Good morning. My name is Andis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Taseko Mines first quarter earnings and production results conference call. [Operator Instructions] Thank you. Mr. Brian Bergot, you may begin your conference.

Thank you, Andis. Welcome, everyone, and thank you for joining Taseko's First Quarter 2021 Conference Call. The news release announcing our financial and operational results was issued yesterday after market close and is available on our website at tasekomines.com. On the call with me today is Taseko's CEO, Russ Hallbauer; our President, Stuart McDonald; John McManus, our COO; Taseko's Chief Financial Officer, Bryce Hamming; and also Richard Tremblay, VP of Operations. As usual, before we get into opening remarks by management, 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 first quarter MD&A and the related news release as well as the risk factors particular to our company. I would also like to point out that we will use various non-GAAP measures during the call. You can find explanations and reconciliations regarding these measures in the related news release. After opening remarks, we will open the phone lines to analysts and investors for a question-and-answer session. I would now like to turn the call over to Russ for his remarks.

Thank you, Brian. Good morning, everyone. Hope you are all doing well. As you can see from our quarterly results, it's been quite the ride for us over the last year. With the price volatility we've seen over the last year, it's been a tough environment to operate in. When you produce 10 million less pounds of copper as we did this quarter within in the comparable quarter or year ago to make $25 million worth of operating profit, that's a good thing, I suppose. In simple terms, our plan last year were to get through the early stages of the pandemic when copper dropped just over $2 per pound. And we accomplished that by managing our mining plants to maintain positive cash margin at Gibraltar in the same way -- in the same manner that we got through the global financial crisis in 2008, 2009 and then copper price crash in 2016. As we've spoken about many times in the past, Taseko Mines moved quickly to adjust our whole mining plan to ensure we get by whatever was going to happen, and that was no different during the pandemic. They were uncertain times. [indiscernible] copper [indiscernible] steel around $2 further to $1.50 or lower or recover quickly, who knew? And our large mining operation at Gibraltar, where we're moving in excess of 100 million tonnes of waste in our year, it's a complex engineering undertaking. And if you move in one direction, it takes a lot of time to rectify once the metal prices sort of develop. And thus, here we are a year later giving ourselves as a whole we [indiscernible] into 12 months ago. But things have turned out pretty well with the operating profit we made in our operating results, and financials will continue to improve…

Okay. Thanks, Russ, and good morning, everyone. It's hard to believe that the copper price today at just around $4.58 a pound, $1 higher than at the beginning of the year. And that's a 30% increase on what -- on top of what was already a strong price, a great situation for an unhedged producer like Taseko, certainly feels like there's been a shift in how many analysts and industry experts are thinking about the market over the next few years. And we started seeing the impact of that strong market on Taseko share price, which has doubled again over the last 6 months. Strong markets also allowed us to refinance and upsize our bonds in February at attractive terms. And looking ahead with the large reserve base we have at Gibraltar and low-cost growth coming from our Florence project, we're in an excellent position to benefit from strong copper prices in the coming years. In terms of the first quarter results that we released yesterday, copper production from Gibraltar was 22 million pounds on head grade of 0.19% and recoveries of 82%. We knew that grades would be lower in the first half of this year as ore mining transitioned into the upper benches of the Pollyanna Pit. The grade was lower-than-expected, and that impacted recoveries as well. On the positive side, we mined a total of 32 million tonnes, which is more than 20% higher than the previous quarter as we benefited from shorter hauls and high productivities. Because of the strong performance in the mine, we now expect to get into the higher grade that was forecast for the second half of the year later in the second quarter. So we see improved production in the second quarter and then higher again in the second half of…

Thanks, Stuart. Good morning, everyone. For the first quarter, we reported earnings from mine ops before depreciation of $30 million and adjusted EBITDA of $24 million. Earnings this quarter continued to benefit from the recovering copper price, which averaged $3.86 per pound for the quarter. Taseko also had a further $4 million in upward provisional price adjustments included in revenue, resulting in an average price of $4.09 per pound. We had sales of 22 million pounds, which is similar to our production, as we continue to keep our concentrate inventory low at the end of March. Ending inventory was 3.6 million pounds and was similar to prior quarters. C1 total operating cost came in at $2.23 per pound and remained higher than the life of mine average as a result of lower copper production. The total spending on the site costs, including $21.5 million in capitalized strip, were generally in line with previous 2 quarters since ramping back up to full mining rates in Q4 last year. The Canadian dollar continued its strengthening trend in line with commodity prices, which is also impacting our cost per pound in U.S. dollar terms. But at a $4.09 realized copper price, we still made a notable operating margin of $30 million before depreciation which increased from Q4. Cash flow from operations, which was negative $3 million compared to adjusted EBITDA of $24 million, was simply impacted by an increase of $27 million in working capital due to the timing of one shipment and the AR balance we carried at the end of the quarter. We did not collect on a provisional invoice February shipment until early April, which resulted in the AR ending at -- the quarter at $31 million compared to $6 million last quarter. Depreciation at $16 million was a little…

[Operator Instructions] Your first question comes from Ed Brucker with Barclays.

So my first one, just want to ask on the potential infrastructure deal. Do you think you have an advantage kind of being the North America copper producer with a potential infrastructure deal, especially with the Buy American stance the administration is taking? And then on top of that, has it kind of made you want to speed up the time line performance, if at all possible?

