Taseko Mines Limited (TGB) Q4 2024 Earnings Report, Transcript and Summary

Hello everyone and welcome to Taseko Mines' 2024 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. Now, it's my pleasure to turn the call over to the Vice President of Investor Relations, Brian Bergot. Please proceed.

Thank you, Carmen. Welcome everyone and thank you for joining Taseko's 2024 fourth quarter annual results conference call. The news release and regulatory filing announcing our financial and operational results was issued yesterday after market close and is available on our website at tasekomines.com and on SEDAR+. I'm joined today in Vancouver by Taseko's President and CEO, Stuart McDonald; Taseko's Chief Financial Officer Bryce Hamming; and our Chief Operating Officer Richard Tremblay. 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 and this information by its nature is subject to risks and uncertainties. As such actual results may differ materially from the views expressed today. For further information on these risks and uncertainties I encourage you to read the cautionary note that accompanies our fourth quarter MD&A and the related news release as well as the risk factors particular to our company. These documents can be found on our website and also on SEDAR+. 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. And finally all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified. Following opening remarks, we will open the phone lines to analysts and investors for questions. I will now turn the call over to Stuart for his remarks.

Thanks Brian and good morning everyone and thanks for joining us for the fourth quarter and annual earnings conference call. As you can tell, I'm struggling with my voice, so I'm going to give slightly abbreviated remarks today and pass the call over to Richard to talk about our operations and projects in more detail. But just a couple of reflections looking back on the last year. We're very happy with the progress that we've made across our business. I think at Gibraltar it was a busy and at times quite challenging year. We've had milling disruptions. We had major maintenance. We moved an in-pit crusher. We had a labor strike for 18 days in June and we overcame all of those challenges successfully, showed a strong fourth quarter and strong annual financial results. We've also made great strides at Florence. Construction is advancing smoothly and that's soon to become our second producing operation. And through all of that we've also maintained a solid balance sheet. We opportunistically refinanced our bonds earlier in the year and we ended 2024 with over CAD330 million of available liquidity and that's after a significant capital expenditure at Florence during the year. Taking a closer look at our financial results we generated CAD224 million of adjusted EBITDA and CAD233 million of cash flow from operations. Those results are notable improvements over 2023 as a result of a slightly higher copper price and also our increased stake in Gibraltar as we stepped up to 100% ownership in March last year and that was obviously a very accretive transaction for us. So, before I lose my voice completely, I'm going to now pass the call to Richard Tremblay.

Thanks Stuart. Gibraltar produced 106 million pounds of copper and 1.4 million pounds of molybdenum in 2024. Scheduled project work and maintenance plus the unexpected labor strike resulted in lower mill operating hours for the year amounting to roughly 15 million pounds of lost copper production. That is roughly equivalent to the shortfall from 2023 production levels and we should be able to get those pounds back in 2025 with normalized mill availability. The operation finished the year with a solid quarter producing 29 million pounds of copper in Q4 at a cash cost of US$ 2.42 per pound. Mill throughput averaged 89,700 tons per day exceeding the design capacity of 85,000 tons per day and that was actually the best quarter in Gibraltar's history as we benefited from stockpiled ore in the Connector pit. Mill recoveries in the quarter were impacted from the transition ore, which has higher oxide content as we continue to mine the upper benches of the Connector pit. We expect to have mined our way through this material by the second half of this year. Moly production of nearly 600,000 pounds in Q4 was the highest quarter since 2021. The Connector pit has better moly grades than the Gibraltar pit, so we expect production to remain at the current levels for 2025 and combined with continued strong moly prices will provide us with a valuable byproduct credit, which was US$ 0.42 per pound in the fourth quarter. Going forward with no major mill downtime or planned in 2025, we expect -- we are looking to return to the life of mine average production levels. Our guidance is 120 million pounds to 130 million pounds for the year but it is important to note that the production profile is weighted to the second half of the year. We expect roughly a 40-60 split between the first half and the second. The first quarter will be the weakest quarter of the year as we initiate a new pushback in the Connector pit. And during this period, mined ore will be supplemented with low-grade stockpiled ore. Head grades in the first quarter will be below 0.2% then we expect to see some improvement in the second quarter. And then in the second half of the year, we should see head grades quite a bit higher than our 0.25% reserve grade and actually higher than we have mined on a sustained basis in quite a few years. So we just need to get through the first quarter and then we'll see a steady ramp-up of production. The SX/EW plant at Gibraltar, which has been idle for nearly 10 years, is currently being refurbished and ready for restart. There was an oxide cap on the Connector pit and we have recharged heap leach pads with this ore. We expect to restart the SX/EW plant in the second quarter of this year, which will provide some incremental production on top of copper concentrate production. This year we would expect between 3 million pounds to 4 million pounds of cathode production. And then going forward that should increase to 4 million pounds to 6 million pounds per year. So, an important future revenue stream for us. On to Florence, where construction is progressing smoothly and on schedule. We provided a thorough construction update a few weeks ago, so there isn't too much new information to provide today. Construction of surface infrastructure and wellfield drilling activities are continuing to advance smoothly on schedule and in line with our previous cost guidance. The overall project completion today is a little over 60% and we're now about 10 months away from first production, which will be a very significant milestone for the company. Through the first year of construction our capital spend related to the commercial facility has been US$155 million. This quarter will be a peak construction and spending and then activity and spending will begin to slow down through the fourth quarter when we transition into operations. There will be a ramp-up period for Florence, which will be most of 2026 and we anticipate producing 40 million to 50 million pounds in 2026 and for 2027. Production levels should be up to 80 million pounds or higher. It is a very exciting time for us, but we still have a lot of work ahead of us and fully executing at Florence means ramping up to the 85 million pound annual production capacity. To finish off, I wanted to give a quick update on our longer-term projects. Our Yellowhead project represents a major growth opportunity for Taseko's North American copper business and we'll be advancing -- and we will be advancing project permitting this year. It's an interesting time in Canada with the threat of US tariffs and here in BC the government is clearly focused on how to respond and bolster our economy. One of the initiatives that BC has underway is a focus on shortening permitting time lines. This is an initiative that could benefit Yellowhead and an opportunity that we are monitoring very closely. We're aiming -- we're also aiming to publish an updated technical report for Yellowhead in the second quarter of this year. The current technical report is five years old now and the metal price assumptions we use were US$3.10 per pound copper US$1,350 per ounce gold and US$18 per ounce silver, which are well below current long-term price estimates. So we will update metal prices and also update capital and operating costs in the new report. Another significant change is the new Canadian tax credit available for copper mine development and this will be incorporated into the updated technical report as well and we expect will have a very positive impact on the project economics. Finally, just a quick update on New Prosperity. If you recall, we've been in a dialogue with the Tsilhqot'in Nation and the BC provincial government. These discussions have made meaningful progress last summer, but were paused due to the BC provincial election in October. We have recently reengaged and remain optimistic that we can reach a successful conclusion to that dialogue. And now, I'll turn the call over to Bryce.

