Good day, ladies and gentlemen, and welcome to the Taseko Mines 2018 Q1 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Brian Bergot, Investor Relations. Sir, you may begin.

Thank you, Ashley. Good morning, everyone, and thank you for joining us today to review Taseko’s first quarter 2018 financial results. My name is Brian Bergot, and I’m the Vice President, Investor Relations for Taseko. Our financial results were issued yesterday after market close and are available on our website at tasekomines.com. Before we begin, I would like to introduce everyone on the call today. We have Russ Hallbauer, President and CEO of Taseko; John McManus, COO of Taseko; and Stuart McDonald, Taseko’s Chief Financial Officer. After opening remarks by management, which will review the first quarter business and operational results, we will open the phone lines to analysts and investors for question-and-answer session. As usual before we proceed, I would like to remind our listeners that our comments and answers to your questions may contain forward-looking information. This information by its nature is subject risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome. I encourage you to read the cautionary note that accompanies our first quarter financials in MD&A and the related results, news release as well as the risk factors particular to our company. I will now turn the call over to Russ for his remarks.

Thank you, Brian. Good morning, everyone, and thank you for joining us today. As we indicated in our year-end conference call, we expected production in Q1 to be roughly comparable to that of Q4 of last year, with metal production being affected by the drop in head grade as we developed our new major pushback as lower grade ore is on the top of the Gibraltar ore body. Mine production can best be described as being somewhat lumpy over the past few months, as our operating team experienced those pushback lower grade ores as well as inconsistent metallurgical ores. The ore feed has also had more oxidation than we normally experience when develop these new pushbacks. And as we are still pulling from supplemental ore from the stockpile along with the pit ore, our recoveries went down significantly because of those mineralogical changes. The copper – and we’ve experienced in the past, the copper mineralization is a little bit different than we’ve experienced in the past and it’s taken us some time to work through that. Historically, recovery has been around 86%, 87%. As you all well know, in this quarter, we were 76% as a result of both grade and recovery. So that was unfortunate. As I said at year-end, it would take a number of months to get through this period of lower head grade ore. However, we did not recognize the degree of oxidation we would have – we have encountered. We are now though seeing higher grades from the pit and our recoveries are slowly coming back to normal levels. On the positive side, throughout the – throughput has been excellent as our concentrators are continuing to perform very well. And we rate – ran right around design at 85,000 tons per day and our cost…

Hey thanks, Russ, and good morning, everyone. I’m happy to provide some further details in our first quarter financials that we released yesterday. And as we described in the release, our copper production and grades this quarter were well below normal levels. Credit score has a knock-on effect on earnings, although we still generated $13.5 million of earnings from mine operations before depreciation and adjusted EBITDA of $7.5 million for the quarter. Gibraltar’s copper sales volumes were just under 23 million pounds, which was the same number as our quarterly production as we are able to maintain a low inventory level at quarter end. The average LME price in the period was US$3.16, which is higher than recent quarters, but we didn’t get the full benefit of that as the copper price dipped at the end of the March. And for accounting, we revalued our receivables at the quarter end price of $3.04 per pound. Total provisional price adjustments on copper were negative $4 million over the quarter, resulting in a realized copper sales price of US$2.98 per pound. Moly prices strengthened significantly in the first quarter, rising from about $10 a pound at the beginning of the year to well over $12 by quarter end. Our byproduct credit in the first quarter increased to $0.23 per pound of copper. Based on our 75% share of Gibraltar volumes, our total revenues for the quarter were $64 million, which is obviously a lower amount than recent quarters and is the main reason why earnings are below normal levels. On the cost side, our total site spending continues to be fairly consistent from quarter-to-quarter, but our operating cost per pound increased this quarter to US$2.33 because of the lower copper production and lower capitalized stripping. We also drew down our lower grade…

Thank you, Stuart. Operator, we will open the lines for questions please?

Thank you. [Operator Instructions] Our first question comes from Alex Terentiew of BMO Capital. Your line is open.

Hey, good morning, guys. Just two quick questions. First is on Aley. Interesting to hear that you guys are advancing that one. Is that – or I know, you’ve always had it kind of under your belt in doing some work there, but is the plan to do this technical report updated, is that driven by the increased interest from steel mills? Or is this just something that you guys – you have this deposit, you think it is more valuable and you want to kind of get it out there and show that – show what – show the potential of it?

Yes, I think that’s probably pretty accurate.

Okay.

But it also helps in discussions. We need technical report updates if you’re in discussions with steel mills. They don’t have to be public documents. We can publish a technical report and give it to them with inside a nondisclosure agreement.

Okay. Yes, I mean, I don’t know a whole lot about the niobium market, so looking forward to kind of seeing that report when it comes out. Second thing, I know grades in Q1 were low as planned, and you kind of talked about how grades are coming up. I mean, for the quarter on whole, I mean, is it kind of point – you said, yesterday it’s 0.25%. And obviously, you guys understand this more than anybody, but 0.25% versus 0.22% or 0.23%. I mean, that little bit on a low grade makes a big difference. So should we expect kind of a transition over the quarter up to 0.26%? Or I’m just wondering how quickly that transition from the 0.2 to 0.6 is going to happen, I guess?

I don’t know. It depends on how quickly we access the ores. So I think it’s a general rise. I see – we see it rising across this quarter and into Q3 and Q4.

