Good morning. My name is Leone, and I’ll be your conference operator today. At this time, I would like to welcome everyone to Taseko Mines Second Quarter Earnings and Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to your host Mr. Brian Bergot, please go ahead.

Thank you, Leone. Welcome, everyone, and thank you for joining us today to review Taseko's second quarter 2019 financial results. The news release announcing our financial results were issued yesterday after market closed and are available on our website at tasekomines.com. With me today in Vancouver is Russ Hallbauer, CEO; Stuart McDonald, President; John McManus, COO; and Taseko's Chief Financial Officer, Bryce Hamming. After opening remarks by management, which will review the second quarter business and operational results, we will open the phone lines to analysts and investors for question-and-answer session. Before we proceed, 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 that may cause the stated outcome to differ materially from the actual outcome. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our second quarter MD&A and the related news release, as well as the risk factors particular to our company. I would now like to turn the call over to Stuart for his remarks.

Okay. Thanks, Brian. Good morning, everyone. Thanks for dialing into our second quarter earnings call. We've changed the format slightly this time. I'll start with a review of the second quarter activity and also give an update on our financing progress at Florence. Bryce will then review the Q2 financials in more detail and Russ will wrap-up and talk about the bigger picture and our strategy going forward. So operationally we had a solid performance at Gibraltar this quarter producing just under 35 million pounds of copper. Average head grade was 0.256% much below our life of mine average grade. Mill throughput was right around the design capacity of 85,000 tons a day and recoveries were a bright spot at 87% which is slightly better than normal. But overall at 35 million pounds of quarterly production, we're back to where we should be in terms of average production rates. We were coming off two lower-grade quarters. And if you look back over the last few years, we have had some quarterly ups and downs in terms of production, but that variability always evens out over time and our annual production has been fairly stable. For the second half of this year, we see fairly stable production rates and we're reiterating our annual production guidance of 130 million pounds plus or minus 5%. Second quarter earnings from mine operations were $19 million and adjusted EBITDA was $15 million. The Gibraltar mine continues to generate positive cash flow, which is funding the rest of our business. Our financial results were certainly impacted by the decline in copper prices, but a lot of that impact is being offset by improved moly production and moly revenues are significantly higher than they were a year ago. The price remains in the $12 a pound range…

Thanks, Stuart. Good morning. I'd like to cover in further detail the second quarter financial results that were released yesterday. We reported earnings from mining operations before depletion and amortization of $18.6 million on a quarterly basis, bringing our year-to-date earnings to $34.4 million. Earnings from mine operations were impacted by two main factors in the quarter: First, the copper price decreased to a realized price of $2.69 per pound, a notable 14% decrease from the same quarter last year when it was at a realized price of $13 -- or $3.13 per pound. Second, we capitalized only $2 million of mining cost for capitalized stripping in the quarter compared to $7.7 million in the same quarter last year. In the current quarter ended of June 30 we also began to recognize higher levels of depreciation of previously capitalized stripping cost for the Granite pit as we transition to more ore mining in this pit. This resulted in $30 million of depreciation expense in the quarter, an increase of $10 million or $0.04 per share compared to $20 million in Q1 and $18 million in Q2 of 2018. This greater depreciation expense of approximately $30 million per quarter is expected to continue over the next year. Revenue in the quarter was $86.5 million, a 23% increase over the first quarter primarily due to the increased copper production to 35 million pounds on a 100% basis that was noted by Stuart. On a year-to-date basis revenue is $157 million and overall in line with the first half of 2018 which saw $158 million in revenue. Realized copper prices were $0.28 per pound less in the first half of 2019 compared to last year, but this was offset by both a weaker Canadian dollar and increases in moly revenue due to higher…

