Taseko Mines Limited (TGB) Q1 2025 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to the Taseko Mines First Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Brian Bergot, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Jonathan. Welcome, everyone, and thank you for joining Taseko's first quarter 2025 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 am joined today in Vancouver by Taseko's President and CEO, Stuart McDonald; Taseko's Chief Financial Officer, Bryce Hamming; and our COO, 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. 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 first 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 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.

Great. Thank you, Brian, and welcome everyone to our first quarter conference call. As usual, I'll start with a business overview of our key activities and operational results in the quarter and then turn the call over to Bryce for a more detailed review of the financial performance. So, starting with Florence, our Florence Copper project, we just issued a project update last week confirming everything is moving forward on time and on budget. Good progress continues to be made with construction activity at the site, and we remain on schedule to produce first copper before the end of this year. In the well field, as of this week, we only have two wells left to drill. So, we have 88 out of 90 production wells completed, and all 18 of the point of compliance wells are also done. We've ramped down to just one drill remaining on-site, and that one will be finishing up in the next few weeks. This is a great accomplishment, as obviously, the well field is a critical aspect of the overall project. In the SX/EW plant area, we also have a lot of activity and progress, and all critical path items are moving forward on schedule. The installation of the electrowinning crane was completed in Q1, which allowed for the final wall and roof panels to be installed, completing the building structure. Current areas of focus include installation of electrical and piping equipment, completing, completion of the substation facility, and ongoing work on the pipe corridor to connect the plant to the well field. In the coming months, as key systems are completed, progressive commissioning and testing will occur at the same time, as the final construction activities. And in the fall, we expect to commence well field operations at initial injection, which sets us up for first copper cathode production before the end of the year. We continue to advance initiatives for operational readiness. Our recruiting is going well. By next week, we'll have over 100 employees on-site. We're also close to finalizing our first asset supply contract for the initial ejection and pre-leaching period later this year. It's been 10 years, since we acquired the Florence project, and we're now less than 9 months from producing first cathodes. It's been a long process to get where we are today, but I think the outcome is going to be well worth the wait for all our shareholders and other stakeholders. Florence is one of the few copper projects in the world currently under construction, and it will be a major new supplier of refined copper capital for the U.S. market. The potential for U.S. import tariffs on copper is further evidence of the unique value that we have in this asset. The COMEX copper price yesterday was about 14% higher than the LME price, and the project has the potential to benefit from this premium in the future. Now, onto Gibraltar, where we produced 20,000,000 pounds of copper in the first quarter with a C1 cost of $2.26 per pound. Copper sales of CAD22 million at a realized price of $4.24 per pound generated adjusted EBITDA of CAD34 million and cash flows from operations of CAD56 million. Mill throughput ran above design capacity at an average rate just under 88,000 tons per day. Head grade of 0.19% was in line with our expectations as a significant portion of the mill feed was from lower grade stockpiles as planned. However, copper recoveries dropped to 68%, as the impact of oxidized ore was more significant than anticipated. So, our overall production in the quarter was about 10% lower than we expected. Our original plan had higher grade ore coming from the deeper benches of the connector pit beginning in the second quarter, after the initial waste stripping was completed. Unfortunately, challenging mining conditions at the top of the current connector pit pushback has impacted truck and shovel productivities, so we will not get to the higher grades now until the third quarter. Second quarter production is expected to be similar to the first quarter, and then we will see a step change of production in the second half with average grades above Gibraltar's reserve average, and these good grades should continue, into 2026. As a result of all this, we expect 2025 production to be approximately CAD10 million lower than our previous guidance of CAD120 million to CAD130 million. The refurbishment of Gibraltar's SX/EW plant and restart plants have made good progress, and we expect first cathode production later in the second quarter. The plan is to produce about 3,000,000 or 4,000,000 pounds of cathode this year. It will be a seasonal operation, but a lot of copper oxide ore has been stacked, and we expect the leach pads to run for many years into the future. Last but not least, a brief update on our Yellowhead copper project, which we believe represents an important long-term growth option for the company, continuing to work closely with BC government and the Simp First Nation on project permitting initiatives. The Yellowhead mine would be a major producer with 180,000,000 pounds of copper production annually over a 25-year mine life. I would make it the second largest copper mine in Canada. We're planning to publish a new technical report this summer, which will incorporate updated metal pricing, costing, and then also the new Canadian tax credits are available for copper mine development and have the potential to positively impact the economics as well. So, with that, I'll pass the call over to Bryce.