Thank you, Richard and Stuart. Maybe I'll start and reflect further on the 2024 year and then cover some of our quarterly financial highlights. For the year we had sales of 108 million pounds of copper which generated revenues of $608 million, which is the highest Taseko has ever reported and that can be attributed to our growth in Gibraltar to now owning 100% of it coupled with a healthy average copper price of US$4.17 a pound in the year. We posted a GAAP net loss of $13 million for the 2024 year or $0.05 loss per share. However, on an adjusted basis we had $57 million of net income or $0.19 per share, which was a $0.04 per share increase over the prior year. A couple of items to note, the weaker Canadian dollar has created an unrealized loss on our US dollar-denominated bonds and other debt. That totaled CAD 52 million for the year. We adjust for that in our adjusted earnings. The offset to that of course is our investment of our US dollars into Florence. And those FX moves go through foreign currency translation and OCI. So there's kind of an accounting mismatch. So we normalize for that. And given the weakness in the Canadian dollar, this move was more significant in the year. $19 million of our costs were expensed for site care and maintenance due to the labor strike. We had $2.5 million in June as well as the completion of our primary crusher relocation project. That project totaled CAD16 million that included costs for the demolition of the old station outlays for the physical move. And then there was a non-cash write-off of some conveyor equipment that was in the fourth quarter, which was made redundant with the crusher move. So these capital project costs are all expensed for under IFRS and we adjusted for those in earnings as well. Total site costs at Gibraltar, they totaled CAD414 million in the year that's on a 100% basis. We do provide a note on that in our MD&A. That was actually CAD17 million lower than 2023, due to the lower input costs, notably diesel prices were lower than the prior year and the impact of our labor strike in June that reduced our site operating costs in the second quarter. Capitalized stripping costs, they were CAD32 million in the year and that was CAD23 million less than last year. And we do expect capitalized stripping costs to increase in 2025 and that's associated with the Connector pit pushback Richard mentioned that's occurring in the first half of this year. So we'll have capitalized stripping more in line with 2023 run rates of around CAD40 million to CAD 50 million, with most of that in the first half of the year. Costs on a per pound basis they were US$2.66 per pound and that was higher in 2023 and that was due to the lower production levels we saw in 2024 with our mill downtimes but we also had less capitalized strip. That was offset of course by improved moly, byproduct credit and then lower off-property costs and some lower input costs. And as we've mentioned, there will be significantly more moly production in 2025 in the Connector pit, which will help keep our C1 costs down. In the second half of 2024, we started to benefit from new sales contracts, we signed at Gibraltar. Those had notably lower TC/RC charges. For the year, TC/RCs accounted for CAD0.09 per pound of off property costs and with new off-take contracts covering 2025 and 2026, we expect our average TC/RCs to be actually slightly below zero for those years going forward. For the quarter, we achieved CAD56 million in adjusted EBITDA and that was on 27 million pounds of sales. Production finished the year strong and we ended with a bit more inventory that increased to 4 million pounds at the end of the year. Adjusted earnings was CAD10.5 million or CAD0.03 per share. At Florence, the project is progressing on plan as we've highlighted and we will hit peak construction spending this quarter Q1 of 2025. Capital spend was – sorry US$58 million in the fourth quarter. And our total spend to date on the Florence commercial facilities US$155 million. We expect to incur about US$20 million per month through this first quarter and then we'll begin to taper. We ended the year with CAD173 million of cash and we have our CAD110 million revolving credit facility that's currently undrawn. And so that gives us our total liquidity of approximately CAD330 million. And finally as a reminder, given the volatility in the markets, notably in copper price as well we do have copper price protection in place. For 2025, it's a minimum price of CAD4 per pound. These are collar contracts, so they have a ceiling price and that ceiling price average is CAD5.20 per pound. So those collars and price protection should provide stable operating margins for Gibraltar as the year progresses. And we can of course always look to extend copper price protection into 2026, if the markets are favorable and they continue on the current positive trends. So with that operator, I'll hand it back to you and open the phone lines for questions. Thank you.