Yes, we’re in the better ore now, Alex, so for the rest of the year, we expect to see the average on the – deposit average of about 0.25% or 0.26% for the rest of the year, total.

Okay. and I…

So I could – it’s effectively an arithmetic average, right? So if you have a quarter at 0.2 to get back to 0.25%, 0.26%, you got to go higher and then back lower, and that’s pretty much the – it’s almost like a sinusoidal curve, for lack a better words. Hey, John, in terms of how our grade goes up and down like that?

Yes, it’s through mine planning. We’re trying reduce the amount of the swing, but we can’t eliminate it. So – and this is what we said, with Gibraltar, how long is it. It tends on a quarter-by-quarter basis to be 10% above or below the average. So for the rest of the year, I expect to be the average, not including the first quarter.

Okay. All right, makes sense. Thanks guys.

Thanks, Alex.

[Operator Instructions] Our next question comes from Craig Hutchison of TD Securities. Your line is open.

Hi, guys. Just a question on the insurance claim for – you guys mentioned $4 million to $10 million. Have you gotten any feedback from your insurance company? Whether $4 million is a reasonable amount? And what would be the timing of the payment for that claim?

Yes. In terms of the amount, absolutely, we have had some back and forth with the insurance companies in order to kind of report that range and record that $4 million through our P&L. We’ve got a high comfort level in that. In terms of the timing, that’s – I would say, it’s certainly going to be settled in the next two quarters, but they kind of put a specific date on it. It’s – again, not quite sure, but certainly, I would say by the fall we’ll have this settled in any of the bank.

It’s – I’ve been involved in a couple of insurance business and roughly in insurance claims, Craig, and they take a long time to negotiate and work their way through. Specifically, you have to get in and show – actually do some pretty – John had to do some pretty detailed engineering and show us what the impact was on our cost, why it affected production? All those kind of things. And then the insurance companies, Mr. Bruff ups the rates as soon as they have to do any payout. So they’re not – they’re reluctant to do payouts. And I mean, I’ll tell you if we had completely shut down, then we would probably talking about a $50 million or $60 million claim here. So the fact that we’re working through it, it takes many, many months. And – but Stuart and I have been talking about a lot. And we have this range that we’re pretty comfortable with because – there’s a number of items that have been ticked off the list that support our claim.

And was that insurance claim included in your adjusted EBITDA number?

Yes, it would have been included in adjusted earnings and EBITDA, correct.

Okay. And just [indiscernible] I think you mentioned the CapEx to be spent there, but what’s the cash component of the remaining CapEx for 2018?

The cash component? Well, we got…

Yes, is there going to be actual cash to go out the door?

Yes. We spent – I think, if you look at our expenses in Q1, the CapEx incurred was CAD 14 million. I think, we’ve got unpaid bills at quarter end, and I would say about CAD 7 million of that in Q1 went out as cash, though Canadian dollar. So you could say maybe USD 15 million remaining to be spent.

In cash. Okay?

In terms of cash over the remainder of the year, yes.

Perfect guys. Thank you.

Thanks, Craig.

Our next question comes from CJ Baldoni of Principal Global. Your line is open.

Yes. Hi, thanks. Could you talk maybe a little bit about what you expect for production for the next quarter and for the year?

Well, we just – we gave guidance on the grade. So depending on what throughput is, depending what head grade is, depending on what recovery is, that’s how it works out. So you can run those numbers as easy as we can.

Okay. With respect to cash, you said that you think it will dip a little bit. I know I can run these numbers too, but I like know what your number suggest with respect to your cash balance over the second half of the year? And where do you think it will grow back to range?

Well, yes. It’s not going to dip much. It might dip a little bit in Q2. And then going forward from that, obviously, it depend on copper prices. Is it foreign exchange? I know there are so many variables. Our stripping rates, as we head into 2019.

How much copper we produce?

How much copper we produce? It’s hard to put a precise figure on it. But at these copper prices, we should be growing that in the second half.

Do you have any intention to supplement liquidity via revolving credit facility?

We don’t have any immediate plans, but as Russ mentioned in his comments, we’re starting to think ahead to phase II of Florence. And we’ll get into those discussions with banks towards the end of the year. We’re not exactly sure how that will play out, but it could be – as a piece of that Florence financing, there could be a revolver piece to that as well as a credit facility on the Florence asset. So – but at this time, we don’t have any immediate intention to put in a revolver.

Okay. And then lastly, could you talk about – you mentioned some components of your CapEx, but I’m curious, do you have a number for that the full year all-in as well as the breakdown capitalized stripping?

Yes. Well, capitalize stripping is going to drop off as we kind of complete the transition into the new pushback. We had $15 million for the quarter. And I think, last quarter was $17 million or $18 million. That will drop down to a more normal in $5 million to $10 million range per quarter. And then sustaining CapEx at Gibraltar, kind of no – John, I mean, no surprises coming there. I don’t think.

No, we’ve got some big – several rebuilds, but that’s all. It doesn’t add up to a whole lot in this. I think we’re $10 million for the year.

$10 million for the full calendar year, yes.

Okay, thank you.

Thank you.

And I’m showing no further questions in queue at this time. I would like to turn the call back to management for closing remarks.

Okay. Everyone, thank you very much for joining us, and we look forward to talking you later in the summer after the next quarter. And we believe that things will be significantly better. So have a nice next three months. Cheers. Bye.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you may all and you may all disconnect. Everyone, have a great day.