Trekor Metals Ltd 6-K, filed Nov 7, 2024
Trekor Metals Ltd (TGB)
About this 6-K
Trekor Metals Ltd filed this 6-K on November 7, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
As at November 6, 2024
Commission File Number: 001-31965
Taseko Mines Limited
(Translation of registrant's name into English)
12th Floor - 1040 West Georgia St., Vancouver, BC, V6E 4H1
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
[ ] Form 20-F [ x ] Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
SUBMITTED HEREWITH
Exhibits
| Exhibit | Description | |
| 99.1 | Interim Financial Statements for the period ended September 30, 2024 | |
| 99.2 | Management's Discussion and Analysis for the period ended September 30, 2024 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Taseko Mines Limited | ||
| (Registrant) | ||
| Date: November 6, 2024 | By: | /s/ Bryce Hamming |
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| Bryce Hamming | ||
| Title: | Chief Financial Officer | |
Condensed Consolidated Interim Financial Statements
September 30, 2024
(Unaudited)
| TASEKO MINES LIMITED Condensed Consolidated Interim Balance Sheets (Cdn$ in thousands) (Unaudited) |
| September 30, | December 31, | ||||||||
| Note | 2024 | 2023 | |||||||
| ASSETS | |||||||||
| Current assets | |||||||||
| Cash and equivalents | 208,751 | 96,477 | |||||||
| Accounts receivable | 9 | 9,626 | 16,514 | ||||||
| Inventories | 10 | 142,445 | 122,942 | ||||||
| Prepaids | 6,662 | 8,465 | |||||||
| Other financial assets | 11 | 1,404 | 5,057 | ||||||
| 368,888 | 249,455 | ||||||||
| Property, plant and equipment | 12 | 1,631,723 | 1,286,001 | ||||||
| Inventories | 10 | 39,585 | 17,554 | ||||||
| Other financial assets | 11 | 1,659 | 7,896 | ||||||
| Goodwill | 5,577 | 5,462 | |||||||
| 2,047,432 | 1,566,368 | ||||||||
| LIABILITIES | |||||||||
| Current liabilities | |||||||||
| Accounts payable and accrued liabilities | 136,098 | 71,748 | |||||||
| Current portion of long-term debt | 13 | 28,908 | 27,658 | ||||||
| Deferred revenue | 15 | 4,024 | 10,346 | ||||||
| Current portion of Cariboo consideration payable | 3c | 17,030 | 14,384 | ||||||
| Interest payable | 24,447 | 13,896 | |||||||
| Current income tax payable | 2,924 | 3,157 | |||||||
| Derivative liability | 6 | 2,300 | - | ||||||
| 215,731 | 141,189 | ||||||||
| Long-term debt | 13 | 713,450 | 610,233 | ||||||
| Cariboo consideration payable | 3 | 124,296 | 55,997 | ||||||
| Deferred revenue | 15 | 63,877 | 59,720 | ||||||
| Florence royalty obligation | 14 | 75,715 | - | ||||||
| Florence copper stream | 6 | 46,035 | - | ||||||
| Provision for environmental rehabilitation | 168,686 | 145,786 | |||||||
| Deferred tax liabilities | 148,492 | 114,723 | |||||||
| Other financial liabilities | 16b | 9,661 | 4,572 | ||||||
| 1,565,943 | 1,132,220 | ||||||||
| EQUITY | |||||||||
| Share capital | 16 | 514,098 | 486,136 | ||||||
| Contributed surplus | 56,847 | 54,833 | |||||||
| Accumulated other comprehensive income ("AOCI") | 26,159 | 16,557 | |||||||
| Deficit | (115,615 | ) | (123,378 | ) | |||||
| 481,489 | 434,148 | ||||||||
| 2,047,432 | 1,566,368 | ||||||||
| Commitments and contingencies | 18 | ||||||||
| Subsequent events | 6b, 13b |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| TASEKO MINES LIMITED Condensed Consolidated Interim Statements of Comprehensive (Loss) Income (Cdn$ in thousands, except share and per share amounts) (Unaudited) |
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| Note | 2024 | 2023 | 2024 | 2023 | |||||||||||
| Revenues | 4 | 155,617 | 143,835 | 440,294 | 371,278 | ||||||||||
| Cost of sales | |||||||||||||||
| Production costs | 5 | (104,367 | ) | (78,390 | ) | (306,787 | ) | (237,030 | ) | ||||||
| Depletion and amortization | 5 | (20,466 | ) | (15,993 | ) | (49,211 | ) | (43,614 | ) | ||||||
| Other operating costs | 5 | (4,098 | ) | - | (14,533 | ) | - | ||||||||
| Insurance recovery | 5 | - | - | 26,290 | - | ||||||||||
| Earnings from mining operations | 26,686 | 49,452 | 96,053 | 90,634 | |||||||||||
| General and administrative | (3,542 | ) | (2,506 | ) | (10,188 | ) | (9,396 | ) | |||||||
| Share-based compensation expense | 16b | (1,435 | ) | (675 | ) | (9,387 | ) | (4,404 | ) | ||||||
| Project evaluation expense | (2,673 | ) | (259 | ) | (3,432 | ) | (796 | ) | |||||||
| Loss on derivatives | 6 | (2,803 | ) | (4,988 | ) | (19,712 | ) | (4,645 | ) | ||||||
| Other income (expense) | 23 | 528 | (238 | ) | 732 | ||||||||||
| Income before financing costs and income taxes | 16,256 | 41,552 | 53,096 | 72,125 | |||||||||||
| Finance expenses, net | 7 | (24,181 | ) | (13,963 | ) | (67,950 | ) | (38,062 | ) | ||||||
| Foreign exchange gain (loss) | 7,545 | (14,677 | ) | (10,385 | ) | (2,687 | ) | ||||||||
| Call premium on settlement of debt | 7 | - | - | (9,571 | ) | - | |||||||||
| Gain on Cariboo acquisition | 3 | - | - | 47,426 | 46,212 | ||||||||||
| Gain on acquisition of control of Gibraltar | 3b | - | - | 14,982 | - | ||||||||||
| (Loss) income before income taxes | (380 | ) | 12,912 | 27,598 | 77,588 | ||||||||||
| Income tax recovery (expense) | 8 | 200 | (12,041 | ) | (19,835 | ) | (32,938 | ) | |||||||
| Net income (loss) | (180 | ) | 871 | 7,763 | 44,650 | ||||||||||
| Other comprehensive (loss) income: | |||||||||||||||
| Items that will remain permanently in other comprehensive (loss) income: | |||||||||||||||
| Loss on financial assets | (57 | ) | (300 | ) | (346 | ) | (1,120 | ) | |||||||
| Items that may in the future be reclassified to profit (loss): | |||||||||||||||
| Foreign currency translation reserve | (4,082 | ) | 9,566 | 9,948 | 1,329 | ||||||||||
| Total other comprehensive (loss) income | (4,139 | ) | 9,266 | 9,602 | 209 | ||||||||||
| Total comprehensive (loss) income | (4,319 | ) | 10,137 | 17,365 | 44,859 | ||||||||||
| Earnings per share | |||||||||||||||
| Basic | 17 | - | - | 0.03 | 0.15 | ||||||||||
| Diluted | 17 | - | - | 0.03 | 0.15 | ||||||||||
| Weighted average shares outstanding (thousands) | |||||||||||||||
| Basic | 17 | 295,051 | 288,681 | 292,459 | 288,406 | ||||||||||
| Diluted | 17 | 295,051 | 290,945 | 294,858 | 291,043 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| TASEKO MINES LIMITED Condensed Consolidated Interim Statements of Cash Flows (Cdn$ in thousands) (Unaudited) |
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| Note | 2024 | 2023 | 2024 | 2023 | |||||||||||
| Operating activities | |||||||||||||||
| Net (loss) income for the period | (180 | ) | 871 | 7,763 | 44,650 | ||||||||||
| Adjustments for: | |||||||||||||||
| Depletion and amortization | 12 | 20,466 | 15,993 | 49,211 | 43,614 | ||||||||||
| Income tax (recovery) expense | 8 | (200 | ) | 12,041 | 19,835 | 32,938 | |||||||||
| Finance expenses, net | 7 | 24,181 | 13,963 | 67,950 | 38,062 | ||||||||||
| Share-based compensation expense | 16b | 1,496 | 727 | 9,748 | 4,753 | ||||||||||
| Loss on derivatives | 6 | 2,803 | 4,988 | 19,712 | 4,645 | ||||||||||
| Foreign exchange (gain) loss | (7,259 | ) | 14,582 | 11,837 | 2,666 | ||||||||||
| Gain on Cariboo acquisition | 3a, 3c | - | - | (47,426 | ) | (46,212 | ) | ||||||||
| Gain on acquisition of control of Gibraltar | 3b | - | - | (14,982 | ) | - | |||||||||
| Inventory sold or processed with write-ups to net realizable value | 3b | 3,266 | - | 24,444 | - | ||||||||||
| Amortization of deferred revenue | 15 | (1,292 | ) | (1,685 | ) | (4,131 | ) | (4,468 | ) | ||||||
| Call premium on settlement of debt | 7 | - | - | 9,571 | - | ||||||||||
| Deferred revenue deposit | 15b | - | - | - | 13,586 | ||||||||||
| Other | (67 | ) | (40 | ) | (214 | ) | (356 | ) | |||||||
| Net change in working capital : | |||||||||||||||
| Insurance receivable | 5 | 26,292 | - | (22 | ) | - | |||||||||
| Net change in working capital - other | 19 | (4,468 | ) | (34,451 | ) | 6,027 | (45,621 | ) | |||||||
| Cash provided by operating activities | 65,038 | 26,989 | 159,323 | 88,257 | |||||||||||
| Investing activities | |||||||||||||||
| Gibraltar capitalized stripping costs | 12 | (3,631 | ) | (2,083 | ) | (28,320 | ) | (23,670 | ) | ||||||
| Gibraltar sustaining capital expenditures | 12 | (12,292 | ) | (2,743 | ) | (22,117 | ) | (27,871 | ) | ||||||
| Gibraltar capital project expenditures | 12 | (555 | ) | (7,095 | ) | (3,587 | ) | (24,704 | ) | ||||||
| Florence Copper development costs | 12 | (59,761 | ) | (20,351 | ) | (146,574 | ) | (36,860 | ) | ||||||
| Other project development costs | 12 | (1,987 | ) | (422 | ) | (3,011 | ) | (951 | ) | ||||||
| Acquisition of Cariboo, net | 3a, 3c | - | - | (9,665 | ) | 2,948 | |||||||||
| Release of restricted cash | 11 | - | - | 12,500 | - | ||||||||||
| Purchase of copper price options | 6 | - | - | (6,770 | ) | - | |||||||||
| Other investing activities | 909 | 1,680 | 2,741 | 2,520 | |||||||||||
| Cash used for investing activities | (77,317 | ) | (31,014 | ) | (204,803 | ) | (108,588 | ) | |||||||
| Financing activities | |||||||||||||||
| Interest paid | (3,661 | ) | (20,902 | ) | (34,727 | ) | (44,452 | ) | |||||||
| Net proceeds from issuance of senior secured notes | 13a | - | - | 670,419 | - | ||||||||||
| Repayment of senior secured notes and call premium | 13a | - | - | (556,491 | ) | - | |||||||||
| Net proceeds from share issuance | 16c | 23,132 | - | 23,132 | - | ||||||||||
| Revolving credit facility repayment | 13b | - | (6,109 | ) | (26,494 | ) | (23,611 | ) | |||||||
| (Repayment of) net proceeds from Gibraltar equipment financings | 13e | (7,376 | ) | 27,490 | (20,937 | ) | 40,737 | ||||||||
| Net proceeds from Florence financings | 6, 14 | 11,290 | - | 101,816 | 11,067 | ||||||||||
| Share-based compensation | 9 | 77 | 2,187 | (1,378 | ) | ||||||||||
| Cash provided by (used for) financing activities | 23,394 | 556 | 158,905 | (17,637 | ) | ||||||||||
| Effect of exchange rate changes on cash and equivalents | (991 | ) | (79 | ) | (1,151 | ) | (876 | ) | |||||||
| Increase (decrease) in cash and equivalents | 10,124 | (3,548 | ) | 112,274 | (38,844 | ) | |||||||||
| Cash and equivalents, beginning of period | 198,627 | 85,562 | 96,477 | 120,858 | |||||||||||
| Cash and equivalents, end of period | 208,751 | 82,014 | 208,751 | 82,014 | |||||||||||
| Supplementary cash flow disclosures | 19 | ||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| TASEKO MINES LIMITED Condensed Consolidated Interim Statements of Changes in Equity (Cdn$ in thousands) (Unaudited) |
| Share | Contributed | ||||||||||||||
| capital | surplus | AOCI | Deficit | Total | |||||||||||
| Balance at January 1, 2023 | 479,926 | 55,795 | 26,792 | (206,104 | ) | 356,409 | |||||||||
| Share-based compensation | - | 4,501 | - | - | 4,501 | ||||||||||
| Exercise of options | 843 | (298 | ) | - | - | 545 | |||||||||
| Settlement of performance share units | 3,833 | (5,755 | ) | - | - | (1,922 | ) | ||||||||
| Total comprehensive income (loss) for the period | - | - | 209 | 44,650 | 44,650 | ||||||||||
| Balance as at September 30, 2023 | 484,602 | 54,243 | 27,001 | (161,454 | ) | 404,183 | |||||||||
| Balance as at January 1, 2024 | 486,136 | 54,833 | 16,557 | (123,378 | ) | 434,148 | |||||||||
| Share-based compensation | - | 4,658 | - | - | 4,658 | ||||||||||
| Exercise of options | 4,830 | (1,721 | ) | - | - | 3,109 | |||||||||
| Share issuance | 23,132 | - | - | - | 23,132 | ||||||||||
| Settlement of performance share units | - | (923 | ) | - | - | (923 | ) | ||||||||
| Total comprehensive income for the period | - | - | 9,602 | 7,763 | 17,365 | ||||||||||
| Balance as at September 30, 2024 | 514,098 | 56,847 | 26,159 | (115,615 | ) | 481,489 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
1. REPORTING ENTITY
Taseko Mines Limited (the "Company" or "Taseko") is a corporation governed by the British Columbia Business Corporations Act. These unaudited condensed consolidated interim financial statements of the Company as at and for the three and nine months ended September 30, 2024 comprise the Company and its wholly-owned subsidiaries. The Company is principally engaged in the production and sale of metal concentrates, as well as related activities including mine permitting and development, within the province of British Columbia, Canada and the State of Arizona, USA.
As a result of the Company's acquisition of Cariboo Copper Corporation ("Cariboo"), after March 25, 2024, the financial results of the Company reflect its 100% beneficial interest in the Gibraltar mine ("Gibraltar") (Note 3a). The financial results of the Company before March 15, 2023 reflect its 75% beneficial interest in Gibraltar and the financial results between March 16, 2023 and March 24, 2024 reflect its 87.5% beneficial interest in Gibraltar (Note 3c).
The Company finalized the accounting for the acquisition of its 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 at September 30, 2023 and for the three and nine 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 (Note 3c).
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting and follow the same accounting policies and methods of application as the Company's most recent annual consolidated financial statements. These unaudited condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and should be read in conjunction with the consolidated annual financial statements of the Company as at and for the year ended December 31, 2023, prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
These unaudited condensed consolidated interim financial statements were authorized for issue by the Company's Audit and Risk Committee on November 6, 2024.
(b) Use of judgments and estimates
In preparing these unaudited condensed consolidated interim financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies, including the accounting for the Cariboo acquisition (Note 3) and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
The significant judgments made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those applied to the annual consolidated financial statements as at and for the year ended December 31, 2023.
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TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) IFRS Pronouncements
Several new accounting standards, amendments to existing standards and interpretations have been published by the IASB. Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the new standard.
New standards, amendments and pronouncements that became effective for the period covered by these statements have not been disclosed as they did not have a material impact on the Company's unaudited condensed consolidated interim financial statements.
3. ACQUISITION OF CARIBOO COPPER CORPORATION
a) Acquisition of Cariboo from Dowa and Furukawa
On March 25, 2024 ("Acquisition Date"), the Company completed the acquisition of the remaining 50% of Cariboo from Dowa Metals & Mining Co., Ltd. ("Dowa") and Furukawa Co., Ltd. ("Furukawa") which gives the Company an additional 12.5% effective interest in Gibraltar bringing its total effective interest to 100%. Gibraltar is operated through a joint venture which is owned 75% by Taseko and 25% by Cariboo.
