Good morning. My name is Sarah and I will be your conference operator today. At this time, I would like to welcome everyone to Taseko’s Second Quarter 2022 Earnings and Production Conference Call. As a reminder, today’s conference will be recorded. [Operator Instructions] At this time, I would now like to turn your conference over to Mr. Bergot. You may now begin your conference, sir.

Thank you, Sarah. Welcome everyone and thank you for joining Taseko’s second quarter 2022 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 President and CEO, Stuart McDonald; and our Senior VP of Operations, Richard Tremblay. Bryce Hamming, our CFO, is traveling and unavailable to be on the call, so Stuart will provide the second quarter financial review. 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 second 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 will now turn the call over to Stuart for his remarks.

Okay. Thank you, Brian and good morning everyone. Thanks for taking the time to join us today. I will make some introductory remarks and then turn it over to Richard for some specifics on operations for the quarter. And then we will conclude with financial highlights before we open it up for Q&A. And I will start off today with the Florence permitting update as we know it’s a topic that shareholders are keenly focused on and we are as well. And we are hopeful, in fact, that we would have had an announcement by now. In fact, the EPA told us in June that they were aiming to issue the draft UIC permit and commence the public comment period in mid-July. That slipped to late July and then to August 7. And then late last week, we were informed the dates have been pushed another week to August 14. So, it’s imminent. And while the timing is definitely disappointing, the good news is there continues to be no issues raised by the EPA. We understand that all the documents are complete and expect the EPA’s final internal approvals this week. We certainly share your frustration with the length of time it has taken to start this process, but we remain optimistic that the extra time the EPA is taking today will pay off in the long run. There is no dispute that the U.S. needs projects like Florence Copper to supply their domestic needs and reduce reliance on foreign supply. And when you look at the project in terms of surface disturbance, energy and water consumption and GHG emissions, it’s clear that Florence has one of the smallest environmental footprints of any copper project in the world. So we are ready to get going on it. Now turning to…

Thanks, Stuart. Good morning, everyone. I will talk a little more about operations in the second quarter, but more about what’s ahead for the second half of the year. As Stuart mentioned, we definitely had our challenges in the mine. While all the Gibraltar mine pits have a similar profile with lower grade closer to the surface and the higher grade towards the bottom of the deposit, we had some additional issues which exasperated things in the quarter. We found in the second quarter that there were unexpected ore gaps or gaps in the mineralization related to patchy complex ore and which were not evident from our previous drilling and geological modeling. So, our mine plan had average grade for the quarter at 0.21%, but those gaps resulted in lower actual mine grade. This was compared – or this was compounded by the small ore zones, which are not ideal for the size of the equipment we run at Gibraltar. Blasting of these small zones mixes the waste ore boundaries and makes it very difficult for our large shovels to separate ore from waste, so we end up sending more waste to the mill than we otherwise would. Even with the MineSense technology we are using, which is designed for this purpose, it doesn’t take a lot of waste to lower the grade from 0.21% to 0.17%, which is where we ended up for the quarter. More importantly though is how will we deal with this in the back half of the year. First, the issue is naturally resolving itself as we dig deeper into the Gibraltar Pit, where the ore zones have become larger and more consistent. We have also done a significant amount of infill drilling over the last few months to confirm mine plan grades and ore…

Okay. Thanks, Richard. And as Bryce mentioned – or as Brian mentioned earlier, Bryce is traveling today. So, let me cover a few financial matters before we get to the Q&A. Revenue for the second quarter was down from the first quarter and that’s partly due to lower pricing, but mainly because of lower sales volumes. If you recall, our first quarter financials were boosted by an additional 6 million pounds of sales that carried over from the prior year. Also reducing revenues this period was $5.5 million of downward provisional pricing adjustments, which related to the drop in copper prices over the period. Actually, in the context of the copper price dropping by $1 in the quarter, our negative price adjustments are quite small and lower than some of the other copper producers this quarter. That’s because we’ve been minimizing QP exposure by fixing the copper price at around the time of shipment. We do that with customers directly and through banks. And that pricing strategy has worked very well for us in this last most recent downturn. On the cost side, our total cost – our total site costs, and that includes capital strip, is up slightly over the first quarter and about $11 million higher than the same quarter last year. The main driver of that increase is higher fuel costs as diesel prices averaged about CAD1.70 a liter in Q2. Prices have come down since the highs in Q2 and currently landing at site of around CAD1.50 per liter, and we hope that downward trend continues. We do have a short-term hedging strategy in place, which effectively caps our fuel price at between $1.65 and $1.70 per liter for the rest of this year. So we’re covered on diesel. And with the exception of grinding media,…

Thank you. [Operator Instructions] And we will take our first caller from Craig Hutchison, TD Securities.

