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:
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.