The acquisition price payable to Dowa and Furukawa is a minimum of $117 million and a maximum of $142 million payable over a 10-year period, with the quantum and timing of payment depending on LME copper prices and the cashflow of Gibraltar.
An initial $5 million payment was made to Dowa and Furukawa on closing. The remaining cash consideration will be payable in annual payments commencing in March 2026. The amounts owing to Dowa and Furukawa are non- interest bearing. The annual payments will be based on the average LME copper price of the previous calendar year, subject to an annual cap based on a percentage of cashflow from Gibraltar. At copper prices below US$4.00 per pound, the annual payment will be $5 million, increasing pro-rata to a maximum annual payment of $15.25 million at copper prices of US$5.00 per pound or higher. The annual payments also cannot exceed 6.25% of Gibraltar's annual cashflow for the 2025 to 2028 calendar years, and 10% of Gibraltar's cashflow for the 2029 to 2033 calendar years. Any outstanding balance on the minimum acquisition amount of $117 million will be payable in a final balloon payment in March 2034.
The annual payments were estimated as at the Acquisition Date based on forecasted copper prices over the next 10 years. The total estimated purchase consideration was then discounted to determine its fair value and the amount as at the Acquisition Date was $71,116.
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TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
3. ACQUISITION OF CARIBOO COPPER CORPORATION (CONTINUED)
a) Acquisition of Cariboo from Dowa and Furukawa (continued)
The purchase consideration has been allocated to the assets acquired and liabilities assumed, including the additional 12.5% effective interest in the Gibraltar Joint Venture, based upon their estimated fair values at the Acquisition Date. The following sets forth the preliminary allocation of the purchase price:
| Cash and cash equivalents | 9,884 | ||
| Accounts receivable and other assets | 3,046 | ||
| Reclamation deposits | 6,262 | ||
| Inventory | 24,634 | ||
| Property, plant and equipment and mineral properties | 126,194 | ||
| Accounts payable and other liabilities | (7,353 | ) | |
| Debt | (7,143 | ) | |
| Deferred tax liabilities | (16,955 | ) | |
| Provision for environmental rehabilitation | (20,027 | ) | |
| Total fair value of net assets acquired | 118,542 |
The fair value of the net assets acquired at March 25, 2024 was determined using a discounted cash flow model for the 12.5% interest in Gibraltar and also considering cash and working capital of Cariboo. The discounted cash flow model included key assumptions on future production and estimated remaining reserves of the Gibraltar, operating assumptions, metal prices, operating and capital costs, and foreign exchange rates, and a discount rate based on an estimate of the Company's weighted average cost of capital. The discounted cash flow model was analyzed using a range of inputs and assumptions and provided a range of values, of which the Company recorded $118,542 at the lower end of its fair value estimate range.
To account for the difference between the fair value of net assets acquired of $118,542 and the total fair value of consideration payable of $71,116, the Company recognized a bargain purchase gain on Cariboo acquisition on the income statement of $47,426 for the nine months ended September 30, 2024.
The fair value of inventories was determined based on their net realizable value, whereby the future estimated cash flows from sales of payable metal produced were adjusted for costs to complete. The fair values of accounts receivable, reclamation deposits and accounts payable and other liabilities were determined to approximate their book values. The fair value of debt owed to third parties was determined based on the principal amounts outstanding as the interest rate on the debt was considered at market. Deferred tax liabilities were determined based on 50% of the available tax pools and other tax attributes of Cariboo. The fair value of the reclamation and closure cost provisions were estimated using discounted cash flows of future expenditures to settle the obligation for disturbances at the Acquisition Date and discount rates. The fair value of property, plant and equipment other than mineral properties and the major mill equipment and infrastructure were determined based on the estimated fair value of plant and other equipment in use and independent equipment appraisals on certain mobile equipment. The remaining portion of the fair value of net assets acquired was attributable to mineral properties and the major mill equipment and infrastructure within property, plant and equipment which are amortizable over the estimated remaining life of Gibraltar on a units of production basis.
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TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
3. ACQUISITION OF CARIBOO COPPER CORPORATION (CONTINUED)
a) Acquisition of Cariboo from Dowa and Furukawa (continued)
As at September 30, 2024, the estimated present value of the outstanding Cariboo consideration payable to Dowa and Furukawa is as follows:
| Consideration payable | 66,116 | ||
| Accretion on consideration payable | 5,627 | ||
| Long term Cariboo consideration payable | 71,743 |
From the Acquisition Date to September 30, 2024, $11,991 of the Company's consolidated net income relates to its share of Cariboo and the Company recognized $547 of acquisition related costs that were included in other expenses.
The following table presents unaudited pro forma results for the nine months ended September 30, 2024, as though the acquisition had taken place as of January 1, 2024. Additionally, pro forma net income was adjusted to exclude acquisition-related costs incurred.
| Pro forma information | Nine months ended September 30, 2024 | ||
| Revenue | 455,710 | ||
| Net income | 9,660 |
b) Deemed Disposition at Fair Value of 87.5% Gibraltar Interest on Acquisition of Control
Prior to the Company's acquisition of the remaining 50% of Cariboo from Dowa and Furukawa on March 25, 2024, the Company had joint control over the joint arrangement and proportionately consolidated its 87.5% effective interest of all the Gibraltar Joint Venture's assets, liabilities, income and expenses. On March 25, 2024, the Company acquired the remaining 12.5% interest through its purchase of Cariboo thereby increasing its effective interest to 100% in Gibraltar. As a result, the Company obtained full control and transitioned from joint control and a joint arrangement under IFRS 11 Joint Arrangements to full control under IFRS 10 Consolidated Statements and IFRS 3 Business Combinations. This transition in applicable standards requires the Company to reassess its previously held 87.5% interest in Gibraltar and remeasure this interest at fair value as of the March 25, 2024 acquisition date, with any gains or losses recognized immediately in the statement of comprehensive income. Additionally, the Company is required to measure all identifiable assets acquired and liabilities assumed at their fair values on this deemed acquisition date.
Management assessed whether there was a gain on the date of the acquisition based upon it's review of estimated fair values of the assets acquired and liabilities assumed. The fair value of the net assets acquired at March 25, 2024 was determined using a discounted cash flow model for the 87.5% interest in Gibraltar and also considering cash and working capital of Gibraltar Mines Ltd, a wholly-owned subsidiary of Taseko which owns the 75% interest in the Gibraltar joint venture and the 50% interest of Cariboo held by Taseko immediately before the deemed disposal and reacquisition. The discounted cash flow model included key assumptions on future production and estimated remaining reserves of Gibraltar, operating assumptions, metal prices, operating and capital costs, and foreign exchange rates, and a discount rate based on an estimate of the Company's weighted average cost of capital. The discounted cash flow model was analyzed using a range of inputs and assumptions and provided a range of values, of which the Company recorded net asset value at the lower end of its fair value estimate range. Based on the assessment performed, a gain of $14,982 was realized from the fair value adjustments of the assets acquired and liabilities assumed. This gain was solely attributable to the inventory's increased fair value.
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TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
3. ACQUISITION OF CARIBOO COPPER CORPORATION (CONTINUED)
b) Deemed Disposition at Fair Value of 87.5% Gibraltar Interest on Acquisition of Control (continued)
The fair value of inventories was determined based on their net realizable value, whereby the future estimated cash flows from sales of payable metal produced were adjusted for costs to complete. For finished goods inventory consisting of copper concentrate inventory, the fair value as at the deemed acquisition date was determined to be $37,717 compared to the book value of $22,735, which resulted in a gain of $14,982. This gain was immediately recognized in the statement of comprehensive income for the nine months ended September 30, 2024.
The fair values of accounts receivable, reclamation deposits and accounts payable and other liabilities were determined to approximate their book values. The fair value of debt owed to third parties was determined based on the principal amounts outstanding as the interest rate on the debt was considered at market. Deferred tax liabilities were determined based on the tax pools and attributes of Gibraltar Mines Ltd. which owns the 75% effective interest and 50% of the available tax pools and tax attributes of Cariboo. The fair value of the reclamation and closure cost provisions were estimated using discounted cash flows of future expenditures to settle the obligation for disturbances at the Acquisition Date and discount rates. The fair value of property, plant and equipment other than mineral properties and the major mill equipment and infrastructure were determined based on the estimated fair value of plant and other equipment in use and independent equipment appraisals on certain mobile equipment. The remaining portion of the fair value of net assets acquired was attributable to mineral properties and the major mill equipment and infrastructure within property, plant and equipment which are amortizable over the estimated remaining life of Gibraltar on a units of production basis.
The assets acquired and liabilities assumed for the Company's 87.5% effective interest in Gibraltar on March 25,
2024 were estimated on a preliminary basis as follows:
| Cash and cash equivalents | 5,122 | ||
| Accounts receivable and other asset | 21,302 | ||
| Inventory | 172,440 | ||
| Property, plant and equipment and mineral properties | 801,700 | ||
| Accounts payable and other liabilities | (50,192 | ) | |
| Debt | (50,002 | ) | |
| Provision for environmental rehabilitation | (140,190 | ) | |
| Total fair value of net assets | 760,180 |
Between March 26 and September 30, 2024, the Company sold $43,105 of concentrate inventory with a gross profit of $17,122 that it wrote up to fair value on the March 25, 2024 deemed acquisition date.
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TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
3. ACQUISITION OF CARIBOO COPPER CORPORATION (CONTINUED)
c) Acquisition of Cariboo from Sojitz in 2023
On March 15, 2023, the Company completed the acquisition of an additional 12.5% interest in the Gibraltar from Sojitz Corporation ("Sojitz") pursuant to its acquisition of Sojitz's 50% interest in Cariboo.
The acquisition price consisted of a minimum amount of $60 million payable over a five-year period and potential contingent performance payments depending on Gibraltar copper revenues and copper prices over the next five years. An initial $10 million was paid to Sojitz upon closing and the remaining minimum amount is payable in $10 million annual instalments over five years. There is no interest payable on the minimum amounts and the second instalment of $10 million was paid in February 2024.
The contingent performance payments are payable annually for five years only if the average LME copper price exceeds US$3.50 per pound in a year. The payments are calculated by multiplying Gibraltar copper revenues by a price factor, which is based on a sliding scale ranging from 0.38% at US$3.50 per pound copper to a maximum of 2.13% at US$5.00 per pound copper or above. Total contingent payments cannot exceed $57 million over the five- year period, limiting the acquisition cost to a maximum of $117 million.
The total purchase consideration was discounted to determine fair value and the amounts as at March 15, 2023 were estimated as follows:
| Fixed instalments payable | 51,387 | ||
| Contingent performance payments payable | 28,010 | ||
| Total fair value of consideration payable | 79,397 |
The purchase consideration was allocated to the assets acquired and liabilities assumed, based upon their estimated fair values at the date of acquisition. The following sets forth the allocation of the purchase price:
| Preliminary Purchase | Final Purchase | ||||||||
| Price Allocation | Adjustment | Price Allocation | |||||||
| Cash and cash equivalents | 13,467 | - | 13,467 | ||||||
| Accounts receivable and other assets | 1,525 | - | 1,525 | ||||||
| Reclamation deposits | 6,262 | - | 6,262 | ||||||
| Inventory | 15,860 | - | 15,860 | ||||||
| Property, plant and equipment | 72,304 | 43,275 | 115,579 | ||||||
| Deferred tax asset | 5,594 | 2,937 | 8,531 | ||||||
| Accounts payable and other liabilities | (8,535 | ) | - | (8,535 | ) | ||||
| Debt | (9,144 | ) | - | (9,144 | ) | ||||
| Provision for environmental rehabilitation | (17,936 | ) | - | (17,936 | ) | ||||
| Total fair value of net assets acquired | 79,397 | 46,212 | 125,609 |
To account for the difference between the fair value of net assets acquired of $125,609 and the total fair value of consideration payable of $79,397, the Company recognized a bargain purchase gain on Cariboo acquisition on the statement of comprehensive income of $46,212 for the nine months ended September 30, 2023.
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
3. ACQUISITION OF CARIBOO COPPER CORPORATION (CONTINUED)
c) Acquisition of Cariboo from Sojitz in 2023 (continued)
As at September 30, 2024, outstanding Cariboo consideration payable to Sojitz is as follows:
| Fixed consideration payable | 35,226 | ||
| Contingent performance payments payable | 34,357 | ||
| Total Cariboo consideration payable | 69,583 | ||
| Less current portion: | |||
| Fixed consideration payable | 9,744 | ||
| Contingent performance payments payable | 7,286 | ||
| Long-term portion of Cariboo consideration payable | 52,553 |
The contingent performance payment of $4,549 for the 2023 calendar year was paid on April 1, 2024. The Company recognized $263 of acquisition-related costs that were included in other expenses in the year ended December 31, 2023.
4. REVENUE
| Three months ended | Nine months ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Copper contained in concentrate | 143,808 | 137,011 | 420,694 | 359,066 | ||||||||
| Copper price adjustments on settlement | 2,130 | 1,652 | 2,375 | (105 | ) | |||||||
| Molybdenum concentrate | 10,109 | 10,333 | 22,362 | 23,794 | ||||||||
| Molybdenum price adjustments on settlement | (412 | ) | 209 | 1,514 | 789 | |||||||
| Silver (Note 15) | 1,534 | 1,395 | 4,654 | 4,441 | ||||||||
| Total gross revenue | 157,169 | 150,600 | 451,599 | 387,985 | ||||||||
| Less: Treatment and refining costs | (1,552 | ) | (6,765 | ) | (11,305 | ) | (16,707 | ) | ||||
| Revenue | 155,617 | 143,835 | 440,294 | 371,278 | ||||||||
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
5. COST OF SALES AND OTHER OPERATIONAL COSTS
| Three months ended | Nine months ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Site operating costs | 107,712 | 87,148 | 267,194 | 244,960 | ||||||||
| Transportation costs | 8,682 | 7,681 | 25,243 | 19,751 | ||||||||
| Changes in inventories: | ||||||||||||
| Changes in finished goods | (2,938 | ) | (4,267 | ) | 27,916 | (7,224 | ) | |||||
| Changes in sulphide ore stockpiles | (5,424 | ) | (12,172 | ) | (4,246 | ) | (8,029 | ) | ||||
| Changes in oxide ore stockpiles | (3,665 | ) | - | (9,320 | ) | (12,428 | ) | |||||
| Production costs | 104,367 | 78,390 | 306,787 | 237,030 | ||||||||
| Depletion and amortization | 20,466 | 15,993 | 49,211 | 43,614 | ||||||||
| Cost of sales | 124,833 | 94,383 | 355,998 | 280,644 | ||||||||
| Other operational costs: | ||||||||||||
| Crusher relocation costs | 4,098 | - | 12,009 | - | ||||||||
| Site care and maintenance | - | - | 2,524 | - | ||||||||
| 4,098 | - | 14,533 | - | |||||||||
| Insurance recovery | - | - | (26,290 | ) | - | |||||||
Site operating costs include personnel costs, non-capitalized waste stripping costs, repair and maintenance costs, consumables, operating supplies and external services.
Changes in inventories of finished goods for the nine months ended September 30, 2024 included $17,987 in write-ups to net realizable value for copper concentrate inventory held at March 25, 2024 that was sold between March 26 and June 30, 2024.
Changes in inventories of sulphide ore stockpiles for the three and nine months ended September 30, 2024 included $3,266 and $6,457, respectively, in write-ups to net realizable value for sulphide ore stockpiles inventory held at March 25, 2024 that was processed and sold between April 1 and September 30, 2024.
During the three and nine ended September 30, 2024, the Company has recognized costs of $4,098 and $12,009 in the statement of income (loss) related to the in-pit primary crusher relocation project. Relocation related costs for the physical move of the primary crusher to its new location as well as demolition costs for the old station are not included in the carrying amount of property, plant and equipment.
In June 2024, operations at the Gibraltar mine were suspended for 18 days due to the unionized workforce strike which started on June 1. The Company elected to systematically shut down mining and milling operations and the mine was put into care and maintenance with only essential staff operating and maintaining critical systems. The resulting care and maintenance costs during the 18 day period amounted to $2,524 and are excluded from cost of sales. Operations at Gibraltar resumed on June 19, after the ratification of a new agreement by union members.