Thank you, Bryce. Good morning, everyone. Thanks everybody for being here in the middle of a long hot summer, so we appreciate your attendance. I know most of the folks on the call today are focused on how Gibraltar is performing and that's important, but generally speaking Gibraltar has been very consistent with respect to cost and production for the last number of years. And really true economic impact for the company is when copper prices take a run up by 10%, 20%, 30% then the financial returns really accelerate. And as the pandits say and a lot of analysts that time will come again soon, we believe in the not too distant future. In the interim, however our management team is really focusing on how we grow our business, executing our strategic plan, and creating increased value for our shareholders in difficult times. So we have both short-term goals and long-term goals in that respect. As I said, short term is to ensure Gibraltar continues to generate cash, pay the bills and allow us to advance our projects. Secondly, we've worked for the past decade or so to acquire reserves that would grow our reserve base with minimum -- minimal shareholder dilution and use our core strengths and engineering operations to advance those reserves towards production. Presently, our executive and operational teams as Stuart indicated are intensely focused on advancing Florence to production. While we've had numerous challenges on the permitting front not because of the environmental issues, but a result of the ability in the U.S. as in many jurisdictions throughout the world to challenge permits as a result of local opposition. In our case, this has resulted in a number of legal impediments to us advancing the project as quickly as we would've liked. Those legal challenges…

Thank you. [Operator Instructions] Your first question is from Orest Wowkodaw from Scotiabank. Orest, please go ahead.

Hi, good morning guys. A question on recoveries at Gibraltar. They were quite high in Q2 despite pushing throughput and kind of average grade and even Q1 you did pretty good recoveries on arguably very low-grade material. Can you maybe give us some color of what's going on in terms of how are you able to achieve that and then whether we should read anything into that moving forward?

Hi, Orest, John here. Yes, what's happened there is we're down in the bottom at the Granite pit. So there is really little acid soluble or oxidized material. When you see these recoveries drop off, I think it was Q4 last year we had low recoveries that was because we're in top of orebody, where you've got more oxidation. So for the next year most of our feed is going to be coming from the Granite pit when we get into the top of Pollyanna pit…

Okay. So they should expect -- so we should expect then a trend kind of above average for the next year.

Yes, that's the way I see it coming, yes.

Okay. Great. And then in terms of the strip ratio, it came down pretty hard in Q2. Should we expect that 2.3 is that a good kind of number for the back half of the year or do you think it comes down more?

No, that's another result of the same function of being down at the bottom of Granite pit. We've had a really long haul that's a deep pit now. So most of our trucks lot of our truck power is eaten up just moving ore from the bottom of Granite up to the mill. As the Pollyanna pit picks up you will see more stripping at the top, you'll see more higher strip ratio and as Stuart mentioned then the capital strip will swing back into a higher number two. So all of those are really recoveries the low strip ratio all driven by the length of the haul.

Okay. Thanks. And then just finally on the balance sheet. I mean, as you are progressing on Florence, do you -- should we anticipate any refinancing plans with respect to the existing corporate debt? I know it matures in 2022, but I'm just wondering if you're already thinking about extending that before taking on more debt related to Florence?

Well we keep an eye on that market obviously, but -- it's Stuart speaking here Orest. But still three years we're only two years into kind of a five-year bond, so still lots of time there's still a pretty healthy call premium on that bond. So I think the first priority for us is getting a funding package in place for Florence and then we'll think about the bond in the coming years, so no immediate….

Okay. Thanks guys.

Thanks, Orest.

Thank you. [Operator Instructions] Your next question is from Joshua Givelber from Nomura. Joshua, please go ahead.

I note that you just said operating cost $66 million seems a little bit high to me. Some of that's probably from less capital strip so more kind of expense -- more of that goes into expense, but any other factors that were driving this cost high?

Yes, Josh, it's Stuart here. I think you're right. I think the low capital strip makes our operating cost on the P&L appear to be higher this quarter. We look at it in terms of total spending at the site including capitalized amount and the amounts are relatively stable. We do get some fluctuations with our mining rate. I think we mined a few more tons this quarter than the prior quarter. And then the other piece might be, if we have some maintenance items that can be bigger ticket items and we kind of try to schedule those through the year, but those would be two factors that will give us a little bit of fluctuation, but generally pretty consistent total spend.

Great, great. And then, on Florence, did I hear right that you expect by year-end to have everything in place?

No, no I think -- I mean, I think, we want a plan in place by the end of the year. And in terms of actually drawing financing or closing transactions for Florence, I think, that will be dependent on permitting timing. And so, we're talking about first half of 2020. And at that point we would be kind of completing or execute -- actually executing the financings that we're getting organized this year.

And how quickly -- once Florence is, I guess, ready to go, like how quickly does it achieve commercial production?

