Taseko Mines Limited (TSX: TKO) (NYSE American: TGB) (LSE: TKO) reports second quarter 2024 Adjusted EBITDA* of $71 million and Earnings from mining operations before depletion and amortization* of $77 million. Second quarter earnings benefited from a $26 million insurance recovery related to mill repairs that were completed in January. Revenues for the second quarter were $138 million. A net loss of $11 million ($0.04 loss per share) was recorded for the quarter and adjusted net income was $31 million ($0.10 per share).

Gibraltar produced 20 million pounds of copper and 185 thousand pounds of molybdenum in the second quarter, as previously disclosed. Production was impacted by planned downtime for the in-pit crusher relocation and other maintenance, and an 18-day mine shutdown for a labour strike. Mill throughput in the quarter was 5.7 million tons, processing an average grade of 0.23% copper. Copper recoveries in the quarter averaged 78%, lower than previous quarters due to interruptions to operating time in both concentrators. Total operating costs (C1)* for the quarter were US$2.99 per pound of copper produced, higher than recent quarters mainly due to lower production levels. The in-pit crusher relocation, a project in development for nearly two years, was completed in the second quarter. Conveyor and electrical tie ins were done by mid-July and the new system is now running at full capacity.

Stuart McDonald, President and CEO of Taseko, commented, “This was our first full quarter with 100% ownership of Gibraltar and despite the operational disruptions, the mine’s financial performance was quite strong as we generated $35 million of operating cashflow. With all of the major project and mill maintenance work now completed at Gibraltar, we’re looking forward to stronger copper production and cashflow generation in the second half.”

Construction activities at the Florence Copper project continued to ramp up in the second quarter and there are over 200 contractors now onsite. Concrete foundations have been poured for the SX/EW plant, tank farms and other key components of the plant site. On the wellfield, 18 production wells were completed to the end of June, in line with the schedule, and development of the pipeline corridor is well advanced. The first evaporation pond, which has been brought ahead in the schedule to provide greater water management flexibility will be fully lined and completed in the next few weeks.

Mr. McDonald added, “We’re pleased with the initial construction progress at Florence as all key activities are advancing on schedule.  We’ve also had good success in recruiting key management and technical roles for the commercial operation and now have nearly half of the 170 permanent positions filled. Many of these positions have been filled by local Arizonans and there is excitement about participating in the development of America’s next copper mine.  The project remains on schedule for first copper production in the fourth quarter 2025.”

*Non-GAAP performance measure. See end of news release

Second Quarter Review

• Earnings from mining operations before depletion, amortization and non-recurring items* was $76.9 million, Adjusted EBITDA* was $70.8 million, and Adjusted net income* was $30.5 million ($0.10 per share);
• Second quarter cash flow from operations was $34.7 million and net loss was $11.0 million ($0.04 loss per share) for the quarter;
• Gibraltar produced 20.2 million pounds of copper for the quarter. Average head grades were 0.23% and copper recoveries were 78% for the quarter;
• Gibraltar sold 22.6 million pounds of copper in the quarter at an average realized copper price of US$4.49 per pound;
• Total operating costs (C1)* for the quarter were US$2.99 per pound produced;
• On June 1, 2024, operations at the Gibraltar mine were suspended for 18 days due to strike action by its unionized workforce. The mine was put into temporary care and maintenance with only essential staff operating and maintaining critical systems during the strike. Operations at Gibraltar resumed on June 19 after the ratification of a new agreement by union members;
• During the quarter, a total of 5.7 million tons were milled. Throughput was impacted by both the labour strike and planned downtime in Concentrator #1 for the relocation of the primary crusher and maintenance;
• During the quarter, the Company finalized an insurance claim for property damage to Concentrator #2 and business interruption for the associated production impact in 2023 and January 2024. An additional insurance recovery of $26.3 million was recorded in the second quarter, and proceeds are expected to be received in the third quarter;
• Construction of the commercial production facility at Florence is advancing with recent activities focused on wellfield drilling, process pond construction and civil works including pouring of concrete foundations;
• On April 23, 2024, the Company completed an offering of US$500 million aggregate principal amount of 8.25% Senior Secured Notes due May 1, 2030. The majority of the proceeds were used to redeem the outstanding US$400 million 7% Senior Secured Notes due on February 15, 2026. The remaining proceeds, net of transaction costs, call premium and accrued interest, were approximately $110 million and are available to fund capital projects, including construction at Florence Copper; and
• The Company had a cash balance of $199 million at June 30, 2024 and has approximately $308 million of available liquidity including its undrawn US$80 million revolving credit facility.