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
5. COST OF SALES AND OTHER OPERATIONAL COSTS (CONTINUED)
With the component replacement in Concentrator #2 completed in January 2024, the Company finalized its insurance claim for associated property damage and business interruption as a result of a component failure. During the three months ended June 30, 2024, the Company recognized an insurance recovery of $26,290 related to the business interruption portion of the insurance claim in the statement of income (loss) against costs of operations.
6. DERIVATIVE INSTRUMENTS
a) Derivative Instruments - Copper Price and Fuel Contracts
The following is a summary of the derivative transactions entered into by the Company during the three and nine months ended September 30, 2023 and 2024:
|
Date of |
|
|
|
|
|
|
purchase |
Contract |
Quantity |
Strike price |
Period |
Cost |
|
March 2024 |
Copper collar |
42 million lbs |
US$3.75 per lb |
July 2024 - |
1,985 |
|
April 2024 |
Copper collar |
54 million lbs |
US$4.00 per lb |
January 2025 - |
2,563 |
|
April 2024 |
Copper collar |
54 million lbs |
US$4.00 per lb |
July 2025 - |
2,222 |
|
February 2024 |
Fuel call options |
12.5 million ltrs |
US$0.79 per ltr |
February 2024 - |
165 |
|
September 2024 |
Fuel call options |
18 million ltrs |
US$0.65 per ltr |
January 2025 - |
561 |
|
January 2023 |
Copper collar |
42 million lbs |
US$3.75 per lb |
July 2023 - |
Zero cost |
|
January 2023 |
Fuel call options |
12 million ltrs |
US$1.00 per ltr |
July 2023 - |
941 |
The following is a summary of the realized and unrealized derivative gain or loss incurred during the three and nine months ended September 30, 2023 and 2024:
| Three months ended | Nine months ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Net realized loss on settled copper options and collars | 983 | - | 4,175 | 2,873 | ||||||||
| Net unrealized (gain) loss on outstanding copper options and collars | (1,117 | ) | 5,000 | 8,620 | 591 | |||||||
| Realized loss on fuel call options | - | 470 | 165 | 1,534 | ||||||||
| Unrealized loss (gain) on fuel call options | 144 | (482 | ) | 144 | (353 | ) | ||||||
| 10 | 4,988 | 13,104 | 4,645 | |||||||||
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
6. DERIVATIVE INSTRUMENTS (CONTINUED)
a) Derivative Instruments - Copper Price and Fuel Contracts (continued)
Details of the outstanding copper price option contracts as at September 30, 2024 are summarized in the following table:
|
Contract |
Quantity |
Strike price |
Period |
Cost |
Fair value |
|
Copper collars |
21 million lbs |
US$3.75 per lb |
Q4 2024 |
993 |
(415) |
|
Copper collars |
54 million lbs |
US$4.00 per lb |
H1 2025 |
2,563 |
(2,638) |
|
Copper collars |
54 million lbs |
US$4.00per lb |
H2 2025 |
2,222 |
753 |
|
Fuel call options |
18 million ltrs |
US$0.65 per ltr |
H1 2025 |
561 |
417 |
b) Derivative Instruments - Florence Copper Stream
On December 19, 2022, the Company signed agreements with Mitsui & Co. (U.S.A.) Inc. ("Mitsui") to form a strategic partnership to develop the Company's Florence Copper project ("Florence Copper"). Mitsui has committed to an initial investment of US$50 million, with proceeds to be used for construction of the commercial production facility. The initial investment is in the form of a copper stream agreement (the "Copper Stream") on 2.67% of the copper produced at Florence Copper and Mitsui to pay a delivery price equal to 25% of the market price of copper delivered under the contract.
In addition, Mitsui has acquired an option to invest an additional US$50 million for a 10% equity interest in Florence Copper (the "Equity Option"). The Equity Option is exercisable by Mitsui at any time up to three years following completion of construction of the commercial production facility. If Mitsui elects to exercise its Equity Option, the Copper Stream will terminate. If the Equity Option is not exercised by Mitsui by its expiry date, the Company will have the right to buy-back 100% of the Copper Stream, otherwise, it will terminate when 40 million pounds of copper have been delivered under the agreement.
As part of the arrangement, Taseko and Mitsui have entered into an offtake contract for 81% of the copper cathode produced at Florence during the initial years of production. The initial offtake agreement will cease and be replaced with a marketing agency agreement if the Equity Option is exercised by Mitsui. Mitsui's offtake entitlement would also reduce to 30% if the Equity Option is not exercised by its expiry date until the Copper Stream deposit has been reduced to nil.
On January 26, April 26, 2024 and July 26,2024, the Company received the first three US$10 million of the US$50 million Copper Stream. The remaining amounts are payable on a quarterly instalment basis. On October 28, 2024, the Company received the fourth US$10 million.
For accounting purposes, the Mitsui agreement is accounted for as a financial instrument and includes derivatives that are required to be fair valued at each reporting period. The Company has determined that the carrying value of the financial instrument and fair value of the derivatives is $46,035 as at September 30, 2024 based on the timing of future instalment payments, estimates of future production, estimates of future copper prices and other relevant factors. For the three and nine months ended September 30, 2024, the Company recorded an unrealized loss of $2,793 and $6,608, respectively, in the statement of comprehensive income (loss).
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
6. DERIVATIVE INSTRUMENTS (CONTINUED)
b) Derivative Instruments - Florence Copper Stream (continued)
| Proceeds from Florence copper stream | 40,947 | ||
| Deferred financing fees | (1,086 | ) | |
| Fair value adjustment on Florence copper stream derivative | 6,608 | ||
| Unrealized foreign exchange gain | (434 | ) | |
| Florence copper stream as at September 30, 2024 | 46,035 |
7. FINANCE EXPENSES
| Three months ended | Nine months ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||
| Interest expense | 16,244 | 12,250 | 44,650 | 35,072 | |||||||||
| Amortization of financing fees | 579 | 665 | 1,938 | 2,053 | |||||||||
| Finance expense - deferred revenue (Note 15) | 1,828 | 1,836 | 5,005 | 4,801 | |||||||||
| Accretion on PER | 695 | 572 | 2,090 | 1,648 | |||||||||
| Accretion and fair value adjustment on consideration payable to Cariboo (Notes 3a and 3c) | 9,423 | 1,244 | 19,377 | 2,695 | |||||||||
| Accretion and fair value adjustment on Florence royalty obligation (Note 14) | 3,703 | - | 9,251 | - | |||||||||
| Finance income | (1,504 | ) | (322 | ) | (3,501 | ) | (2,000 | ) | |||||
| Loss on settlement of long-term debt (Note 13a) | - | - | 4,646 | - | |||||||||
| Less: interest expense capitalized | (6,787 | ) | (2,282 | ) | (15,506 | ) | (6,207 | ) | |||||
| 24,181 | 13,963 | 67,950 | 38,062 | ||||||||||
For the three and nine months ended September 30, 2024, interest expense includes $324 (2023 - $464) and $1,035 (2023 - $1,514), respectively, from lease liabilities.
As part of the senior secured notes refinancing completed in April 2024, the Company redeemed its US$400 million aggregate principal amount of senior secured notes (the "2026 Notes") on April 23, 2024, which resulted in an accounting loss of $4,646 due to the accumulated write-off of deferred financing costs. $1,742 of the accounting loss was capitalized to the Florence Copper development costs, as further discussed below.
The Company also paid a one-time redemption call premium of $9,571 on the settlement of the 2026 Notes, which is not included in net financing expenses shown above.
For the three and nine months ended September 30, 2024, $6,787 and $15,506 (2023 - $2,282 and $6,207), respectively, of borrowing costs have been capitalized to Florence Copper development costs (Note 12).
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
8. INCOME TAX
| Three months ended | Nine months ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||
| Current income tax expense | 915 | 1,244 | 2,353 | 2,003 | |||||||||
| Deferred income tax expense (recovery) | (1,115 | ) | 10,797 | 17,482 | 30,935 | ||||||||
| (200 | ) | 12,041 | 19,835 | 32,938 | |||||||||
9. ACCOUNTS RECEIVABLE
| September 30, | December 31, | |||||
| 2024 | 2023 | |||||
| Trade and settlement receivables | 3,172 | 11,039 | ||||
| Insurance proceeds receivable | 22 | 4,057 | ||||
| Other receivables | 6,432 | 1,418 | ||||
| 9,626 | 16,514 | |||||
10. INVENTORIES
| September 30, | December 31, | |||||
| 2024 | 2023 | |||||
| Current: | ||||||
| Sulphide ore stockpiles | 80,048 | 57,678 | ||||
| Copper contained in concentrate | 10,365 | 17,356 | ||||
| Molybdenum concentrate | 1,097 | 711 | ||||
| Materials and supplies | 50,935 | 47,197 | ||||
| 142,445 | 122,942 | |||||
| Long-term: | ||||||
| Oxide ore stockpiles | 39,585 | 17,554 | ||||
| 182,030 | 140,496 | |||||
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
11. OTHER FINANCIAL ASSETS
| September 30, | December 31, | |||||
| 2024 | 2023 | |||||
| Current: | ||||||
| Marketable securities | 987 | 1,333 | ||||
| Copper price options (Note 6a) | - | 3,724 | ||||
| Fuel call options (Note 6a) | 417 | - | ||||
| 1,404 | 5,057 | |||||
| Long-term: | ||||||
| Investment in private companies | 1,200 | 1,200 | ||||
| Reclamation deposits | 459 | 6,696 | ||||
| 1,659 | 7,896 |
The Company holds strategic investments in publicly-traded and privately owned mineral exploration and development companies, including marketable securities. Marketable securities and the investment in privately owned companies are accounted for at fair value through other comprehensive income.
In March, 2024, the Company replaced its letter or credit with the Province of British Columbia with a surety bond, which resulted in a $12,500 release of restricted cash to the Company's cash and equivalents.
12. PROPERTY, PLANT & EQUIPMENT
The following schedule shows the continuity of property, plant and equipment net book value for the three and nine months ended September 30, 2024:
| Three months ended September 30, 2024 |
Nine months ended September 30, 2024 |
|||||
| Net book value as at beginning of period | 1,554,850 | 1,286,001 | ||||
| Additions: | ||||||
| Gibraltar capitalized stripping costs | 4,257 | 30,787 | ||||
| Gibraltar sustaining capital expenditures | 13,446 | 27,933 | ||||
| Gibraltar capital projects | 2,199 | 5,231 | ||||
| Cariboo acquisition (Note 3a) | - | 126,194 | ||||
| Fair value reclass adjustment on deemed disposition (Note 3b) |
- | (13,342 | ) | |||
| Florence Copper development costs | 80,390 | 212,918 | ||||
| Yellowhead development costs | 1,646 | 2,199 | ||||
| Aley development costs | 392 | 872 | ||||
| Other items: | ||||||
| Right of use assets | 4,144 | 4,877 | ||||
| Rehabilitation costs asset | 5 | 1,050 | ||||
| Disposals | (50 | ) | (349 | ) | ||
| Foreign exchange translation and other | (4,932 | ) | 8,936 | |||
| Depletion and amortization | (24,624 | ) | (59,946 | ) | ||
| Net book value as at September 30, 2024 | 1,631,723 | 1,631,723 |
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
12. PROPERTY, PLANT & EQUIPMENT (CONTINUED)
| Net book value |
Gibraltar Mine |
Florence Copper |
Yellowhead | Aley | Other | Total | ||||||||||||
| As at December 31, 2023 | 805,508 | 441,107 | 22,826 | 15,884 | 676 | 1,286,001 | ||||||||||||
| Cariboo acquisition (Note 3a) | 126,194 | - | - | - | - | 126,194 | ||||||||||||
| Deemed disposition (Note 3b) | (13,342 | ) | - | - | - | - | (13,342 | ) | ||||||||||
| Net additions | 66,582 | 213,177 | 2,199 | 872 | - | 282,830 | ||||||||||||
| Changes in rehabilitation cost asset | 1,050 | - | - | - | - | 1,050 | ||||||||||||
| Depletion and amortization | (59,617 | ) | - | (62 | ) | - | (267 | ) | (59,946 | ) | ||||||||
| Foreign exchange translation | - | 8,936 | - | - | - | 8,936 | ||||||||||||
| As at September 30, 2024 | 926,375 | 663,220 | 24,963 | 16,756 | 409 | 1,631,723 |
For the three and nine months ended September 30, 2024, the Company capitalized development costs of $80,390 and $212,918 for the Florence Copper project, respectively, which includes $6,787 and $15,506 of capitalized borrowing costs (Note 7), respectively.
During the three and nine months ended September 30, 2024, non-cash additions to property, plant and equipment of Gibraltar include $628 and $4,977, respectively, of depreciation on mining assets related to capitalized stripping.
Since January 1, 2020, development costs for Yellowhead of $8,688 have been capitalized as mineral property, plant and equipment. Depreciation related to the right of use assets for the three and nine months ended September 30, 2024 was $3,074 (2023 - $2,856) and $8,762 (2023 - $7,875), respectively.
13. DEBT
| September 30, | December 31, | |||||
| 2024 | 2023 | |||||
| Current: | ||||||
| Lease liabilities (d) | 9,001 | 11,040 | ||||
| Gibraltar equipment loans (e) | 13,811 | 11,105 | ||||
| Florence equipment facility (f) | 6,096 | 5,513 | ||||
| 28,908 | 27,658 | |||||
| Long-term: | ||||||
| Senior secured notes (a) | 676,300 | 529,880 | ||||
| Revolving credit facility (b) | - | 26,494 | ||||
| Lease liabilities (d) | 6,957 | 6,929 | ||||
| Gibraltar equipment loans (e) | 20,995 | 26,887 | ||||
| Florence equipment facility (f) | 22,792 | 26,851 | ||||
| 727,044 | 617,041 | |||||
| Deferred financing fees | (13,594 | ) | (6,808 | ) | ||
| Total debt | 742,358 | 637,891 |
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
13. DEBT (CONTINUED)
(a) Senior secured notes
On April 23, 2024, the Company completed an offering of US$500 million aggregate principal amount of senior secured notes (the "2030 Notes"). The 2030 Notes mature on May 1, 2030 and bear interest at an annual rate of 8.25%, payable semi-annually on May 1 and November 1. Majority of the proceeds were used to redeem the outstanding 2026 Notes. The remaining proceeds, net of transaction costs, call premium and accrued interest, of approximately $110 million (US$81 million) were available for capital expenditures, including for Florence Copper and Gibraltar, working capital and for general corporate purposes.
The 2030 Notes are secured by liens on the shares of Taseko's wholly-owned subsidiary, Gibraltar Mines Ltd., and the subsidiary's rights under the joint venture agreement relating to Gibraltar, as well as the shares of Curis Holdings (Canada) Ltd., Florence Holdings Inc. ("Florence Holdings") and Cariboo. The 2030 Notes are guaranteed by each of Taseko's existing and future restricted subsidiaries.
The liens on the collateral securing the notes and the guarantees will be first lien, junior in priority to the corresponding liens of the revolving credit facility. The Company is also subject to certain restrictions on asset sales, issuance of preferred stock, dividends and other restricted payments. However, there are no maintenance covenants with respect to the Company's financial performance.
The Company may redeem some or all of the 2030 Notes at any time on or after November 1, 2026, at redemption prices ranging from 104.125% to 100%, plus accrued and unpaid interest to the date of redemption. Prior to November 1, 2026, all or part of the notes may be redeemed at 100%, plus a make-whole premium, plus accrued and unpaid interest to the date of redemption. Until November 1, 2026, the Company may redeem up to 10% of the aggregate principal amount of the notes, at a redemption price of 103%, plus accrued and unpaid interest to the date of redemption. In addition, until November 1, 2026, the Company may redeem up to 40% of the aggregate principal amount of the notes, in an amount not greater than the net proceeds of certain equity offerings, at a redemption price of 108.250%, plus accrued and unpaid interest to the date of redemption. On a change of control, the 2030 Notes are redeemable at the option of the holder at a price of 101%.
The settlement of the 2026 Notes resulted in finance expenses as further described in Note 7.
(b) Revolving credit facility
The Company has in place a secured US$80 million revolving credit facility (the "Facility"). The Facility is secured by first liens against Taseko's rights under the Gibraltar joint venture, as well as the shares of Gibraltar Mines Ltd., Curis Holdings (Canada) Ltd., Florence Holdings and Cariboo. The Facility will be available for capital expenditures, working capital and general corporate purposes. The maturity date of the Facility is July 2, 2026. On November 6, 2024, the Company entered into an amendment for its revolving credit facility pushing out its maturity to November 2027 from July 2026. The Company also upsized the facility amount from US$80 million to US$110 million.