Hi, good morning, guys. My first question is with respect to Gibraltar. Obviously, encouraging to see that the grades in July, I think you said were 20% higher than they were in the previous quarter. To hit the low end of guidance, will you not need to be at or above your reserve grade? And maybe a question is that what your expectation is here for the second half?

Hi, good morning, Craig, Richard here. So the grade will trend back up towards the reserve grade. The other factor really is the softer ore and the throughput opportunity or the upside that we’ve seen in July and how that will carry through to the second half of the year.

Okay.

I think we were rough – 95,000 tons a day, roughly, for July. So that kind of gives you an indication of what the mine is capable of.

Okay. And then in terms of just the total tons mined in the first half of this year, a fair bit lower than the average you had last year. Is that a function of just kind of where you are in the mine plan, trickier ore, more selectivity. And can we expect that number to sort of creep up here in the second half?

The tons mined is more a function of the haul distance. So with mining out of the Gibraltar Pit, we have a longer haul out to the waste dumps and over to the crushers. So that’s reflected in the truck productivities we’re able to achieve with the fleet. So we will see tons mined come up a bit as kind of the – mine the different stages of the dump development advances through the remainder of the year, but will not return to the levels we saw back in 2021, just again, based on haul distances.

Are there any trucks you guys need to add? Or...

Don’t have to add trucks. We are going to be trialing three Cat 794 trucks that will be coming in. I believe the last update was beginning of Q4 time frame.

Okay. Maybe one last question real quick just on Florence, just given obviously the weaker-than-expected first half this year, just thinking about financing. I mean, you mentioned sort of your thoughts on more small kind of financing requirements. But I mean, is there a possibility here that you need a much more substantial financing, something in the order of $100 million to $200 million or am I not modeling that correctly?

No, that’s not the way we’re seeing it right now. Obviously, Craig – it’s Stuart speaking here, by the way. There is a lot of moving parts on this, of course. Copper prices have moved. Gibraltar production is going to improve, which will improve our cash flow generation. We haven’t got to 2023 at Gibraltar yet. But obviously, our cash generation at the rest of our business will be a key input. And permitting timelines as well at Florence, which are – have slipped out a little bit. So, no, I don’t think we are looking at any financings of that magnitude, pretty comfortable with the balance sheet right now. And as I have said in my notes there, we do have lots of options if we need to add a small royalty or equipment financing in the range of maybe $25 million to $50 million. So, that’s how we are thinking about it right now. But obviously, as we get closer to that construction start date, we will get more visibility and the picture will become clearer.

Okay guys. Thanks. Good luck.

Thanks Craig.

Thank you. And next, we will move on to Ed Brucker with Barclays.

Hi guys. Thanks for taking my question this morning. First one, just on the EPA, I just wanted to get a sense for how long the post comment period took during the 2020 – or the previous EPA timeframe to get through those comments? And then what kind of negative comments that you get and then do you expect those to come this time? And are you confident you can overcome those?

Yes, Richard here. As far as the previous process, what I mentioned in my comments regarding the 2020 process that was actually the state process, ABQ process, for our APP permit, the other permit we require, which we have in hand now. And that was a 30-day public comment period. There was one comment received by one opponent that essentially got dealt with, and they withdrew their comments before proceeding through the process of dealing with that concern raised by them. As far as the other part of your question in terms of how long it will take, it’s really going to depend on the nature of the comments they receive and the validity of them. To-date, we have not seen any new concerns or issues raised. And previous concerns raised were more grounded around uncertainty on the technical aspects, whereas now, we have run the production test facility and demonstrated how the system performs and our ability to operate as we modeled and said we could operate. So, it makes concerns on the unknown quite a bit less for the regulators to have to deal with or field from potential components.

Got it. And then my next question, just on Gibraltar. I mean if the copper price is going lower. When – and I know you are hedged, but at what copper price generally does it start to get difficult? I guess thinking in the context of the $2.20 cost number that you gave. And then what do you have in your back pocket to squeeze out cash flows at lower copper levels?

Yes. I mean, Stuart speaking here, $2.20 a pound is our expected C1 cost for the back half of the year. And going forward, that’s a typical level that you could see. It does reflect higher fuel costs, which we are experiencing now. And what we have seen in the past at Gibraltar, and I guess across the industry, that if copper prices were to drop dramatically, that you will also see input costs drop, fuel follows typically and steel and all the other inputs. So, as copper prices drop, input costs also drop. So, yes, we are a long way from any kind of cash flow issues or margin issues at Gibraltar. We just got to get our grade up and we will be fine.

Got it. My last question, just on absenteeisms. In the hirings you have been doing, do you expect that to keep costs high throughout the year kind of as you train more people, hire more people, having to bring more people into the building?