Yes. It's Stuart speaking. Yes, absolutely. I mean we are moving, I think, as fast as we can on Florence. We think it's the right time to be bringing on a new mine like that. As you say, it fits perfectly into the Buy American approach out there and delivering a product that's going to be required for some of the infrastructure spending that's planned in the U.S. So we think we're -- it's perfect timing for this project. We're moving as quickly as we can. The constraint right now, as I said, is that EPA permit. But we get that permit in the third quarter, and we'll be -- which is our expectation, and we'll be ready to move into construction as quickly as we can after that.

Got it. That actually brings me to my next question. Was there any specific reasons for the holdup in the EPA decision, given your talks with them? I think the previous expectation was that it was going to be mid-2021 decision. I'm just trying to get a sense for why the final decisions seems to be pushed back or at least lower than expected and then wondering if that could be pushed back any further.

Yes. I mean it's definitely -- the process has moved a little more slowly than we would have liked. It's unfortunately a process where there aren't any clearly defined deadlines or time lines. And so the EPA just has to get through their work. I think they're moving slowly and prudently and cautiously, and the important thing I think is that there's no major issues coming up in the process. So they're making progress. It's just taking time. And yes, that's our expectation at the current time is it we'll get that permit sometime later in the third quarter, but no major issues there.

Got it. Got it. And then my last question. I just wanted to get an update on where you are in the process at Yellowhead. And the preproduction CapEx, I think I read it was $1.3 billion. It seems pretty big compared to Florence Phase 2 at kind of the $230 million level. So I just wanted to get a sense if you thought about how you're going to pay for that. I know it's further down the line, but would you look at JV partners for that? Or do you think we'll be building free cash flow, et cetera?

Yes. I mean it's -- you're right. It's definitely a bigger CapEx bite for us, and it's a few years down the road. We've got obviously some permitting and community work to get done first, which we're focused on right now. But looking ahead, a couple of years when we have Gibraltar and Florence both running, we're going to be a different company. We're going to be a much stronger -- from EBITDA and cash flow generation. So it's a project that we like, we're interested in. And if we can take it on a few years down the road with a JV partner, we think it could be -- we think it could work for us and fits into the whole copper story as well because you're going to need projects like that to be built to fill the supply deficit that's coming. So yes, that's the way we're thinking about it. It's not a decision that needs to be made anytime soon, but it's -- as I said, it's a couple of years down the road.

[Operator Instructions] Your next question comes from Craig Hutchison with TD Securities.

You touched on earlier that you need a permit to access the Gibraltar East Pit. Just curious, when do you need this permanent place to avoid having any potential impacts on your guidance for 2021?

Richard, would you be able to take that question?

Yes, yes, for sure. Craig, Richard Tremblay here. Really, we're looking to require that permit here before the end of May. If it goes longer than that, then we'll start seeing impacts in 2021.

Okay. And obviously, I guess you're expecting higher grades from this portion of the pit. Is that correct?

Grades from the Gibraltar pit will be in line with the life of mine average. So yes, it will be higher than what we've seen in Q1. And the other, I guess, comment I'll make is not getting into the Gibraltar pit, we see impacts from that, if we're not in there before the end of May, but there's also opportunities to do some things in the Pollyanna Pit to potentially offset it. So we're currently looking at those variabilities or optionalities as a worst-case scenario. But our expectations is that we should receive that permit here shortly in the coming weeks.

Okay. And just on grades, you guys were pretty clear in the opening commentary that you expect grades in the sort of second half of this year to be above reserve grade. But any clarity you guys can provide on Q2, what kind of grades we're seeing right now? And the same kind of question just on throughput, are you into some softer ore? Can we expect throughput to sort of increase over the Q1 levels?

Yes. So as mining continues here in Pollyanna, we see less reliance on stockpile material. And with the ore coming out of the pit, we don't expect or don't see throughput as being a restriction anymore as it was in Q1. So we'll see that come up. And then grades, as has been said previously, will start increasing as the quarter progresses. And then into the second half of the year, we'll see the higher grades.

Okay. Just on Florence, I asked this question on the last conference call, but I feel like I had to ask it again. You guys did mention that you're not seeing much inflationary pressure in your existing Gibraltar operation. But just given steel prices in the U.S. are up 50% through Q1, based on the engineering work you're doing, are you starting to see any inflationary pressure in terms of your cost estimates for that project?

Craig, it's Stuart speaking here. And I think the short answer to that is no. We're not seeing major cost increases at this stage in Florence. That's -- we just haven't seen it.

Okay. Great. And then maybe last question for me. You mentioned almost a willingness to go 100% interest in Florence or keeping 100% interest. Can you maybe talk about the partnering interest at this point? And is it your preference to pursue 100%? Or are you still looking at potential JVs?

Yes. I mean it's -- there's still parties that are interested. I think it's just -- we're fortunate with the financings that we have behind us and the copper price environment that we're in that we now have the ability to build it ourselves. If there's an accretive transaction there that's available to us, we could still do something like that. But at this stage, I think we're leaning -- I would say leaning towards a scenario where we own at 100%. But certainly, all options are still on the table.

[Operator Instructions]

Okay. Yes, operator, if there's no further questions, yes, thanks, everyone, again for joining, and we'll talk to you next quarter.

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