Amounts outstanding under the facility bear interest at the Adjusted Term SOFR rate plus an applicable margin and have a standby fee of 1.00%. As at September 30, 2024, no amount was advanced under the Facility (December 2023 - US$20 million).
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
13. DEBT (CONTINUED)
(b) Revolving credit facility (continued)
The Facility has customary covenants for a revolving credit facility. Financial covenants include a requirement for the Company to maintain a leverage ratio, an interest coverage ratio, a minimum tangible net worth and a minimum liquidity amount as defined under the Facility. The Company was in compliance with these covenants as at September 30, 2024.
(c) Letter of credit facilities
The Gibraltar joint venture has in place a $7 million credit facility for the purpose of providing letters of credit ("LC") to key suppliers of Gibraltar to assist with ongoing trade finance and working capital needs. Any LCs issued under the facility will be guaranteed by Export Development Canada ("EDC") under its Account Performance Security Guarantee program. The facility is renewable annually, is unsecured and contains no financial covenants.
As at September 30, 2024, a total of $3.75 million in LCs were issued and outstanding under this LC facility (December 31, 2023 - $3.75 million).
The Company also has a US$4 million credit facility for the sole purpose of issuing LCs to certain key contractors in conjunction with the development of Florence Copper. Any LCs to be issued under this facility will also be guaranteed by EDC. The facility is renewable annually, is unsecured and contains no financial covenants. As at September 30, 2024, there were no LCs issued and outstanding under this LC facility.
(d) Lease liabilities
Lease liabilities include the Company's outstanding lease liabilities under IFRS 16. The lease liabilities have monthly repayment terms ranging between 12 and 84 months.
(e) Gibraltar equipment loans
The equipment loans at September 30, 2024 are secured by most of the existing mobile mining equipment at Gibraltar and commenced between December 2022 and June 2023 with monthly repayment terms of 48 months and with interest rates ranging between 8.9% to 9.4%.
(f) Florence equipment facility
In the fourth quarter of 2023, the Company entered into a Florence project equipment debt facility with Bank of America secured against specific equipment for total proceeds of US$25 million. The facility contains no financial covenants and has monthly payments over a term of 60 months. The equipment facility bears interest at a blended rate of 9.3%.
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
13. DEBT (CONTINUED)
(g) Debt continuity
The following schedule shows the continuity of long-term debt for the nine months ended September 30, 2024:
|
Total debt as at January 1, 2024 |
637,891 |
|
Settlement of 2026 Notes |
(546,920) |
|
Write-off of deferred financing charges |
4,646 |
|
Issuance of 2030 Notes |
683,650 |
|
Deferred financing charges |
(13,231) |
|
Revolving credit facility repayment |
(26,494) |
|
Lease and loan additions |
7,156 |
|
Lease liabilities and equipment loans repayments |
(24,816) |
|
Lease and equipment loans from Cariboo acquisition (Note 3a) |
7,143 |
|
Unrealized foreign exchange loss |
11,395 |
|
Amortization of deferred financing charges (Note 7) |
1,938 |
|
Total debt as at September 30, 2024 |
742,358 |
14. FLORENCE ROYALTY OBLIGATION
On January 15, 2024, Florence Holdings, an indirect wholly-owned subsidiary of Taseko, entered into agreements with Taurus Mining Royalty Fund L.P. ("Taurus"), pursuant to which Florence Holdings received US$50 million from Taurus in exchange for a perpetual gross revenue royalty interest in certain real property, mining and other rights held by Florence. The basic royalty rate is 1.95% of the gross revenue from the sale of all copper from Florence Copper for the life of the mine. If project completion of Florence Copper, as defined under the agreements is reached after July 31, 2025, the royalty rate increases to 2.05%. Proceeds from the royalty transaction were contributed to Florence Copper and are available to Florence Copper to fund the construction and development of the commercial production facility. The royalty constitutes a customary lien and encumbrance on Florence's mineral and property rights, is registered as an interest in the Florence Copper mine and is unsecured.
Under the purchase agreement with Florence Holdings, Taurus has a put right to transfer the royalty back to Florence Holdings upon the occurrence of certain circumstances, including certain breaches of the transaction document or if project completion of Florence Copper has not occurred by a long stop completion date of January 31, 2027. If Taurus exercises such put right, Florence Holdings shall pay to Taurus an amount based on the net present value of the royalty or, if the put right is exercised due to project completion being delayed beyond the long stop completion date, the original purchase price paid by Taurus. As part of the transaction, Taseko, Curis Holdings (Canada) Ltd. and Florence Holdings provided to Taurus an unsecured guarantee of the obligations of Florence Copper.
For accounting purposes, the purchase agreement with Taurus is accounted for as a financial instrument and is recorded as a financial liability at amortized cost. The Company has identified embedded derivatives which as of September 30, 2024 had no estimated value. For the three and nine months ended September 30, 2024, the Company recorded an accretion on the royalty obligation of $3,703 and $9,251, respectively, in the statement of comprehensive income (loss).
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
14. FLORENCE ROYALTY OBLIGATION (CONTINUED)
| Proceeds from Florence royalty obligation | 67,695 | ||
| Deferred financing fees | (1,086 | ) | |
| Accretion and fair value adjustment on Florence royalty obligation (Note 7) | 9,251 | ||
| Unrealized foreign exchange gain | (145 | ) | |
| Florence royalty obligation as at September 30, 2024 | 75,715 |
15. DEFERRED REVENUE
| September 30, | December 31, | |||||
| 2024 | 2023 | |||||
| Current: | ||||||
| Customer advance payments (a) | 57 | 3,096 | ||||
| Osisko - silver stream agreement (b) | 3,967 | 7,250 | ||||
| Current portion of deferred revenue | 4,024 | 10,346 | ||||
| Long-term portion of deferred revenue (b) | 63,877 | 59,720 | ||||
| Total deferred revenue | 67,901 | 70,066 |
(a) Customer advance payments
As at September 30, 2024, the Company received advance payments from a customer on 40,000 pounds (100% basis) of copper concentrate inventory (December 31, 2023 - 0.8 million pounds).
(b) Silver stream purchase and sale agreement
The Company has entered into a silver stream purchase and sale agreement with Osisko Gold Royalties Ltd. ("Osisko"), whereby the Company received upfront cash deposit payments totalling $52.7 million for the sale of an equivalent amount of its 75% share of Gibraltar payable silver production until 5.9 million ounces of silver have been delivered to Osisko. After that threshold has been met, 35% of an equivalent amount of Taseko's share of all future payable silver production from Gibraltar will be delivered to Osisko. The Company receives no further cash consideration once silver deliveries are made under the agreement.
On June 28, 2023, the Company entered into an amendment to its silver stream with Osisko and received $13,586 for the sale of an equivalent amount of its 87.5% share of Gibraltar payable silver production until 6,254,500 ounces of silver have been delivered to Osisko. After that threshold has been met, 30.625% of an equivalent amount of Taseko's share of all future payable silver production from Gibraltar will be delivered to Osisko. The amendment is accounted for as a contract modification under IFRS 15 Revenue from Contracts with Customers. The funds received are available for general working capital purposes.
The Company has recorded the deposits from Osisko as deferred revenue and recognizes amounts in revenue as silver is delivered. The amortization of deferred revenue is calculated on a per unit basis using the estimated total number of silver ounces expected to be delivered to Osisko over the life of Gibraltar. The current portion of deferred revenue is an estimate based on deliveries anticipated over the next twelve months.
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
15. DEFERRED REVENUE (CONTINUED)
The following table summarizes changes in the Osisko deferred revenue:
| Balance as at December 31, 2023 | 66,970 | ||
| Finance expense (Note 7) | 5,005 | ||
| Amortization of deferred revenue (Note 4) | (4,131 | ) | |
| Balance as at September 30, 2024 | 67,844 |
16. EQUITY
(a) Share capital
| Common shares (thousands) |
|||
| Common shares outstanding as at December 31, 2023 | 290,000 | ||
| Exercise of share options | 2,387 | ||
| Share issuance | 7,810 | ||
| Common shares outstanding as at September 30, 2024 | 300,197 |
The Company's authorized share capital consists of an unlimited number of common shares with no par value.
(b) Share-based compensation
| Options (thousands) |
Average price |
|||||
| Outstanding as at January 1, 2024 | 8,799 | 1.85 | ||||
| Granted | 2,956 | 1.86 | ||||
| Exercised | (2,387 | ) | 1.30 | |||
| Cancelled/forfeited | (68 | ) | 1.98 | |||
| Expired | (50 | ) | 0.91 | |||
| Outstanding as at September 30, 2024 | 9,250 | 2.00 | ||||
| Exercisable as at September 30, 2024 | 6,427 | 2.00 |
During the nine months period ended September 30, 2024, the Company granted 2,956,000 (2023 - 2,729,000), share options to directors, executives and employees, exercisable at an average exercise price of $1.86 per common share (2023 - $2.36 per common share), over a five year period. The total fair value of options granted was $3,104 (2023 - $3,684) based on a weighted average grant-date fair value of $1.05 (2023 - $1.35) per option.
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
16. EQUITY (CONTINUED)
(b) Share-based compensation (continued)
The fair value of options was measured at the grant date using the Black-Scholes formula. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the Black-Scholes formula are as follows:
| Expected term (years) | 5.00 | ||
| Forfeiture rate | 0% | ||
| Volatility | 64% | ||
| Dividend yield | 0% | ||
| Risk-free interest rate | 3.5% | ||
| Weighted-average fair value per option | $ | 1.05 |
Deferred, Performance and Restricted Share Units
| RSUs (thousands) |
DSUs (thousands) |
PSUs (thousands) |
|||||||
| Outstanding as at January 1, 2024 | 380 | 2,301 | 1,955 | ||||||
| Granted | 500 | 304 | 880 | ||||||
| Cancelled | (40 | ) | - | - | |||||
| Settled | - | - | (530 | ) | |||||
| Outstanding as at September 30, 2024 | 840 | 2,605 | 2,305 |
During the nine months ended September 30, 2024, 303,750 DSUs were issued to directors (2023 - 342,750) and 880,000 PSUs to senior executives (2023 - 830,000). The fair value of DSUs and PSUs granted was $3,067 (2023 - $4,344), with a weighted average fair value at the grant date of $1.83 per unit for the DSUs (2023 - $2.38 per unit) and $2.87 per unit for the PSUs (2023 - $4.25 per unit).
During the nine months ended September 30, 2024, the Company granted 500,000 units, with a weighted average fair value at the grant date of $2.38 per unit for the RSUs.
Share-based compensation expense is comprised as follows:
| |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Share options - amortization | 521 | 568 | 2,624 | 2,866 | ||||||||
| Performance share units - amortization | 678 | 546 | 2,035 | 1,635 | ||||||||
| Restricted share units - amortization | 141 | 74 | 435 | 218 | ||||||||
| Change in fair value of deferred share units | 156 | (461 | ) | 4,654 | 34 | |||||||
| 1,496 | 727 | 9,748 | 4,753 | |||||||||
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
16. EQUITY (CONTINUED)
(c) At-the-market equity offering program
On May 3, 2023, the Company announced that it has entered into an equity distribution agreement providing for an at-the-market equity offering program ("ATM") of up to US$50 million. For the three months ended September 30, 2024, the Company issued 7,810,427 shares under the ATM program for total gross proceeds of $24,369 at an average share price of $3.12. Between October 1, 2024 and November 6, 2024, the Company issued 4,256,539 shares under the ATM program for total gross proceeds of $14,472 at an average share price of $3.40.
17. EARNINGS PER SHARE
Earnings per share, calculated on a basic and diluted basis, is as follows:
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Net income attributable to common shareholders - basic and diluted | (180 | ) | 871 | 7,763 | 44,650 | |||||||
| (in thousands of common shares) | ||||||||||||
| Weighted-average number of common shares | 295,051 | 288,681 | 292,459 | 288,406 | ||||||||
| Effect of dilutive securities: | ||||||||||||
| Stock options | - | 2,264 | 2,399 | 2,637 | ||||||||
| Weighted-average number of diluted common shares | 295,051 | 290,945 | 294,858 | 291,043 | ||||||||
| Earnings per common share | ||||||||||||
| Basic earnings per share | - | - | 0.03 | 0.15 | ||||||||
| Diluted earnings per share | - | - | 0.03 | 0.15 | ||||||||
18. COMMITMENTS AND CONTINGENCIES
The Company is a party to certain contracts relating to service and supply agreements. Future minimum payments under these agreements as at September 30, 2024 are presented in the following table:
| Remainder of 2024 | 1,175 | ||
| 2025 | 7,708 | ||
| 2026 | 1,463 | ||
| 2027 | - | ||
| 2028 | - | ||
| 2029 and thereafter | - | ||
| Total commitments | 10,346 |
As at September 30, 2024, the Company had minimum commitments for capital expenditures of $62,105 (December 31, 2023 - $6,150) for Florence Copper and $6,744 (December 31, 2023 - $13,236) for Gibraltar.
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
19. SUPPLEMENTARY CASH FLOW INFORMATION
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Change in other non-cash working capital items: | ||||||||||||
| Accounts receivable | (3,982 | ) | (8,777 | ) | 4,711 | (42 | ) | |||||
| Inventories | (12,279 | ) | (21,815 | ) | (7,589 | ) | (31,138 | ) | ||||
| Prepaids | 3,776 | 1,350 | 2,277 | (1,382 | ) | |||||||
| Accounts payable and accrued liabilities1 | 14,605 | 55 | 12,711 | (5,143 | ) | |||||||
| Advance payment on product sales | (3,491 | ) | (5,540 | ) | (3,039 | ) | (6,456 | ) | ||||
| Interest payable | 62 | 240 | 62 | (114 | ) | |||||||
| Mineral tax payable | (3,159 | ) | 36 | (3,106 | ) | (1,346 | ) | |||||
| (4,468 | ) | (34,451 | ) | 6,027 | (45,621 | ) | ||||||
| Non-cash investing and financing activities | ||||||||||||
| Cariboo acquisition, net assets (Notes 3a and 3b) | - | - | 61,232 | 65,930 | ||||||||
| Assets acquired under capital lease | 1,100 | (34 | ) | 2,420 | 834 | |||||||
| Right-of-use assets | 4,816 | 497 | 6,347 | 10,897 | ||||||||
1. Excludes accounts payable and accrued liability changes on capital expenditures.
20. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value, by reference to the reliability of the inputs used to estimate the fair values.
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The fair values of the senior secured notes are $710,983 and the carrying value is $663,791 as at September 30, 2024. The fair value of all other financial assets and liabilities approximates their carrying value.
The Company has certain financial assets and liabilities that are measured at fair value on a recurring basis and uses the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, with Level 1 inputs having the highest priority.
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
20. FAIR VALUE MEASUREMENTS (CONTINUED)
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| September 30, 2024 | ||||||||||||
| Financial assets and liabilities designated as FVPL | ||||||||||||
| Derivative asset fuel call options | - | 417 | - | 417 | ||||||||
| Derivative liability copper put and call options | - | (2,300 | ) | - | (2,300 | ) | ||||||
| Performance payments payable | - | - | (34,357 | ) | (34,357 | ) | ||||||
| Florence copper stream | - | - | (46,035 | ) | (46,035 | ) | ||||||
| - | (1,883 | ) | (80,392 | ) | (82,275 | ) | ||||||
| Financial assets designated as FVOCI | ||||||||||||
| Marketable securities | 987 | - | - | 987 | ||||||||
| Investment in private companies | - | - | 1,200 | 1,200 | ||||||||
| Reclamation deposits | 459 | - | - | 459 | ||||||||
| 1,446 | - | 1,200 | 2,646 | |||||||||
| December 31, 2023 | ||||||||||||
| Financial assets and liabilities designated as FVPL | ||||||||||||
| Derivative asset copper put and call options | - | 3,724 | - | 3,724 | ||||||||
| Performance payments payable | - | - | (25,850 | ) | (25,850 | ) | ||||||
| - | 3,724 | (25,850 | ) | (22,126 | ) | |||||||
| Financial assets designated as FVOCI | ||||||||||||
| Marketable securities | 1,333 | - | - | 1,333 | ||||||||
| Investment in private companies | - | - | 1,200 | 1,200 | ||||||||
| Reclamation deposits | 6,696 | - | - | 6,696 | ||||||||
| 8,029 | - | 1,200 | 9,229 |
There have been no transfers between fair value levels during the reporting period. The carrying value of cash and equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value as at September 30, 2024.