*Non-GAAP performance measure. See end of news release

Highlights

Effective as of March 25, 2024 the Company increased its ownership in Gibraltar from 87.5% to 100%.  As a result, the financial results reported in this MD&A include 100% of Gibraltar income and expenses for the period March 25, 2024 to June 30, 2024 (87.5% for the period March 16, 2023 to March 24, 2024, and 75% prior to March 15, 2023).  For more information on the Company’s acquisition of Cariboo, please refer to the Financial Statements – Note 3.

The Company finalized the accounting for the acquisition of its initial 50% interest in Cariboo from Sojitz and the related 12.5% interest in Gibraltar in the fourth quarter of 2023.  In accordance with the accounting standards for business combinations, the comparable financial statements as of June 30, 2023 and for the three and six months then ended have been revised to reflect the changes in finalizing the consideration paid and the allocation of the purchase price to the assets and liabilities acquired.

*Non-GAAP performance measure. See end of news release

Review of Operations

Gibraltar mine 

Review of Operations

Second Quarter Review

Gibraltar produced 20.2 million pounds of copper for the quarter. Copper production and mill throughput in the quarter were impacted by a strike in June 2024 and planned downtime in Concentrator #1 for the relocation of the in-pit crusher and other concurrent maintenance.

On June 1, 2024, operations at the mine were suspended for 18 days due to strike action by Gibraltar’s unionized workforce strike. During this period all mining and milling operations were shut down and only essential staff remained on site to operate and maintain critical systems. Operations resumed on June 19, after the ratification of a new agreement by union members.

Copper head grades of 0.23% were in line with management expectations and the mine plan. Copper recoveries in the second quarter were 78%, lower than the recent quarters due to increased milling of partially oxidized ore from the Connector pit and variable mill operating conditions during the strike and maintenance activities.

Operations Analysis – Continued

A total of 18.4 million tons were mined in the second quarter, lower than previous quarters due to the labour disruption. Stripping continued in the Connector pit and ore release will transition from the Gibraltar pit to the Connector pit in the coming months. A total of 1.5 million tons of oxide ore from the upper benches of the Connector pit were also added to the heap leach pads in the period.

Total site costs* at Gibraltar of $90.5 million (which includes capitalized stripping of $10.7 million) was lower compared to the previous quarter due to the strike in June. A total of $2.5 million care and maintenance costs were incurred during the strike which are not included in total site costs or cost of sales.

During the six months ended June 30, 2024, the Company incurred total costs of $9.7 million in relation to the primary crusher relocation project for Concentrator #1. Direct costs for the physical move of the crusher of $7.9 million have been included in the statement of income (loss).

Molybdenum production was 185 thousand pounds in the second quarter and production was impacted by mill availability. At an average molybdenum price of US$21.79 per pound, molybdenum generated a by-product credit per pound of copper produced of US$0.26 in the second quarter.

Off-property costs per pound produced* were US$0.37 for the second quarter and also reflected higher copper sales volumes relative to production volumes compared to the prior quarter.

Total operating costs per pound produced (C1)* was US$2.99 for the quarter, compared to US$2.66 in the prior year quarter as shown in the bridge graph below with the difference substantially attributed to the lower copper production in the quarter:

Gibraltar Outlook

With the major project and maintenance work in both concentrators now completed, production in the second half of 2024 is expected to be stronger than the first half of 2024. An updated mine plan and mill throughput opportunities are being evaluated to recover some of the production that was lost during the strike. Copper production for the year is expected to be in the range of 110 to 115 million pounds, compared to original guidance of approximately 115 million pounds.