Yes. Well, so Richard here. I don’t expect it to cause an increase in the cost, given it’s already baked into our operating model and operating costs associated with that. Where it does rear its head is just getting those people trained and operating at the qualified operator level. There is a bit of a ramp-up process that ensues. And that’s something that, the way we do our training and the training processes and systems we have is we are looking at ways for better deployment of those items and tracking of individual operator performance. So, the site team is very focused on that. It’s something that we have actually had to deal with in the past based on the cyclical nature of our industry. So, it’s really kind of dusting off those processes and getting a very well evolved training program in place to get people up to speed and qualified and operating the equipment at the levels we know they can be operated at. So, that’s probably the – I guess the biggest risk if we have one, getting into kind of the level of hiring that we are doing right now.

Great. Thanks for the time.

Thanks.

Thank you. Next, we will move on to Alex Terentiew with Stifel.

Hi. Good morning everybody. A couple of questions for you. First, I just wanted to – just maybe if you could clarify for me, give me some color. I think you said Florence, still about $20 million to be incurred capital spending over the rest of the year. So, I just want to see if you can confirm that. And then also at Gibraltar, can you give us just a bit more color on the capital spend there? Capitalized strip and others for the rest of the year? I mean these are both kind of related to, obviously, cash flow and financing. And then my second question, again, relates to kind of your ability to generate cash flow. I know 2023, you haven’t given guidance yet. But can you just kind of give us an indication for kind of what maybe throughputs and grades you are anticipating? I know the ore is getting softer now. Do you anticipate that carrying through into 2023, and reserve grade to kind of be maintained next year as well? Any clarity there would be helpful. Thank you.

Okay, sure Alex. Yes, Stuart speaking here. In terms of Florence CapEx, yes, you are correct. $20 million is roughly what we are expecting to spend on Florence capital project costs in the second half of this year. We have – on top of that, we have an ongoing much smaller amount that keeps the site team in place there. I think it was CAD3 million or CAD4 million a quarter. But that’s Florence. And Gib capital, we are seeing capital strip, you can expect that to continue along with historical rates. There is no – I guess the one capital project that’s in progress right now is the crusher move. That will – there will be more work on Q3, and then that will slow down as we get into winter, the construction season kind of will come to an end. And – but we could spend another maybe $10 million on the crusher move in the second half of the year. And then that project will wrap up in the first half next year. Yes. So – but other than that, as I said, no major capital requirements at Gibraltar. Looking ahead to 2023. As you noted, we haven’t put out guidance yet. We are working on our mine planning and budgeting right now. But generally speaking, it’s looking like it will be a higher production year than 2022, certainly, and trending back towards that kind of life of mine average of 130 million pounds. So, it’s moving – it will be moving towards that as a target. And I think as we get towards the end of the year here, we can give some more precise guidance. But it will be a stronger year next year for sure.

Okay. And strip ratio, I think from the last tech report, just kind of called around 2.5% for the next 3 years – sorry, 4 years or 5 years. Is that in the ballpark, again, of where you think stripping ratio will be?

Yes. Sorry, the strip ratio in the 2.5% range is – yes, that’s where it will be in the next couple of years.

Okay. Alright. Great. That’s it for me. Thank you.

Thank you. Next, we will move on to Edward Gooden with Panmure Gordon.

Thanks. Hi guys. Just a question on costs. What percentage contribution does diesel have to the total cost at Gibraltar? And then also on diesel, what’s the incurred cost for the hedge on the total diesel cost that you mentioned? Thanks.

Sure. Yes. I mean we generally – we use about 40 million liters of diesel a year at the mine. I mean maybe slightly below that, but that’s a round number. That’s on a 100% basis. As I mentioned, in Q2, the average price was CAD1.70 a liter, and that includes a delivery cost to site. So, that’s something like CAD65 million, CAD68 million of annual diesel costs on a 100% basis. But that’s kind of the math there. I don’t have the percentage off the top of my head, but that gives you an idea. And then sorry, I forget – the other question was about the hedge. What we do on hedging is we buy call options on U.S. Gulf Coast diesel. So, that – we pay a premium. I think we paid about $300,000 for that to purchase that contract for the second half of the year, and that effectively caps our diesel price at around between $1.65 and $1.70 a liter. So, we have really – we have effectively capped the diesel price at around our Q2 cost level. And actually, currently, the price is lower, the price right now is around $1.50, so which is a positive, we have seen that price come off.

Okay. That’s great. Thanks very much.

Thank you. And there are no further questions. I would like to turn this conference back over to management for any additional or closing remarks.

Okay. Thanks very much everyone for joining and we don’t have anything further. So, let’s end the call here and everyone enjoy the rest of your summer. We will talk to you after Q3. Thanks.

Thank you. And that does conclude today’s teleconference. We do appreciate your participation. You may now disconnect.