The fair value of the senior secured notes, a Level 1 instrument, is determined based upon publicly available information.
The Company's metal concentrate sales contracts are subject to provisional pricing with the selling price adjusted at the end of the quotational period. At each reporting date, the Company's settlement receivable on these contracts are marked-to-market based on a quoted forward price for which there exists an active commodity market. At September 30, 2024, the Company had net settlement receivable of $1,925 (December 31, 2023 - settlement receivable of $7,406)
The estimated performance payments payable, a Level 3 instrument, was estimated based on forecasted copper prices and sales volumes over the next 4 and 10 year periods. The total estimated performance payments payable was then discounted to determine its fair value.
The investment in private companies, a Level 3 instrument, are valued based on a management estimate. As this is an investment in a private exploration and development company, there are no observable market data inputs.
|
TASEKO MINES LIMITED Notes to Condensed Consolidated Interim Financial Statements (Cdn$ in thousands - Unaudited) |
20. FAIR VALUE MEASUREMENTS (CONTINUED)
As at September 30, 2024, the determination of the estimated fair value of the investment includes comparison to the market capitalization of comparable public companies.
Commodity price risk
The Company is exposed to the risk of fluctuations in prevailing market commodity prices on the metals it produces. The Company enters into copper put and collar option contracts to reduce the risk of short-term copper price volatility. The amount and duration of the hedge position is based on an assessment of business-specific risk elements combined with the copper pricing outlook. Copper put and collar option contracts are typically extended adding incremental quarters at established put strike prices to provide the necessary price protection.
Provisional pricing mechanisms embedded within the Company's sales arrangements have the character of a commodity derivative and are carried at fair value as part of accounts receivable.
The table below summarizes the impact on revenue and receivables for changes in commodity prices on the provisionally invoiced sales volumes.
| As at September 30, 2024 | |||
| Copper increase/decrease by US$0.10/lb.1 | 371 |
1 The analysis is based on the assumption that the period end copper price increases/decreases US$0.10 per pound, with all other variables held constant. At September 30, 2024, 2.7 million pounds of copper in concentrate were exposed to copper price movements. The closing exchange rate at September 30, 2024 of CAD/USD 1.35 was used in the analysis.
The sensitivities in the above tables have been determined with foreign currency exchange rates held constant. The relationship between commodity prices and foreign currencies is complex and movements in foreign exchange can impact commodity prices. The sensitivities should therefore be used with care.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
This management discussion and analysis ("MD&A") is intended to help the reader understand Taseko Mines Limited ("Taseko", "we", "our" or the "Company"), our operations, financial performance, and current and future business environment. This MD&A is intended to supplement and complement the consolidated financial statements and notes thereto, prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board for the three and nine months ended September 30, 2024 (the "Financial Statements"). You are encouraged to review the Financial Statements in conjunction with your review of this MD&A and the Company's other public filings, which are available on the Canadian Securities Administrators' website at www.sedarplus.com and on the EDGAR section of the United States Securities and Exchange Commission's ("SEC") website at www.sec.gov.
This MD&A is prepared as of November 6, 2024. All dollar figures stated herein are expressed in Canadian dollars, unless otherwise specified. Included throughout this MD&A are references to non-GAAP performance measures which are denoted with an asterisk and further explanation including their calculations are provided on page 27.
Cautionary Statement on Forward-Looking Information
This discussion includes certain statements that may be deemed "forward-looking statements". All statements in this discussion, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities, and events or developments that the Company expects are forward-looking statements. Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, global economic events arising from the coronavirus (COVID-19) pandemic outbreak, exploitation and exploration successes, continued availability of capital and financing and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. All of the forward-looking statements made in this MD&A are qualified by these cautionary statements. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by applicable law. Further information concerning risks and uncertainties associated with these forward-looking statements and our business may be found in the Company's other public filings with the SEC and Canadian provincial securities regulatory authorities.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Contents
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Overview
Taseko is a copper focused mining company that seeks to create long-term shareholder value by acquiring, developing, and operating large tonnage mineral deposits in stable jurisdictions which are capable of supporting a mine for decades. The Company's principal assets are the 100% owned Gibraltar mine ("Gibraltar"), which is located in central British Columbia and is one of the largest copper mines in North America and the Florence Copper project in Arizona, which is under construction. Taseko also owns the Yellowhead copper, New Prosperity gold-copper, and Aley niobium projects in British Columbia.
Highlights
| Operating Data (Gibraltar - 100% basis) | Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | |||||||||||||
| Tons mined (millions) | 23.2 | 16.5 | 6.7 | 64.4 | 64.0 | 0.4 | ||||||||||||
| Tons milled (millions) | 7.6 | 8.0 | (0.4 | ) | 21.0 | 22.4 | (1.4 | ) | ||||||||||
| Production (million pounds Cu) | 27.1 | 35.4 | (8.3 | ) | 77.0 | 88.5 | (11.5 | ) | ||||||||||
| Sales (million pounds Cu) | 26.3 | 32.1 | (5.8 | ) | 80.6 | 84.8 | (4.2 | ) | ||||||||||
| Financial Data | Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||
| (Cdn$ in thousands, except for per share amounts) | 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||
| Revenues | 155,617 | 143,835 | 11,782 | 440,294 | 371,278 | 69,016 | ||||||||||||
| Cash flows provided by operations | 65,038 | 26,989 | 38,049 | 159,323 | 88,257 | 71,066 | ||||||||||||
| Net (loss) income (GAAP) | (180 | ) | 871 | (1,051 | ) | 7,763 | 44,650 | (36,887 | ) | |||||||||
| Per share - basic ("EPS") | - | - | - | 0.03 | 0.15 | (0.12 | ) | |||||||||||
| Earnings from mining operations before depletion, amortization and non-recurring items* |
54,516 | 65,445 | (10,929 | ) | 184,241 | 134,248 | 49,993 | |||||||||||
| Adjusted EBITDA* | 47,689 | 62,695 | (15,006 | ) | 168,389 | 120,972 | 47,417 | |||||||||||
| Adjusted net income* | 8,228 | 19,659 | (11,431 | ) | 46,459 | 20,372 | 26,087 | |||||||||||
| Per share - basic ("adjusted EPS")* | 0.03 | 0.07 | (0.04 | ) | 0.16 | 0.07 | 0.09 | |||||||||||
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 September 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 September 30, 2023 and for the three and nine 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.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Third Quarter Review
-
Earnings from mining operations before depletion, amortization and non-recurring items* was $54.5 million and Adjusted EBITDA* was $47.7 million;
-
Third quarter cash flow from operations was $65.0 million, and included $26.3 million for proceeds received on the insurance claim recorded in the prior quarter;
-
Net loss was $0.2 million ($Nil per share) for the quarter and Adjusted net income* was $8.2 million ($0.03 per share);
-
Gibraltar produced 27.1 million pounds of copper in the quarter. Average copper head grades were 0.23% and copper recoveries were 79% for the quarter;
-
Although 7.6 million tons of ore was milled in the quarter, mill throughput was impacted by nearly three weeks of downtime in Concentrator #1 at the beginning of the quarter for the completion of the crusher relocation project, concurrent mill maintenance, and the ramp back up to full capacity;
-
Gibraltar sold 26.3 million pounds of copper in the quarter at an average realized copper price of US$4.23 per pound;
-
Total operating costs (C1)* for the quarter were US$2.92 per pound produced. Lower off-property costs are mainly due to favorably lower treatment and refining ("TCRC") rates realized during the quarter as new offtake agreements begin to take effect;
-
Construction of the Florence Copper commercial production facility continues to advance on schedule. A total of 34 production wells out of a total of 90 new wells had been completed as of September 30. Earthworks and site preparation for the plant area and commercial wellfield is estimated to be 75% complete and installation of structural steel, tanks, and process equipment is underway;
-
An application has been made to the U.S. Department of Energy's Qualifying Advanced Energy Project Credit (48C) Program for a tax credit of up to US$110 million, based on Florence Copper's eligibility as a critical materials project. The Company expects to hear if it has been awarded the tax credit in mid-January 2025;
-
On November 6, the Company entered into an amendment for its revolving credit facility, extending the maturity date to November 2027 from July 2026, and increasing the facility amount to US$110 million from US$80 million. No amounts are drawn against the revolving credit facility;
-
The Company issued 7.8 million shares under its At-the-Market ("ATM") equity offering in the quarter and received net proceeds of $23.1 million. Subsequently, the Company issued an additional 4.3 million shares under the ATM and received net proceeds of $14.2 million; and
-
The Company had a cash balance of $209 million as at September 30, 2024.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Review of Operations
Gibraltar mine
| Operating data (100% basis) | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | ||||||||||
| Tons mined (millions) | 23.2 | 18.4 | 22.8 | 24.1 | 16.5 | ||||||||||
| Tons milled (millions) | 7.6 | 5.7 | 7.7 | 7.6 | 8.0 | ||||||||||
| Strip ratio | 1.2 | 1.6 | 1.7 | 1.5 | 0.4 | ||||||||||
| Site operating cost per ton milled (Cdn$)* | $ | 14.23 | $ | 13.93 | $ | 11.73 | $ | 9.72 | $ | 12.39 | |||||
| Copper concentrate | |||||||||||||||
| Head grade (%) | 0.23 | 0.23 | 0.24 | 0.27 | 0.26 | ||||||||||
| Copper recovery (%) | 78.9 | 77.7 | 79.0 | 82.2 | 85.0 | ||||||||||
| Production (million pounds Cu) | 27.1 | 20.2 | 29.7 | 34.2 | 35.4 | ||||||||||
| Sales (million pounds Cu) | 26.3 | 22.6 | 31.7 | 35.9 | 32.1 | ||||||||||
| Inventory (million pounds Cu) | 2.9 | 2.3 | 4.9 | 6.9 | 8.8 | ||||||||||
| Molybdenum concentrate | |||||||||||||||
| Production (thousand pounds Mo) | 421 | 185 | 247 | 369 | 369 | ||||||||||
| Sales (thousand pounds Mo) | 348 | 221 | 258 | 364 | 370 | ||||||||||
| Per unit data (US$ per pound produced)* | |||||||||||||||
| Site operating costs* | $ | 2.91 | $ | 2.88 | $ | 2.21 | $ | 1.59 | $ | 2.10 | |||||
| By-product credits* | (0.25 | ) | (0.26 | ) | (0.17 | ) | (0.13 | ) | (0.23 | ) | |||||
| Site operating costs, net of by-product credits* | $ | 2.66 | $ | 2.62 | $ | 2.04 | $ | 1.46 | $ | 1.87 | |||||
| Off-property costs | 0.26 | 0.37 | 0.42 | 0.45 | 0.33 | ||||||||||
| Total operating costs (C1)* | $ | 2.92 | $ | 2.99 | $ | 2.46 | $ | 1.91 | $ | 2.20 |
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Operations Analysis
Third Quarter Review
Gibraltar produced 27 million pounds of copper in the quarter. Copper production and mill throughput were impacted by nearly three weeks of downtime in Concentrator #1 at the beginning of the quarter to complete the crusher relocation project, concurrent mill maintenance, and the ramp back up to full capacity.
Copper head grades were 0.23% and more Connector pit ore was fed to the mill. Copper recoveries in the third quarter were 79%, in line with recent quarters, but lower than normal, as the upper benches of the Connector pit contain transition ore with higher oxide content. As mining progresses deeper in the Connector pit, recoveries are expected to improve as oxide content reduces.
A total of 23.2 million tons were mined in the third quarter, and the majority of ore and waste mining occurred in the Connector pit during the period. A total of 1.7 million tons of oxide ore from the upper benches of the Connector pit were also added to the heap leach pads in the period for future copper cathode production from Gibraltar's currently idled SX/EW plant.
Total site costs* at Gibraltar of $111.3 million (which includes capitalized stripping of $3.6 million) was higher compared to the previous quarter due to the Gibraltar mine being on care and maintenance during the labour strike in June. Total site costs* were generally in line with the fourth quarter of 2023 and first quarter of 2024. Higher repairs and maintenance costs were incurred in the quarter due to a large maintenance project on one of the shovels.
During the three months ended September 30, 2024, the Company incurred costs of $4.1 million in relation to the final phase of the in-pit crusher relocation project for Concentrator #1 including demolition of the old station's concrete foundation. Under IFRS, these costs are expensed in the quarter through the statement of income (loss).
Molybdenum production was 421 thousand pounds in the third quarter. The 128% increase in quarter-over-quarter production is primarily due to higher molybdenum grade in the Connector pit ore. At an average molybdenum price of US$21.77 per pound, molybdenum generated a by-product credit per pound of copper produced of US$0.25 in the third quarter.
Off-property costs per pound produced* were US$0.26 for the third quarter, which is lower than recent quarters and reflects lower average TCRC rates realized on third quarter shipments, some of which were tendered earlier in the year at negative rates.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Total operating costs per pound produced (C1)* was US$2.92 for the quarter, compared to US$2.20 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
The major project and related mill maintenance work was completed in the third quarter, and lower than planned mill availability and throughput impacted copper production in the period. As a result, management does not expect to recover the copper production that was lost during the 18-day strike in June and copper production for the year is now expected to be in the range of 105 to 110 million pounds, compared to the original guidance of 115 million pounds. Increased mill availability and higher throughput is expected to be the primary driver of improved copper production in the fourth quarter.
Mining activities have mostly transitioned to the Connector pit, which will be the main source of mill feed in the fourth quarter and going forward. Mining of the current phase of the Gibraltar pit is expected to be finished in the first quarter of 2025. Additional oxide ore from the Connector pit will also be added to the heap leach pads this year. Refurbishment of Gibraltar's SX/EW plant, which has been idle since 2015, has begun and the plant is expected to be restarted in mid-2025.
For 2025, copper head grade and tonnes milled are expected to improve and total copper production is expected to be in the range of 120 to 130 million pounds. Lower grade ore stockpiles will be utilized to supplement mined ore in the first half of 2025, which will result in copper production being weighted to the second half of the year. Molybdenum production is forecast to increase next year as molybdenum head grades are expected to be notably higher in the Connector pit compared to the Gibraltar pit.
The Company has tendered Gibraltar concentrate to various customers for the remainder of 2024 and for significant tonnages in 2025 and 2026. In 2023, TCRCs accounted for approximately US$0.17 per pound of off-property costs. With these recently awarded offtake contracts, the Company expects TCRCs to reduce to nil on average in 2025 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 21 million pounds of copper covering the fourth quarter 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).
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Florence Copper
The Company has all the key permits in place for the commercial production facility at Florence Copper and construction has commenced. 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 ("PTF") 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$232 million (Q3 2022 basis)
Construction of the Florence Copper commercial production facility continues to advance on schedule. A total of 34 production wells out of a total of 90 new wells had been completed as of September 30, 2024. Earthworks and site preparation for the plant area and commercial wellfield is estimated to be 75% complete and installation of structural steel, tanks, and process equipment is underway. Construction of process and surface water run off ponds and the hiring of additional personnel for the construction and operations teams continues.
The Company has a fixed-price contract with the general contractor for construction of the SX/EW plant and associated surface infrastructure.
Florence Copper Quarterly Capital Spend
| Three months ended | Nine months ended | |||||
| (US$ in thousands) | September 30, 2024 | September 30, 2024 | ||||
| Site and PTF operations | 4,946 | 13,505 | ||||
| Commercial facility construction costs | 42,405 | 97,253 | ||||
| Other capital costs | 6,251 | 29,013 | ||||
| Total Florence project expenditures | 53,602 | 139,771 |
Based on the 2023 Technical report, the estimated remaining construction costs for the commercial facility were US$232 million (basis Q3 2022), and management expects that total costs will be within 10% to 15% of that estimate. The project remains on track for first copper production in late 2025.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Construction costs in the third quarter were US$42.4 million, and US$97.3 million has been incurred for the nine months ended September 30, 2024. Other capital costs of US$29.0 million include final payments for delivery of long-lead equipment that was ordered in 2022, and the construction of an evaporation pond to provide additional water management flexibility. Construction of this evaporation pond was completed in the third quarter.
The Company has closed several Florence project level financings to fund initial commercial facility construction costs. In July the Company received the third deposit of US$10 million from the US$50 million copper stream transaction with Mitsui & Co. (U.S.A.) Inc. ("Mitsui"). The fourth deposit was received in October and the remaining US$10 million is scheduled to be received in January 2025.