Thanks, Stuart. Good morning, everyone. I'll provide some additional color on our first quarter financial performance. For the quarter, we sold 22,000,000 pounds of copper at an average realized price of CAD4.24 per pound, generating revenues of CAD139 million. As we fixed most of our prices with our customers before ships depart, we don't have a lot of QP price adjustments in the quarter or following the quarter end, which helps us manage copper price volatility. We posted a GAAP net loss of CAD29 million or CAD0.09 per share for the quarter. Lower quarterly production and higher costs were the main contributors to the loss, as well as a CAD24 million unrealized derivative and fair value adjustment, and that was from reversing the large mark-to-market gain shown in December, and this reversal was due to rising copper prices in Q1. On an adjusted basis, after removing this unrealized loss, we posted a net loss of CAD7 million or CAD0.02 loss per share. Total site costs for the quarter were CAD107 million, which is in line with previous quarters and is similar to our expectations on a quarterly run rate for the year. Capitalized stripping costs in the quarter were markedly higher at CAD38 million. This is attributed to the connector pit pushback and higher strip ratio of 4.6:1, which meant processing a much higher percentage of stockpiled material above the pit average strip ratio. These costs begin to taper in the second quarter. We don't expect much capitalized stripping in the second half as oil release increases from the connector pit. On a per unit basis, costs in the quarter were CAD2.26 per pound of copper produced. This is lower quarter-over-quarter and year-over-year as a result of the higher capitalized stripping costs I mentioned, but also lower TCRCs, which now average to a nominal amount for this year under our new favorable off day contracts. We also saw increased molybdenum sales volumes and a stronger U.S. dollar in the quarter and that was offset by our lower production. Adjusted EBITDA in the first quarter was CAD34 million, lower than previous quarters and again due to the decreased production sales volumes. At Florence, we incurred a total of $57 million in U.S. dollars of costs in the quarter and most of that was directly related to the commercial facility construction, as well as $6 million that was associated with site operations and completion of the rinsing tests, which we are finishing up this quarter. Given we are now 80% complete, construction capital spending will begin to taper down going forward, as the peak spending is behind us. Today, we have incurred CAD206 million of the construction capital. We continue to expect final capital to be within 15% of our 2023 estimate of CAD230 million. We ended the quarter with CAD121 million of cash, and we have available liquidity at the end of the quarter of CAD279 million after factoring in our undrawn revolving credit facility. We did draw CAD25 million against this credit facility after the quarter end to support working capital. Finally, given volatility in copper, just want to highlight in addition to fixing our prices at the time of shipment, we also have our price protection for the year. It covers the balance of the year and it protects CAD4 per pound, minimum floor place for most of our production for 81,000,000 pounds. These are collars and they're based on LME prices and they cover the next three quarters and that gives us all the upside up to $5.40 per pound. So, with that, I'll turn it over to the operator. Thank you.

Certainly. [Operator Instructions] Our first question comes from the line of Craig Hutchison from TD Cowen. Your question please.

Hi, good morning, guys. Thanks for taking my question. Just wondering if you could provide some more context on the issues you're encountering in Gibraltar, with respect to the ground conditions. What are some of the issues? Is it just maybe smaller trucks or just any context on that? And kind of when do you expect to be through that?

Yes. Craig, Richard here. So, the upper bench is in connector pit with the pioneering and kind of setup mining were all around the overburden that had to get mined out before we could access down in the cockpit rock. And that overburden proved to be a lot more challenging than was originally envisioned and required a lot of rock to be basically placed in improving ground conditions to allow the equipment to access the dig phase, as well as the dump properly. We've progressed through that and are now seeing, our expectations on the mining are kind of being met now. So, but it has delayed us in Q1.

Okay. And then, the issues around the oxidized stockpiles, will that be a factor again in Q2? Should we assume recoveries are going to be customer to Q1, both grades and recoveries, I guess?

Yes. And that's why I think as Stuart indicated, production levels will be comparable to Q1. So, that's been kind of factored into that forward looking the reduction of guidance for the year essentially.

Okay. Great. Thanks. And then, just on Florence, I know Gibraltar is not impacted by tariffs, but you're probably importing stuff from overseas at Florence. Any sense, in terms of what that might have an impact, whether it's on finishing the capital here or just on cost going forward or what's most sensitive, in terms of cost of Florence with regards to tariffs?

Thanks. Hi, Craig, it's Stuart here. In terms of the capital projects, there's no impact from any import tariff. And I guess, the reason for that is because we've got all of our supplies and equipment already inside the U.S., mostly already on-site or else a few things at other fabricators in the U.S. So, that's not an issue at all. Speaking about longer term operating costs, obviously, it's a pretty volatile environment with the tariff pitchers still in flux and changing every couple of weeks. So, wouldn't want to make any comments about what our impact might be in '26 or '27. But yes, it's something we're just monitoring. Obviously, the biggest input costs or operating costs going forward will be sulfuric acid. That's, a lot of that is also sourced from within the U.S., so that's probably as much, as much as I would say on it at this time.

Okay. Thanks, guys. I'll jump back in queue.

Thank you. [Operator Instructions] And we've got a follow-up from the line of Craig Hutchison from TD Cowen. Your question please.

Any updates on new prosperity, any kind of plans to kind of any potential breakthroughs there on that project?

Yes, nothing, no real updates beyond what we've kind of disclosed that we've made very good progress there. It's been a constructive dialogue and we think we're close to a resolution. But no, no, yes, nothing that I can really say beyond that. But it's looking positive.

Okay. All right. Thanks, guys.

Certainly. Thank you. And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Taseko Mines' management.

Great. Okay. Thanks, everyone. We'll wrap up the call here. And obviously, if there are other questions, feel free to reach out to us. And otherwise, we will talk to you next quarter. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.