The Gibraltar pit continued to be the main source of mill feed in the second quarter and mining of ore is now transitioning into the Connector pit, which will be the primary source of mill feed in the second half of the year.  Additional oxide ore from Connector pit is expected to be added to the heap leach pads this year.  Refurbishment of Gibraltar’s SX/EW plant, which has been idle since 2015, will begin later this year and management is planning to restart the facility in 2025.

*Non-GAAP performance measure. See end of news release

Gibraltar Outlook – Continued

In the quarter, the Company has tendered Gibraltar concentrate to various customers for the remainder of 2024 and for significant tonnages in 2025 and 2026. In 2023, Treatment and Refining Costs accounted for approximately US$0.17 per pound of off-property costs. With these recently awarded offtake contracts, the Company expects off-property costs to reduce to US$0.05 per pound or less over the next two and a half years due to these fixed, lower TCRCs on the sale of its copper concentrate.

The Company has a prudent hedging program in place to protect a minimum copper price during the Florence construction period.  Currently, the Company has copper collar contracts that secure a minimum copper price of US$3.75 per pound for 42 million pounds of copper covering the second half of 2024, and copper collar contracts that secure a minimum copper price of US$4.00 per pound for 108 million pounds of copper for 2025.  The copper collar contracts also have ceiling prices between US$5.00 and US$5.40 per pound (refer to the section “Hedging Strategy” for details).

Florence Copper

The Company has all the key permits in place for the commercial production facility at Florence Copper and construction has commenced.  All the major SX/EW plant components are on site and previous work on detailed engineering and procurement of long-lead items has de-risked the construction schedule.  First copper production is expected in the fourth quarter of 2025.

The Company has a technical report entitled “NI 43-101 Technical Report Florence Copper Project, Pinal County, Arizona” dated March 30, 2023 (the “2023 Technical Report”) on SEDAR+. The 2023 Technical Report was prepared in accordance with NI 43-101 and incorporated the results of testwork from the Production Test Facility as well as updated capital and operating costs (Q3 2022 basis) for the commercial production facility.

Project highlights based on the 2023 Technical Report:

• Net present value of US$930 million (at $US 3.75 copper price, 8% after-tax discount rate)
• Internal rate of return of 47% (after-tax)
• Payback period of 2.6 years
• Operating costs (C1) of US$1.11 per pound of copper
• Annual production capacity of 85 million pounds of LME grade A cathode copper
• 22 year mine life
• Total life of mine production of 1.5 billion pounds of copper
• Remaining initial capital cost of US$232 million (Q3 2022 basis)

Construction activities in the second quarter of 2024 have focused on wellfield drilling, site preparations and earthworks for the commercial wellfield and plant area including the excavation of process ponds and concrete foundation work for the plant, and the hiring of additional personnel for the construction and operations teams.

Drilling of the commercial facility wellfield commenced in February and two drills operated during the second quarter, with a third drill mobilized in July.  As of the end of June, a total of 18 production wells had been drilled which is in line with the planned construction schedule.

The Company has a fixed-price contract with the general contractor for construction of the SX/EW plant and associated surface infrastructure.

Florence Copper – Continued

Florence Copper Quarterly Capital Spend

The estimated remaining capital costs in the 2023 Technical Report for construction of the commercial facility was US$232 million, of which US$36.9 million has been incurred in the second quarter of 2024 and US$54.8 million has been incurred for the six months ended June 30, 2024.  Other capital costs of US$22.8 million include final payments for delivery of long-lead equipment that was ordered in 2022, and to bring forward the construction of an evaporation pond to provide additional water management flexibility.

The Company has closed several Florence project level financings to fund initial commercial facility construction costs. On April 26^th, the Company received the second deposit of US$10 million from the US$50 million copper stream transaction with Mitsui & Co. (U.S.A.) Inc. (“Mitsui”). The third deposit was received in July and the remaining amounts of US$20 million should be received in October 2024 and January 2025.