In addition, the Company has applied to the U.S. Department of Energy's ("DOE") Qualifying Advanced Energy Project Credit (48C) Program. Florence Copper, which is set to become North America's lowest GHG-intensity primary copper producer, qualifies as a critical materials project. After submitting a concept paper in June, Florence Copper received encouragement to proceed with the full application. The full application has now been filed seeking a tax credit of up to US$110 million, and the Company expects to hear whether the project receives the credit, or not, in mid-January 2025. The Department of the Treasury ("Treasury") and the Internal Revenue Service ("IRS"), in partnership with DOE, have announced up to US$6 billion in a second round of tax credit allocations for projects that expand clean energy manufacturing and recycling and critical materials refining, processing and recycling, and for projects that reduce greenhouse gas emissions at industrial facilities. DOE's Office of Manufacturing & Energy Supply Chains manages the 48C program on behalf of IRS and Treasury.
Remaining project construction costs are expected to be funded with the Company's available liquidity, remaining instalment from Mitsui, and cashflow from its 100% ownership interest in Gibraltar. The Company also has in place an undrawn corporate revolving credit facility for US$110 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
Based on a NI 43-101 technical report published in 2020, the Yellowhead Copper Project ("Yellowhead") has an 817 million tonne mineral reserve and a 25-year mine life. 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. 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.
The 2020 technical report was prepared using long-term copper price of US$3.10 per pound, a gold price of US$1,350 per ounce, and silver price of US$18 per ounce. A new technical report will be published in 2025 using updated long-term metal price assumptions, updated project costing, and incorporating the new Canadian tax credits available for copper mine development.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
The Company is preparing to enter the environmental assessment process in early 2025, and has recently opened a project office to support ongoing engagement with local communities including First Nations. A site investigation field program was completed in the third quarter, and the additional baseline data and modeling 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.
Market Review
| Copper | Molybdenum | Canadian/US Dollar Exchange |
 |
 |
 |
Prices (USD per pound for Commodities)
(Source Data: Bank of Canada, Platts Metals, and London Metals Exchange)
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Copper prices are currently around US$4.35 per pound, compared to US$4.43 per pound at September 30, 2024. Copper prices have moved sideways in recent weeks due to uncertainty arising from the US election, softness in Chinese demand in the near term coupled with the question over when announced stimulus measures in China will have an impact. Tight supply conditions are expected into 2025 due to few available sources of new primary copper supply capacity and growing demand trends primarily for electrification and the energy transition. Smelter treatment and refining charges remain historically low, with some contracts being concluded at negative (premium) or near zero rates. Such conditions indicate a shortfall of concentrate supply and potential shortages of copper metal could continue which could lead to higher copper prices to finish the year and into 2025.
Electrification of transportation and the focus on government investment in construction and infrastructure including initiatives focused on the renewable energy, electrification and meeting net zero targets by 2050, are inherently copper intensive and supports higher copper prices in the longer term. These factors continue to provide unprecedented catalysts for higher copper prices in the future as new mine supply lags growth in copper demand.
Approximately 6% of the Company's revenue is made up of molybdenum sales and Connector pit ore will provide higher moly grades in the coming years. During the third quarter of 2024, the average molybdenum price was US$22.13 per pound. Molybdenum prices are currently around US$22.08 per pound. The Company's sales agreements specify molybdenum pricing based on the published Platts Metals reports.
Approximately 80% of Gibraltar's costs are Canadian dollar denominated and therefore, fluctuations in the Canadian/US dollar exchange rate can have a significant effect on the Company's financial results.
Financial Performance
Earnings
| Three months ended September 30, |
Nine months ended September 30, | |||||||||||||||||
| (Cdn$ in thousands) | 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||
| Net (loss) income | (180 | ) | 871 | (1,051 | ) | 7,763 | 44,650 | (36,887 | ) | |||||||||
| Net unrealized foreign exchange (gain) loss | (7,259 | ) | 14,582 | (21,841 | ) | 11,837 | 2,666 | 9,171 | ||||||||||
| Unrealized loss on derivative instruments | 1,821 | 4,518 | (2,697 | ) | 15,373 | 238 | 15,135 | |||||||||||
| Other operating costs* | 4,098 | - | 4,098 | 14,533 | - | 14,533 | ||||||||||||
| Call premium on settlement of debt | - | - | - | 9,571 | - | 9,571 | ||||||||||||
| Loss on settlement of long-term debt, net of capitalized interest |
- | - | - | 2,904 | - | 2,904 | ||||||||||||
| Gain on Cariboo acquisition | - | - | - | (47,426 | ) | (46,212 | ) | (1,214 | ) | |||||||||
| Gain on acquisition of control of Gibraltar** | - | - | - | (14,982 | ) | - | (14,982 | ) | ||||||||||
| Realized gain on sale of inventory*** | - | - | - | 17,122 | - | 17,122 | ||||||||||||
| Inventory write-ups to net realized value that was sold or processed **** |
3,266 | - | 3,266 | 7,322 | - | 7,322 | ||||||||||||
| Accretion on Florence royalty obligation | 3,703 | - | 3,703 | 9,251 | - | 9,251 | ||||||||||||
| Accretion and fair value adjustment on consideration payable to Cariboo |
9,423 | 1,244 | 8,179 | 19,377 | 2,695 | 16,682 | ||||||||||||
| Non-recurring other expenses for Cariboo acquisition |
- | - | - | 532 | 263 | 269 | ||||||||||||
| Estimated tax effect of adjustments | (6,644 | ) | (1,556 | ) | (5,088 | ) | (6,718 | ) | 16,072 | (22,790 | ) | |||||||
| Adjusted net income | 8,228 | 19,659 | (11,431 | ) | 46,459 | 20,372 | 26,087 | |||||||||||
* Other operating costs relate to the in-pit crusher relocation project, and site care and maintenance costs during the labor strike in June.
** The $15.0 million gain on acquisition of control of Gibraltar in Q1 2024 relates to the write-up of finished copper concentrate inventory for Taseko's 87.5% share to its fair value at March 25, 2024.
*** Cost of sales for the nine months ended September 30, 2024 included $17.1 million in write-ups to net realizable value for concentrate inventory held at the date of acquisition of control of Gibraltar (March 25, 2024) that were subsequently sold. The realized portion of the gains recorded in the first quarter for GAAP purposes have been included in Adjusted net income in the period they were sold.
**** Write-ups to net realizable value for inventory held at the date of acquisition of control of Gibraltar (March 25, 2024) totaled $9.2 million. The inventory write-ups in the first quarter for GAAP purposes have been included in Adjusted net income in the period they were sold or processed. Cost of sales for the nine months ended September 30, 2024 included $7.3 million in inventory write-ups that were subsequently sold or processed in the second and third quarters.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
The Company's adjusted net income for the three months ended September 30, 2024 was $8.2 million ($0.03 per share) compared to $19.7 million ($0.07 per share) for the comparative period. The decrease in adjusted net income during the quarter was driven by increased site operating costs as a result of more tons being mined this quarter compared to third quarter of 2023 and a major maintenance job on one of Gibraltar's shovels being completed this quarter. Revenues were consistent compared to the prior year quarter, with the effects of decreased overall sales volume offset by an increased average copper price and higher percentage ownership in Gibraltar.
Net loss for the quarter was $0.2 million (nil loss per share) compared to net income of $0.9 million (nil per share) for the comparative period. The net loss reflects $13.1 million in accretion on Florence financing arrangements and $4.1 million in relocation and demolition costs expensed for completion of the crusher move. The current quarter also included $7.3 million in unrealized foreign exchange gains whereas the prior year quarter had $19.1 million in unrealized foreign exchange and derivative losses.
The Company's adjusted net income for the nine months ended September 30, 2024 was $46.5 million ($0.16 per share) compared to $20.4 million ($0.07 per share) for the comparative period. Adjusted net income for the current period benefitted from the $26.3 million business interruption insurance recovery related to a component replacement in Concentrator #2 in January that was recognized in the second quarter of 2024 as well as increased sales volume and operating margin from Gibraltar, primarily attributable to the incremental ownership interest in Gibraltar.
Net income for the nine months ended September 30 was $7.8 million ($0.03 per share) compared to $44.7 million ($0.15 per share) for the comparative period. The decrease in net income reflects adjustments for a number of financing transactions concluded in 2024 including $15.4 million in unrealized losses on derivative instruments including fair value adjustments on the Florence copper stream, $9.3 million in accretion on the Florence royalty arrangement closed in February 2024, $19.4 million in accretion on Cariboo earn-out liabilities due to rising copper price expectations, and $12.5 million in costs that were expensed related to the refinancing of the Company's senior secured notes. There was also $14.5 million in relocation and demolition costs expensed related to the primary crusher move for Concentrator #1.
No adjustments are made to adjusted net income for provisional price adjustments in the three and nine months ended September 30, 2024.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Revenues
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||||
| (Cdn$ in thousands) | 20241 | 20231 | Change | 20241 | 20231 | Change | ||||||||||||
| Copper contained in concentrate | 143,808 | 137,011 | 6,797 | 420,694 | 359,066 | 61,628 | ||||||||||||
| Copper price adjustments on settlement | 2,130 | 1,652 | 478 | 2,375 | (105 | ) | 2,480 | |||||||||||
| Molybdenum concentrate | 10,109 | 10,333 | (224 | ) | 22,362 | 23,794 | (1,432 | ) | ||||||||||
| Molybdenum price adjustments on settlement | (412 | ) | 209 | (621 | ) | 1,514 | 789 | 725 | ||||||||||
| Silver | 1,534 | 1,395 | 139 | 4,654 | 4,441 | 213 | ||||||||||||
| Total gross revenue | 157,169 | 150,600 | 6,569 | 451,599 | 387,985 | 63,614 | ||||||||||||
| Less: Treatment and refining costs | (1,552 | ) | (6,765 | ) | 5,213 | (11,305 | ) | (16,707 | ) | 5,402 | ||||||||
| Revenue | 155,617 | 143,835 | 11,782 | 440,294 | 371,278 | 69,016 | ||||||||||||
| (thousands of pounds, unless otherwise noted) | ||||||||||||||||||
| Sales of copper in concentrate2 | 25,322 | 26,993 | (1,671 | ) | 74,477 | 68,101 | 6,376 | |||||||||||
| Average realized copper price (US$ per pound) | 4.23 | 3.83 | 0.40 | 4.18 | 3.86 | 0.32 | ||||||||||||
| Average LME copper price (US$ per pound) | 4.18 | 3.79 | 0.39 | 4.14 | 3.89 | 0.25 | ||||||||||||
| Average exchange rate (Cdn$/US$) | 1.36 | 1.34 | 0.02 | 1.36 | 1.35 | 0.01 |
1 The financial results reported include the Company's 87.5% proportionate share of Gibraltar income and expenses for the period March 16, 2023 to March 24, 2024 (prior to March 15, 2023 - 75%) and 100% of Gibraltar income and expenses for the period March 25, 2024 to September 30, 2024.
2 This amount includes a net smelter payable deduction of approximately 3.5% to derive net payable pounds of copper sold, 12.5% of Cariboo's share of copper sales for the period March 16, 2023 to March 24, 2024 and 25% since March 25, 2024.
Copper revenues for the three months ended September 30, 2024 increased by $6.8 million compared to the same prior period, with $15.3 million due to higher copper prices and a weakening Canadian dollar, partially offset by $8.5 million due to a reduction in copper sales volume.
Copper revenues for the nine months ended September 30, 2024 increased by $61.6 million compared to the same prior period, with $31.3 million due to larger attributable sales volumes of 6.4 million pounds, $26.9 million due to higher copper prices and $3.4 million due to the favorable impact of a stronger US dollar in the first nine months of 2024 compared to 2023. The increase in sales volumes reflects the impact from the Cariboo acquisition in March, partially offset by the impact from the 18-day union strike in Gibraltar in June and mill availability due to mill maintenance downtime in 2024.
Molybdenum revenues for the three months ended September 30, 2024 decreased by $0.2 million compared to the same prior period primarily due to lower average molybdenum prices of US$21.77 per pound, compared to US$23.76 per pound for the prior period. The decrease was partially offset by the impact from the additional ownership interest in Gibraltar.
Molybdenum revenues for the nine months ended September 30, 2024 decreased by $1.4 million compared to the same prior period due primarily to lower average molybdenum prices of US$21.17 per pound, compared to US$26.05 per pound for the prior period and partially offset by the impact from the additional ownership interest in Gibraltar.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Cost of sales and other operating costs
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||||
| (Cdn$ in thousands) | 20241 | 20231 | Change | 20241 | 20231 | Change | ||||||||||||
| Site operating costs | 107,712 | 87,148 | 20,564 | 267,194 | 244,960 | 22,234 | ||||||||||||
| Transportation costs | 8,682 | 7,681 | 1,001 | 25,243 | 19,751 | 5,492 | ||||||||||||
| Changes in inventories: | ||||||||||||||||||
| Changes in finished goods | (2,938 | ) | (4,267 | ) | 1,329 | 27,916 | (7,224 | ) | 35,140 | |||||||||
| Changes in sulphide ore stockpiles | (5,424 | ) | (12,172 | ) | 6,748 | (4,246 | ) | (8,029 | ) | 3,783 | ||||||||
| Changes in oxide ore stockpiles | (3,665 | ) | - | (3,665 | ) | (9,320 | ) | (12,428 | ) | 3,108 | ||||||||
| Production costs | 104,367 | 78,390 | 25,977 | 306,787 | 237,030 | 69,757 | ||||||||||||
| Depletion and amortization | 20,466 | 15,993 | 4,473 | 49,211 | 43,614 | 5,597 | ||||||||||||
| Cost of sales | 124,833 | 94,383 | 30,450 | 355,998 | 280,644 | 75,354 | ||||||||||||
| Site operating costs per ton milled* | 14.23 | 12.39 | 1.84 | 12.16 | 13.11 | (0.95 | ) | |||||||||||
| Other operating costs: | ||||||||||||||||||
| Crusher relocation costs | 4,098 | - | 4,098 | 12,009 | - | 12,009 | ||||||||||||
| Site care and maintenance costs | - | - | - | 2,524 | - | 2,524 | ||||||||||||
| 4,098 | - | 4,098 | 14,533 | - | 14,533 | |||||||||||||
| Insurance recovery | - | - | - | (26,290 | ) | - | (26,290 | ) | ||||||||||
1 The financial results reported include the Company's 87.5% proportionate share of Gibraltar income and expenses for the period March 16, 2023 to March 24, 2024 (prior to March 15, 2023 - 75%) and 100% of Gibraltar income and expenses for the period March 25, 2024 to September 30, 2024.
Site operating costs for the three months ended September 30, 2024 increased by $20.6 million over the same prior period primarily due to the Company's increased ownership in Gibraltar by an additional 12.5% in the current period. Higher overall mining rates this quarter compared to the same prior period was also a factor. In addition, there were some major shovel maintenance in the current quarter as well as the impact of the higher labour costs due to the new union agreement, partially offset by lower input prices on consumables such as diesel.
Site operating costs for the nine months ended September 30, 2024 increased by $22.2 million over the same prior period and reflect the change in the proportionate share of Gibraltar expenses during the current period, partially offset by the impact of the 18-day labour strike in June 2024 which reduced site operating costs in the second quarter of 2024.
Transportation costs for the three months ended September 30, 2024 increased by $1.0 million over the same prior period, primarily due to the impact of proportionately consolidating the additional interest of Gibraltar.
Transportation costs for the nine months ended September 30, 2024 increased by $5.5 million over the same prior period, primarily due to the impact of proportionately consolidating the additional interest of Gibraltar, and higher costs for rail, ocean freight and port handling costs, partially offset by lower trucking related costs.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Depletion and amortization for the three and nine months ended September 30, 2024 increased by $4.5 million and $5.6 million, respectively, over the same prior period primarily due to the impact of proportionately consolidating the additional interest of Gibraltar, partially offset by lower mill throughput from the impact of the June union strike as certain assets are depreciated on a units of production basis.