Thank you so much. [Operator Instructions] Your question comes from the line of Alex Bedwany with Canaccord Genuity. Please proceed.

Hi, guys. Thanks for taking my questions. Just a couple. The first one is, I just wanted to know what was behind the higher sustaining CapEx spend at Gibraltar in the fourth quarter? And what do you think for FY 2025? And then the second piece was just around Florence. So have you put in place any contracts for the acquisition of acid, so that you're ready to certify the fields when the drilling is complete in the second quarter?

Yes. I'll take the first half of that question Alex. It's just regarding the sustaining capital really nothing of note. Sometimes it's really just due to the timing of certain repairs and maintenance and replacements of engines and other components on our mobile fleet at Gibraltar. So I wouldn't highlight really anything that specific there. In the capital projects, we do separate from sustaining capital or capital project costs and we did have some write-off of equipment that I mentioned for about $4 million. I think going forward; we expect it to be in the more ordinary levels in that $20 million to $30 million range for sustaining capital. And again most of that is focused around our maintenance of the mining fleet. And for your second question maybe I'll pass that to Richard and you can talk about the acid strategy.

Yeah. Sounds good. Thanks Bryce. Yeah. Regarding the acid, we've been an ongoing dialogue with four acid suppliers, traders in the US, and there continues to be great interest in providing an acid for the site, and we'll be issuing an RFP here this quarter and start formalizing securing future acid supply with that RFP. That's the process we're undertaking.

Okay. Fantastic. Thanks, Richard. Just one more. How has it been looking so far this quarter in terms of throughput at Gibraltar are you still seeing it pretty high, because of the soft Connector pit ore?

Yeah. The Gibraltar, throughput continues to be strong. Connector ore is softer as we highlighted and saw in Q4 and we'll continue to see that here into this year. But as we highlighted, production is weighted to the second half of the year and Q1 will be our worst quarter, just due to the fact we're supplementing ore feed with stockpile material.

Yes. Okay, I think that's been well flagged. Okay. Thanks guys. Appreciate it.

Thank you.

Thank you. [Operator Instructions] Our next question is from Duncan Hay with Panmure Liberum. Please proceed.

Yeah. Thank you. A couple of questions, first one just on the well costs. I saw the -- you updated on the number of wells you put in at Florence. Just how the costs were tracking and the sort of the rates? And how that was looking versus your forecast going forward? And then the second one, I missed the end of Alex's question, so he may have asked this, but just about acid what the situation was going to be for acid and securing that and how pricing was looking in the region as well? Thank you.

Yeah. Regarding the drilling, and our drilling performance continues to be a strong area of focus for the site team and continue to look for opportunities to keep improving overall performance. And we've been quite happy with how things have been progressing and continue to see opportunities for improvement and continue to refine kind of the efficiency and cost associated with putting in wells. So quite pleased with how that's performing, and that will serve us well on a long-term basis. Regarding acid...

So just before you get to the acid, is the plan still to sort of transition to doing that in-house eventually for the drilling?

Yeah. Eventually it will be something we would look and assess about bringing in-house. But for the near-term here, we definitely would remain utilizing external parties to provide the drilling activity. And we have a strong Florence team that we've recruited and put in place through the construction here which will stay on into operations, because I described drilling at Florence really is the mining activity at a conventional site. So we need to have a strong management team overseeing the drilling activity, but we will be relying on third parties in the near-term here.

Okay. Thanks.

Thank you. As I see no further questions in queue, I will turn it back to management for final remarks.

Okay. Thanks everyone .And we look forward to speaking again at the end of our first quarter and reviewing our progress.

And with that, we conclude today's program. You may now disconnect.