The Company considers that the construction of Florence Copper is now fully funded, and remaining project costs are expected to be funded with the Company’s available liquidity, remaining instalments from Mitsui, and cashflow from its 100% ownership interest in Gibraltar.  The Company also has in place an undrawn revolving credit facility for US$80 million.

Long-term Growth Strategy

Taseko’s strategy has been to grow the Company by acquiring and developing a pipeline of projects focused on copper in North America. We continue to believe this will generate long-term returns for shareholders. Our other development projects are located in British Columbia, Canada.

Yellowhead Copper Project

Yellowhead Mining Inc. has an 817 million tonnes reserve and a 25-year mine life with a pre-tax net present value of $1.3 billion at an 8% discount rate using a US$3.10 per pound copper price based on the Company’s 2020 NI 43-101 technical report. Capital costs of the project were estimated at $1.3 billion over a 2-year construction period. During the first 5 years of operation, the copper equivalent grade will average 0.35% producing an average of 200 million pounds of copper per year at an average C1* cost, net of by-product credit, of US$1.67 per pound of copper produced. The Yellowhead copper project contains valuable precious metal by-products with 440,000 ounces of gold and 19 million ounces of silver production over the life of mine.

Long-term Growth Strategy – Continued

The Company is preparing to advance into the environmental assessment process and has recently opened a project office to support ongoing engagement with local communities including First Nations. The Company is also conducting a site investigation field program this year, and collecting baseline data and modeling which will be used to support the environmental assessment and permitting of the project.

New Prosperity Gold-Copper Project

In late 2019, the Tŝilhqot’in Nation, as represented by Tŝilhqot’in National Government, and Taseko Mines Limited entered into a confidential dialogue, with the involvement of the Province of British Columbia, seeking a long-term resolution of the conflict regarding Taseko’s proposed copper-gold mine previously known as New Prosperity, acknowledging Taseko’s commercial interests and the Tŝilhqot’in Nation’s opposition to the project.

This dialogue has been supported by the parties’ agreement, beginning December 2019, to a series of standstill agreements on certain outstanding litigation and regulatory matters relating to Taseko’s tenures and the area in the vicinity of Teẑtan Biny (Fish Lake).

The dialogue process has made meaningful progress in recent months but is not complete. The Tŝilhqot’in Nation and Taseko acknowledge the constructive nature of discussions, and the opportunity to conclude a long-term and mutually acceptable resolution of the conflict that also makes an important contribution to the goals of reconciliation in Canada.

In March 2024, Tŝilhqot’in and Taseko formally reinstated the standstill agreement for a final term, with the goal of finalizing a resolution before the end of this year.

Aley Niobium Project

Environmental monitoring and product marketing initiatives on the Aley niobium project continue. The converter pilot test is ongoing and is providing additional process data to support the design of the commercial process facilities and will provide final product samples for marketing purposes. The Company has also initiated a scoping study to investigate the potential production of niobium oxide at Aley to supply the growing market for niobium-based batteries.

Annual Sustainability Report

In June 2024, the Company published its annual Sustainability Report, titled H₂O + ESG. The Report focuses on the 2023 operational and sustainability performance of Taseko’s foundational asset, the Gibraltar copper mine in British Columbia, and highlights social and economic contributions from the Florence Copper project in Arizona, which will soon become the Company’s second operating asset.

Taseko’s 2023 Sustainability Report features several significant initiatives underway across the Company to conserve and reuse water, and to achieve water management objectives. This includes a pioneering in-situ biological water treatment initiative undertaken at the Gibraltar mine last year – part of a long-term water management program that has achieved a 77% reduction in free water stored in the mine’s tailings storage facility over the past decade.

While profitable operations and return on investment are critical drivers for Taseko’s success, the Company also delivers value to its employees and operating communities, business partners, Indigenous Nations and governments. The annual Sustainability Report is an opportunity to showcase the important benefits that the Company generates through its operations, investments and people.

The full report can be viewed and downloaded at: tasekomines.com/sustainability/overview/