Other expenses (income)
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||||
| (Cdn$ in thousands) | 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||
| General and administrative | 3,542 | 2,506 | 1,036 | 10,188 | 9,396 | 792 | ||||||||||||
| Share-based compensation expense | 1,435 | 675 | 760 | 9,387 | 4,404 | 4,983 | ||||||||||||
| Realized loss on derivative instruments | 983 | 470 | 513 | 4,340 | 4,407 | (67 | ) | |||||||||||
| Unrealized (gain) loss on derivative instruments | (973 | ) | 4,518 | (5,491 | ) | 8,764 | 238 | 8,526 | ||||||||||
| Unrealized loss on Florence copper stream derivative | 2,793 | - | 2,793 | 6,608 | - | 6,608 | ||||||||||||
| Project evaluation expenditures | 2,673 | 259 | 2,414 | 3,432 | 796 | 2,636 | ||||||||||||
| Gain on Cariboo acquisition | - | - | - | (47,426 | ) | (46,212 | ) | (1,214 | ) | |||||||||
| Gain on acquisition of control of Gibraltar | - | - | - | (14,982 | ) | - | (14,982 | ) | ||||||||||
| Other (income) expense, net | (23 | ) | (528 | ) | 505 | 238 | (732 | ) | 970 | |||||||||
| 10,430 | 7,900 | 2,530 | (19,451 | ) | (27,703 | ) | 8,252 | |||||||||||
General and administrative expenses for the three and nine months ended September 30, 2024, increased by $1.0 million and $0.8 million, respectively, primarily due to increased activity levels at Florence in the current year.
Share-based compensation expense is comprised of amortization of share options and performance share units and the expense on deferred and restricted share units. Share-based compensation expense increased for the three and nine months ended September 30, 2024, compared to the same periods in 2023, primarily due to increases in the Company's share price during the period and its impact on the valuation of the deferred share units. More information is set out in Note 16b of the Financial Statements.
For the three and nine months ended September 30, 2024, the Company realized a net loss on derivative instruments of $1.0 million and $4.3 million, respectively, primarily due to the expensing of premiums paid for copper collars for the period that settled out-of-the-money.
For the three and nine months ended September 30, 2024, the net unrealized gain on derivative instruments of $1.0 million and net unrealized loss on derivative instruments of $8.8 million, respectively, relates primarily to the change in the fair value of outstanding copper price collars covering the last quarter of 2024 and the full year of 2025. These hedge positions were in-the-money in the quarter due to lower prevailing copper prices.
For the three and nine months ended September 30, 2024, the unrealized loss on the Florence copper stream derivative was $2.8 million and $6.6 million, respectively. The increase of unrealized loss was primarily due to the impact of higher estimated copper prices over the forecast period.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
On March 25, 2024, the Company completed the acquisition of the remaining 50% of Cariboo from Dowa and Furukawa. The Company recognized a bargain purchase gain of $47.4 million on the acquisition for the difference between the fair value of the net assets acquired and the estimated fair value of total consideration payable. On March 15, 2023, the Company acquired 50% of Cariboo from Sojitz which gave the Company an additional 12.5 % effective interest in Gibraltar. The Company recognized a bargain purchase gain of $46.2 million on the acquisition for the difference between the fair value of the net assets acquired and the estimated fair value of total consideration payable. More information on these gains is set out in Note 3 of the Financial Statements.
The gain of $15.0 million on the acquisition of control of Gibraltar reflects the difference in the fair value of the assets acquired and liabilities assumed and their book value immediately before the acquisition. The gain was attributed to the write-up of finished copper concentrate inventory to fair value at March 25, 2024 which was subsequently sold in the first half of 2024.
Project evaluation expenditures represent costs associated with the New Prosperity project and other technical expenditures undertaken by Taseko's engineering and technical teams on various project initiatives.
Finance expenses and income
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||||
| (Cdn$ in thousands) | 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||
| Interest expense | 16,244 | 12,250 | 3,994 | 44,650 | 35,072 | 9,578 | ||||||||||||
| Amortization of financing fees | 579 | 665 | (86 | ) | 1,938 | 2,053 | (115 | ) | ||||||||||
| Finance expense - deferred revenue | 1,828 | 1,836 | (8 | ) | 5,005 | 4,801 | 204 | |||||||||||
| Accretion of PER | 695 | 572 | 123 | 2,090 | 1,648 | 442 | ||||||||||||
| Accretion on Florence royalty obligation | 3,703 | - | 3,703 | 9,251 | - | 9,251 | ||||||||||||
| Accretion and fair value adjustment on consideration payable to Cariboo |
9,423 | 1,244 | 8,179 | 19,377 | 2,695 | 16,682 | ||||||||||||
| Finance income | (1,504 | ) | (322 | ) | (1,182 | ) | (3,501 | ) | (2,000 | ) | (1,501 | ) | ||||||
| Loss on settlement of long-term debt | - | - | - | 4,646 | - | 4,646 | ||||||||||||
| Less: interest capitalized | (6,787 | ) | (2,282 | ) | (4,505 | ) | (15,506 | ) | (6,207 | ) | (9,299 | ) | ||||||
| Finance expenses, net | 24,181 | 13,963 | 10,218 | 67,950 | 38,062 | 29,888 | ||||||||||||
Interest expense for the three and nine months ended September 30, 2024, increased from the prior periods primarily due to the impact of higher interest rates and higher principal on the new senior secured notes and new Florence equipment loans, which was partially offset by the capitalization of a portion of borrowing costs attributed to funding of Florence development costs.
Finance expense on deferred revenue adjustments represents the implicit financing component of the upfront deposit from the silver sales streaming arrangement with Osisko Gold Royalties Ltd. ("Osisko").
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Accretion and fair value adjustments on the consideration payable to Cariboo were $9.4 million and $19.4 million for the three and nine months ended September 30, 2024, respectively, and were primarily due to the impact of higher estimated future copper prices over the repayment period. Accretion and fair value adjustments on the Florence royalty obligation were $3.7 million and $9.3 million for the three and nine months ended September 30, 2024, respectively, accounting for increased forecast copper prices on the royalty to Taurus since closing in February 2024 as well as the passing of time with Florence advancing closer towards initial production.
Finance income for the three and nine months ended September 30, 2024, increased from the prior year due to higher interest rates on the Company's cash balances.
Income tax
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||||
| (Cdn$ in thousands) | 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||
| Current income tax expense | 915 | 1,244 | (329 | ) | 2,353 | 2,003 | 350 | |||||||||||
| Deferred income tax (recovery) expense | (1,115 | ) | 10,797 | (11,912 | ) | 17,482 | 30,935 | (13,453 | ) | |||||||||
| Income tax (recovery) expense | (200 | ) | 12,041 | (12,241 | ) | 19,835 | 32,938 | (13,103 | ) | |||||||||
| Effective tax rate | 52.6% | 93.3% | (40.7%) | 71.9% | 42.5% | 29.4% | ||||||||||||
| Canadian statutory rate | 27.0% | 27.0% | - | 27.0% | 27.0% | - | ||||||||||||
| B.C. Mineral tax rate | 9.5% | 9.5% | - | 9.5% | 9.5% | - | ||||||||||||
The overall income tax (recovery) expense for the three and nine months ended September 30, 2024 was due to deferred income tax (recovery) expense recognized on income for accounting purposes. The effective tax rate for the first nine months of 2024 is higher than the combined B.C. mineral and income statutory tax rate due to certain items such as finance charges, derivative gains and general and administrative costs that are not deductible for B.C. mineral tax purposes.
As foreign exchange revaluations on the senior secured notes are not recognized for tax purposes until realized, and in the case of capital losses, when they are applied, the effective tax rate may be significantly higher or lower than the statutory rates, as is the case for the three and nine months ended September 30, 2024, relative to net income for those periods.
The current income tax expense represents an estimate of B.C. mineral taxes payable for the three and nine months ended September 30, 2024.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Financial Condition Review
Balance sheet review
| At September 30, | At December 31, | ||||||||
| (Cdn$ in thousands) | 2024 | 2023 | Change | ||||||
| Cash and equivalents | 208,751 | 96,477 | 112,274 | ||||||
| Other current assets | 160,137 | 152,978 | 7,159 | ||||||
| Property, plant and equipment | 1,631,723 | 1,286,001 | 345,722 | ||||||
| Other assets | 46,821 | 30,912 | 15,909 | ||||||
| Total assets | 2,047,432 | 1,566,368 | 481,064 | ||||||
| Current liabilities1 | 186,823 | 113,531 | 73,292 | ||||||
| Debt: | |||||||||
| Senior secured notes | 663,791 | 524,491 | 139,300 | ||||||
| Equipment related financings | 79,521 | 88,209 | (8,688 | ) | |||||
| Credit facility | (954 | ) | 25,191 | (26,145 | ) | ||||
| Deferred revenue | 63,877 | 59,720 | 4,157 | ||||||
| Other liabilities | 572,885 | 321,078 | 251,807 | ||||||
| Total liabilities | 1,565,943 | 1,132,220 | 433,723 | ||||||
| Equity | 481,489 | 434,148 | 47,341 | ||||||
| Net debt (debt minus cash and equivalents) | 533,607 | 541,414 | (7,807 | ) | |||||
| Total common shares outstanding (millions) | 300.2 | 290.0 | 10.2 |
1 Excludes current portion of long-term debt
The Company's asset base is comprised principally of property, plant and equipment, reflecting the capital intensive nature of its large scale, open pit mining operation at Gibraltar and construction the commercial facility at Florence. Other current assets primarily include accounts receivable, inventories (concentrate inventories, ore stockpiles, and supplies), prepaid expenses, and marketable securities. Concentrate inventories, accounts receivable and cash balances can fluctuate due to sales and cash settlement schedules.
Property, plant and equipment increased by $345.7 million in the nine months ended September 30, 2024, which includes the impact from acquiring an additional 12.5% effective interest in Gibraltar from Dowa and Furukawa, $212.9 million for Florence Copper development costs, and capital expenditures at Gibraltar (deferred stripping, sustaining capital and capital projects).
Net debt has decreased by $7.8 million in the nine months ended September 30, 2024, primarily due to increase of cash position which included net proceeds from the new senior secured notes, Mitsui and Taurus financings, and release of restricted cash offset by investment in the development of Florence Copper and the increase in debt due to the effect of a weakening Canadian dollar against US dollar net borrowings.
Deferred revenue relates to the advance payments received from Osisko for the sale of Taseko's share of future silver production from Gibraltar and customer advance payments on copper concentrate.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Other liabilities increased by $251.8 million primarily due to the $68.3 million for deferred consideration payable to Dowa and Furukawa for the acquisition of 50% of Cariboo and the $23.0 million additional share of Gibraltar's provision for environmental rehabilitation that the Company assumed with the purchase of Cariboo, $75.7 million of Florence royalty obligation related to the Taurus royalty financing closed in February, $46.0 million for the net Florence copper stream derivative liability to Mitsui, and an increase in deferred tax liabilities arising primarily from the recent acquisition of 50% of Cariboo.
As at November 6, 2024, there were 304,453,862 common shares and 9,191,033 stock options outstanding. More information on these instruments and the terms of their exercise is set out in Note 16b of the Financial Statements.
Liquidity, cash flow and capital resources
At September 30, 2024, the Company had cash and equivalents of $208.8 million (December 31, 2023 - $96.5 million).
Cash flow provided by operations during the three months ended September 30, 2024 was $65.0 million compared to $27.0 million for the prior period. The increase in cash flow provided by operations included sale of copper concentrate inventory, higher copper prices and insurance proceeds payout, partially offset by the impact from the June union strike.
Cash flow provided by operations during the nine months ended September 30, 2024 was $159.3 million compared to $88.3 million for the prior period. The increase in cash flow provided by operations was due primarily to higher copper sales volumes, copper prices and the drawdown and sale of finished inventory in addition to the insurance proceeds noted previously.
Cash used for investing activities during the three months ended September 30, 2024 was $77.3 million compared to $31.0 million for the same prior period. Investing cash flows in the third quarter includes $16.5 million for capital expenditures at Gibraltar (which includes $3.6 million for capitalized stripping costs and $12.3 million for sustaining capital and $0.6 million for capital projects), and $59.8 million of cash expenditures for Florence Copper.
Cash used for investing activities during the nine months ended September 30, 2024 was $204.8 million compared to $108.6 million for the same prior period. Investing cash flows in the first nine months of 2024 includes $54.0 million for capital expenditures at Gibraltar (which includes $28.3 million for capitalized stripping costs, $22.1 million for sustaining capital, and $3.6 million for capital projects), $146.6 million of cash expenditures for Florence Copper and $6.8 million for the purchase of copper collars, offset by release of restricted cash relating to exchange of reclamation security of $12.5 million. Included in investing activities in the period is the Company's 50% acquisition of Cariboo, which included an initial fixed payment of $5.0 million to Dowa and Furukawa and the pickup of the Company's 50% share of Cariboo's cash balance of $9.8 million offset by a $10 million second instalment to Sojitz in February and $4.5 million of 2023 performance payment to Sojitz in April.
Cash provided by financing activities for the three months ended September 30, 2024 was $23.4 million comprised of $23.1 million net proceeds from share issuance and $11.3 million net proceeds from Florence financing. Partially offset by interest paid of $3.7 million, and Gibraltar equipment principal repayments of $7.4 million.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Cash provided by financing activities for the nine months ended September 30, 2024 was $158.9 million comprised of proceeds from issuance of the US$500 million senior secured notes of $670.4 million, Florence financings totaling $101.8 million, $23.1 million net proceeds from share issuance, and $2.2 million of share-based compensation, partially offset by interest paid of $34.7 million, repayment of the US$400 million senior secured notes and call premium of $556.5 million, revolving credit facility repayment of $26.5 million, and Gibraltar equipment principal repayments of $20.9 million.
The Company has approximately $317.0 million of available liquidity at September 30, 2024, including a cash balance of $208.8 million and its undrawn US$80 million revolving credit facility. On November 6, 2024, the Company entered into an amendment for its revolving credit facility, extending the maturity date to November 2027 from July 2026, and increasing the facility amount to US$110 million from US$80 million.
Based on current copper prices and forecast copper production and with copper collar hedges in place, stable operating margins and cash flows are expected from Gibraltar for the remainder of 2024. Other than refurbishment of the SX/EW plant over the next 12 months, Gibraltar has no other significant capital projects planned for 2024.
With construction underway at Florence Copper, the Company has entered into significant capital commitments for the completion of the construction of the commercial facility. The Company intends to finance the remaining Florence Copper project costs over the next fifteen months from available liquidity, remaining instalments from Mitsui, cashflow from Gibraltar and/or its undrawn corporate credit facility.
If needed, the Company could raise further additional capital through equity financings or asset sales, including royalties, sales of project interests, or joint ventures, or additional credit facilities, including additional notes offerings or increasing the size of its credit lines with commercial banks. The Company evaluates these financing alternatives based on a number of factors including the prevailing metal prices and projected operating cash flow from Gibraltar, relative valuation, liquidity requirements, covenant restrictions and other factors, in order to optimize the Company's cost of capital and maximize shareholder value.
Future changes in copper and molybdenum market prices could also impact the timing and amount of cash available for future investment in the Company's capital commitments and development projects, debt obligations, and other uses of capital. To mitigate commodity price risks in the short-term, copper price options are entered into for a substantial portion of Taseko's share of Gibraltar copper production and the Company has a long track record of doing so.
Hedging strategy
The Company generally fixes substantially all of the copper prices of its copper concentrate shipments at the time of shipment. Where the customer's offtake contract does not provide a price fixing option, the Company may look to undertake a quotational period hedge directly with a financial institution as the counterparty in order to fix the price of the shipment.
To protect against sudden and unexpected copper price volatility in the market, the Company's hedging strategy aims to secure a minimum price for a significant portion of future copper production using copper put options that are either purchased outright or substantially funded by the sale of copper call options that are out of the money. The amount and duration of the copper hedge position is based on an assessment of business-specific risk elements combined with the copper pricing outlook. Copper price and quantity exposure are reviewed regularly to ensure that adequate revenue protection is in place.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Hedge positions are typically extended by adding incremental quarters at established floor prices (i.e. the strike price of the copper put option) to provide the necessary price protection. Considerations for the cost of the hedging program include an assessment of Gibraltar's estimated production costs, copper price trends and the Company's fixed capital requirements during the relevant period. During periods of volatility or step changes in the copper price, the Company may revisit outstanding hedging contracts and determine whether the copper put (floor) or call (ceiling) levels should be adjusted in line with the market while maintaining copper price protection.
From time to time, the Company will look at potential hedging opportunities to mitigate the risk of rising input costs, including foreign exchange and fuel prices where such a strategy is cost effective. To protect against a potential operating margin squeeze that could arise from oil and diesel price shocks, the Company purchases fuel call options to provide a price cap for its share of diesel that is used by its mining fleet.