Hi, Josh, John here. We will be at 80% detail design by the end of Q1, it's our target for next year. And then, if we get the go on permits, we should be able to construct the facility in under a-year-and-a-half, and then it will be a little while before production comes on. So you add all that up and we're about two years away from commercial production.

Thank you.

Thank you. Your next question is from Craig Hutchison from TD Bank. Craig, please go ahead.

Hi, guys. Thanks for taking my call. Just in terms of the elevated depreciation that we saw in Q2, can we essentially assume that will be similar in the next, say, two to three quarters, based on your mine plan, where you are in the Granite Pit?

Yeah. Hi, Craig, it's Bryce. I think that's reasonable. I think if we look four quarters out, we were mining most of the ore from the Granite Pit, we'll see levels commensurate with current quarter of $30 million.

I think, that is the most optimal price like per capital Gibraltar and Pollyanna which we're adjusting now.

That's right. So we'll start Pollyanna and start capitalizing some of the Pollyanna strip. But as far as depreciation, that will be elevated as a result of the capital strip we have on our balance sheet, which will be amortized over four quarters.

Okay, perfect. And then in terms of sustaining capital, it was obviously quite low in the quarter. I think it was about $1.5 million. Do you anticipate that sort of picking up over the back half of the year? Is there any major programs with respect to lift of the tailings dam, et cetera, that we should sort of factor into our estimates?

Hi, Craig. No, there is nothing significant. We have some work to do at the tailings facility, but we're not mining Gibraltar. We're well set up. Got a new fleet out there, so our sustaining capital rates will be similar to what you see now.

Okay. And then question on the financing for Florence. You guys gave a fair bit of color there. You talked about raising approximately US$200 million in new capital and if I understand correctly $125 million of that will come from project-level debt and then the balance is going to come from a possible partnership 10% to 20% of Florence and then a possible stream. I mean, would you not want to raise a little bit more than US$200 million, just given I think that is roughly the CapEx of the project, do you assume any kind of working capital overruns, et cetera?

Yes. Craig, it's Stuart here. I think we will certainly for reclamation bonding required in Arizona. So we will -- our plan is to fully fund it and not -- and kind of not rely on Gibraltar cash flow to help fund projects. So that's our plan. And in terms of the components, I mean, I would say, we'll see how the negotiations go. In terms of how we allocate that total funding between the three components, I mentioned. We could do up to $125 million I think. So maybe if we get a great deal from a JV partner perhaps it's -- we need less than that, in terms of project debt. But time will tell, to see how that all with go.

Is there anything you have seen so far at Florence that would suggest capex could be less than the $200 million or possibly more than the $200 million, based on just what you've seen to date?

We're in the middle of detailed engineering right now, Craig. And we're not really seeing any major changes. We see the price of drilling has gone down. The price of labor has gone up a bit. But those will fluctuate by the time we actually get into it. There is really no significant difference that we can see.

And maybe one last question for me. I thought I heard in the opening remarks that, you're looking at potentially doing a royalty or stream on Gibraltar as well as Florence, is that correct?

Yeah. I would say we're looking at copper streams and royalties generally, on both Florence and Gibraltar. And so, we've got, we think kind of a few options that we're reviewing there. And so we could do -- we could do a transaction on either of those projects in terms of royalty this year before Florence -- find that before Florence permit, Now as the way we view that is it, I mean both our working capital a little bit builds cash a little bit in order -- so that we head into the Florence Copper Project next year with a solid balance sheet.

Can you give us a sense of in terms of the percentage or the metal that you would sell from Gibraltar or would it be -- would you sell a stream on the copper or will it be molybdenum?

There is copper, there is moly, it's roughly $500 million of revenue at Gibraltar last year. So, on a 100% basis, so it's a big mine there is lots of metal. We don't have to sell a high portion of that to realize a lot of -- a large value on royalty. So, that's one of the things we're looking at.

Yeah, thanks.

I wouldn't want to be too more -- too specific than that at this point.

I understood. Thanks.

Thank you. There are no further questions, at this time. Please proceed.

Okay. Thank you. Thanks everyone for dialing in. And we will talk to you next quarter.

Thanks.

Ladies and gentlemen, this concludes your conference call today. We thank you for participating. And ask that you please disconnect your lines.