A summary of the Company's outstanding hedges are shown below:
|
|
Notional amount |
Strike price |
Term to maturity |
Original cost |
|
At September 30, 2024 |
||||
|
Copper collars |
21 million lbs |
Floor - US$3.75 per lb |
Q4 2024 |
$1.0 million |
|
Copper collars |
54 million lbs |
Floor - US$4.00 per lb |
H1 2025 |
$2.6 million |
|
Copper collars |
54 million lbs |
Floor - US$4.00 per lb |
H2 2025 |
$2.2 million |
|
Fuel call options |
18 million ltrs |
US$0.65 per ltr |
H1 2025 |
$0.6 million |
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Commitments and contingencies
| Payments due | |||||||||||||||||||||
| (Cdn$ in thousands) | Remainder of 2024 |
2025 | 2026 | 2027 | 2028 | Thereafter | Total | ||||||||||||||
| Debt: | |||||||||||||||||||||
| 2030 Notes | - | - | - | - | - | 676,300 | 676,300 | ||||||||||||||
| Interest | 29,137 | 55,795 | 55,795 | 55,795 | 55,795 | 27,897 | 280,214 | ||||||||||||||
| Equipment loans: | |||||||||||||||||||||
| Principal | 4,691 | 20,416 | 22,354 | 9,416 | 6,817 | - | 63,694 | ||||||||||||||
| Interest | 1,227 | 3,978 | 2,387 | 1,060 | 295 | - | 8,947 | ||||||||||||||
| Lease liabilities: | |||||||||||||||||||||
| Principal | 3,808 | 6,475 | 3,668 | 1,287 | 434 | 286 | 15,958 | ||||||||||||||
| Interest | 339 | 781 | 317 | 92 | 26 | 8 | 1,563 | ||||||||||||||
| Cariboo acquisition payments - Sojitz1 | - | 10,000 | 10,000 | 10,000 | 10,000 | - | 40,000 | ||||||||||||||
| Cariboo acquisition payments - Dowa and Furukawa2 | - | - | 9,000 | 9,000 | 10,000 | 84,000 | 112,000 | ||||||||||||||
| PER3 | - | - | - | - | - | 168,686 | 168,686 | ||||||||||||||
| Capital expenditures | 37,647 | 31,202 | - | - | - | - | 68,849 | ||||||||||||||
| Other expenditures | |||||||||||||||||||||
| Transportation related services4 | 1,175 | 7,708 | 1,463 | - | - | - | 10,346 | ||||||||||||||
1 On March 15, 2023, the Company completed its acquisition of an additional 12.5% interest in Gibraltar from Sojitz. The acquisition price consists of a minimum amount of $60 million payable over a five-year period and potential contingent payments depending on Gibraltar copper revenue and copper prices over the five year period. Remaining minimum amounts will be paid in $10 million annual instalments over the remaining four years. The Company estimates that there is $40 million payable over the next 4 years relating to the contingent consideration payable to Sojitz for its acquisition of the 12.5% interest in the shares of Cariboo which is not included in the table above.
2 On March 25, 2024, the Company completed the acquisition of the remaining 50% of Cariboo from Dowa and Furukawa. The acquisition price payable to Dowa and Furukawa is a minimum of $117 million and a maximum of $142 million payable over a 10-year payment period, with the quantum and timing of payment depending on LME copper prices and the cashflow of Gibraltar. An initial $5 million payment was made to Dowa and Furukawa on closing. The remaining cash consideration will be repayable in annual payments commencing in March 2026.
3 Provision for environmental rehabilitation amounts presented in the table represents the present value of estimated costs of legal and constructive obligations required to retire an asset, including decommissioning and other site restoration activities, primarily for Gibraltar and Florence Copper. As at September 30, 2024, the Company has provided surety bonds of $108.5 million for Gibraltar's reclamation security. For Florence Copper, the Company has provided to the federal and state regulator surety bonds totaling $48.8 million as reclamation security.
4 Transportation related services commitments include ocean freight and port handling services, which are both cancelable upon certain operating circumstances.
The Company has made minimum capital expenditure commitments relating to equipment, contractors and other supplies for the Florence Copper project totaling $62.1 million as at September 30, 2024.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Summary of Quarterly Results
|
|
2024 |
2023 |
2022 |
|||||
|
(Cdn$ in thousands, |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
|
Revenues |
155,617 |
137,730 |
146,947 |
153,694 |
143,835 |
111,924 |
115,519 |
100,618 |
|
Net (loss) income |
(180) |
(10,953) |
18,896 |
38,076 |
871 |
9,991 |
33,788 |
(2,275) |
|
Basic EPS |
- |
(0.04) |
0.07 |
0.13 |
- |
0.03 |
0.12 |
(0.01) |
|
Adjusted net income (loss) * |
8,228 |
30,503 |
7,728 |
24,060 |
19,659 |
(4,376) |
5,088 |
7,146 |
|
Adjusted basic EPS * |
0.03 |
0.10 |
0.03 |
0.08 |
0.07 |
(0.02) |
0.02 |
0.02 |
|
Adjusted EBITDA * |
47,689 |
70,777 |
49,923 |
69,107 |
62,695 |
22,218 |
36,059 |
35,181 |
|
|
||||||||
|
(US$ per pound, except where indicated) |
||||||||
|
Average realized copper price |
4.23 |
4.49 |
3.89 |
3.75 |
3.83 |
3.78 |
4.02 |
3.66 |
|
Total operating costs * |
2.92 |
2.99 |
2.46 |
1.91 |
2.20 |
2.66 |
2.94 |
2.75 |
|
Copper sales (million pounds) |
26.3 |
22.6 |
27.7 |
31.4 |
28.1 |
22.8 |
20.8 |
19.1 |
Financial results for the last eight quarters reflect: volatile copper and molybdenum prices and foreign exchange rates that impact realized sale prices; and variability in the quarterly sales volumes due to copper grades and timing of shipments which impacts revenue recognition. In addition, first quarter of 2024 and 2023 were impacted by the gain recorded on the purchase price allocation for the Cariboo acquisition.
Critical Accounting Policies and Estimates
The Company's material accounting policies are presented in Note 2.4 of the 2023 annual consolidated financial statements. The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies, including the accounting for the Cariboo acquisition and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
In the process of applying the Company's accounting policies, significant areas where judgment is required include the determination of a joint arrangement, determining the timing of transfer of control of inventory for revenue recognition, provisions for environmental rehabilitation, reserve and resource estimation, functional currency, determination of the accounting treatment of the advance payment under the silver purchase and sale agreement reported as deferred revenue, determination of business or asset acquisition treatment, and recovery of other deferred tax assets.
Significant areas of estimation include reserve and resource estimation; fair value of assets and liabilities acquired in a business combination, asset valuations and the measurement of impairment charges or reversals; valuation of inventories; plant and equipment lives; tax provisions; provisions for environmental rehabilitation; valuation of financial instruments and derivatives; capitalized stripping costs and share-based compensation. Key estimates and assumptions made by management with respect to these areas have been disclosed in the notes to these consolidated financial statements as appropriate.
The accuracy of reserve and resource estimates is a function of the quantity and quality of available data and the assumptions made and judgment used in the engineering and geological interpretation, and may be subject to revision based on various factors. Changes in reserve and resource estimates may impact the carrying value of property, plant and equipment; the calculation of depreciation expense; the capitalization of stripping costs incurred during production; and the timing of cash flows related to the provision for environmental rehabilitation.
Changes in forecast prices of commodities, exchange rates, production costs and recovery rates may change the economic status of reserves and resources. Forecast prices of commodities, exchange rates, production costs and recovery rates, and discount rates assumptions, either individually or collectively, may impact the carrying value of derivative financial instruments, inventories, property, plant and equipment, and intangibles, as well as the measurement of impairment charges or reversals. These items also impacted the fair values of assets and liabilities recorded in the acquisition disclosed in Note 4 of the 2023 annual consolidated financial statements and Note 3 of the Financial Statements.
There were no changes in accounting policies during the nine months ended September 30, 2024.
Internal and Disclosure Controls Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (ICFR) and disclosure controls and procedures (DC&P).
The Company's internal control system over financial reporting is designed to provide reasonable assurance to management and the Board of Directors regarding the preparation and fair presentation of published financial statements. Internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
The Company's internal control system over disclosure controls and procedures is designed to provide reasonable assurance that material information relating to the Company is made known to management and disclosed to others and information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by us under securities legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined effective can provide only reasonable assurance with respect to financial reporting and disclosure.
There have been no changes in our internal controls over financial reporting and disclosure controls and procedures during the nine months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting and disclosure.
Key Management Personnel
Key management personnel include the members of the Board of Directors and executive officers of the Company.
The Company contributes to a post-employment defined contribution pension plan on the behalf of certain key management personnel. This retirement compensation arrangement ("RCA Trust") was established to provide benefits to certain executive officers on or after retirement in recognition of their long service. Upon retirement, the participant is entitled to the distribution of the accumulated value of the contributions under the RCA Trust. Obligations for contributions to the defined contribution pension plan are recognized as compensation expense in the periods during which services are rendered by the executive officers.
Certain executive officers are entitled to termination and change in control benefits. In the event of termination without cause, other than a change in control, these executive officers are entitled to an amount ranging from 12-month to 18-months' salary. In the event of a change in control, if a termination without cause or a resignation occurs within 12 months following the change of control, these executive officers are entitled to receive, among other things, an amount ranging from 12-months' to 24-months' salary and accrued bonus, and all stock options held by these individuals will fully vest.
Executive officers and directors also participate in the Company's share option program (refer to Note 16b of the Financial Statements).
Compensation for key management personnel (including all members of the Board of Directors and executive officers) is as follows:
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
| (Cdn$ in thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||
| Salaries and benefits | 1,072 | 897 | 4,380 | 4,043 | ||||||||
| Post-employment benefits | 220 | 220 | 660 | 702 | ||||||||
| Share-based compensation expense | 1,147 | 442 | 8,193 | 3,493 | ||||||||
| 2,439 | 1,559 | 13,233 | 8,238 | |||||||||
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Non-GAAP Performance Measures
This document includes certain non-GAAP performance measures that do not have a standardized meaning prescribed by IFRS. These measures may differ from those used by, and may not be comparable to such measures as reported by, other issuers. The Company believes that these measures are commonly used by certain investors, in conjunction with conventional IFRS measures, to enhance their understanding of the Company's performance. These measures have been derived from the Company's financial statements and applied on a consistent basis. The following tables below provide a reconciliation of these non-GAAP measures to the most directly comparable IFRS measure.
Total operating costs and site operating costs, net of by-product credits
Total costs of sales include all costs absorbed into inventory, as well as transportation costs and insurance recoverable. Site operating costs are calculated by removing net changes in inventory, depletion and amortization, insurance recoverable, and transportation costs from cost of sales. Site operating costs, net of by-product credits is calculated by subtracting by-product credits from the site operating costs. Site operating costs, net of by-product credits per pound are calculated by dividing the aggregate of the applicable costs by copper pounds produced. Total operating costs per pound is the sum of site operating costs, net of by-product credits and off-property costs divided by the copper pounds produced. By-product credits are calculated based on actual sales of molybdenum (net of treatment costs) and silver during the period divided by the total pounds of copper produced during the period. These measures are calculated on a consistent basis for the periods presented.
| (Cdn$ in thousands, unless otherwise indicated) | 2024 Q3 |
2024 Q2 |
2024 Q11 |
2023 Q41 |
2023 Q31 |
||||||||||
| Cost of sales | 124,833 | 108,637 | 122,528 | 93,914 | 94,383 | ||||||||||
| Less: | |||||||||||||||
| Depletion and amortization | (20,466 | ) | (13,721 | ) | (15,024 | ) | (13,326 | ) | (15,993 | ) | |||||
| Net change in inventories of finished goods | 2,938 | (10,462 | ) | (20,392 | ) | (1,678 | ) | 4,267 | |||||||
| Net change in inventories of ore stockpiles | 9,089 | 1,758 | 2,719 | (3,771 | ) | 12,172 | |||||||||
| Transportation costs | (8,682 | ) | (6,408 | ) | (10,153 | ) | (10,294 | ) | (7,681 | ) | |||||
| Site operating costs | 107,712 | 79,804 | 79,678 | 64,845 | 87,148 | ||||||||||
| Less by-product credits: | |||||||||||||||
| Molybdenum, net of treatment costs | (8,962 | ) | (7,071 | ) | (6,112 | ) | (5,441 | ) | (9,900 | ) | |||||
| Silver, excluding amortization of deferred revenue | (241 | ) | (144 | ) | (137 | ) | 124 | 290 | |||||||
| Site operating costs, net of by-product credits | 98,509 | 72,589 | 73,429 | 59,528 | 77,538 | ||||||||||
| Total copper produced (thousand pounds) | 27,101 | 20,225 | 26,694 | 29,883 | 30,978 | ||||||||||
| Total costs per pound produced | 3.63 | 3.59 | 2.75 | 1.99 | 2.50 | ||||||||||
| Average exchange rate for the period (CAD/USD) | 1.36 | 1.37 | 1.35 | 1.36 | 1.34 | ||||||||||
| Site operating costs, net of by-product credits (US$ per pound) |
2.66 | 2.62 | 2.04 | 1.46 | 1.87 |
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
| Site operating costs, net of by-product credits | 98,509 | 72,589 | 73,429 | 59,528 | 77,538 | ||||||||||
| Add off-property costs: | |||||||||||||||
| Treatment and refining costs | 816 | 3,941 | 4,816 | 7,885 | 6,123 | ||||||||||
| Transportation costs | 8,682 | 6,408 | 10,153 | 10,294 | 7,681 | ||||||||||
| Total operating costs | 108,008 | 82,938 | 88,398 | 77,707 | 91,342 | ||||||||||
| Total operating costs (C1) (US$ per pound) | 2.92 | 2.99 | 2.46 | 1.91 | 2.20 |
1 Q3 and Q4 2023 includes the impact from the March 15, 2023 acquisition of Cariboo from Sojitz, which increased the Company's Gibraltar ownership from 75% to 87.5%. Q1 2024 includes the impact from the March 25, 2024 acquisition of Cariboo from Dowa and Furukawa, which increased the Company's Gibraltar ownership from 87.5% to 100%.
Total Site Costs
Total site costs are comprised of the site operating costs charged to cost of sales as well as mining costs capitalized to property, plant and equipment in the period. This measure is intended to capture Taseko's share of the total site operating costs incurred in the quarter at Gibraltar calculated on a consistent basis for the periods presented.
| (Cdn$ in thousands, unless otherwise indicated) - 87.5% basis (except for Q1, Q2 and Q3 2024) |
2024 Q3 |
2024 Q2 |
2024 Q11 |
2023 Q41 |
2023 Q31 |
||||||||||
| Site operating costs | 107,712 | 79,804 | 79,678 | 64,845 | 87,148 | ||||||||||
| Add: | |||||||||||||||
| Capitalized stripping costs | 3,631 | 10,732 | 16,152 | 31,916 | 2,083 | ||||||||||
| Total site costs - Taseko share | 111,343 | 90,536 | 95,830 | 96,761 | 89,231 | ||||||||||
| Total site costs - 100% basis | 111,343 | 90,536 | 109,520 | 110,584 | 101,978 |
1 Q3 and Q4 2023 includes the impact from the March 15, 2023 acquisition of Cariboo from Sojitz, which increased the Company's Gibraltar ownership from 75% to 87.5%. Q1 2024 includes the impact from the March 25, 2024 acquisition of Cariboo from Dowa and Furukawa, which increased the Company's Gibraltar ownership from 87.5% to 100%.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Adjusted net income (loss) and Adjusted EPS
Adjusted net income (loss) removes the effect of the following transactions from net income as reported under IFRS:
- Unrealized foreign currency gains/losses;
- Unrealized gain/loss on derivatives;
- Other operating costs;
- Call premium on settlement of debt;
- Loss on settlement of long-term debt, net of capitalized interest;
- Gain on Cariboo acquisition;
- Gain on acquisition of control of Gibraltar;
- Realized gain on sale of inventory;
- Inventory write-ups to net realizable value that was sold or processed;
- Accretion and fair value adjustment on Florence royalty obligation; and
- Finance and other non-recurring costs for Cariboo acquisition.
Management believes these transactions do not reflect the underlying operating performance of our core mining business and are not necessarily indicative of future operating results. Furthermore, unrealized gains/losses on derivative instruments, changes in the fair value of financial instruments, and unrealized foreign currency gains/losses are not necessarily reflective of the underlying operating results for the reporting periods presented.
Adjusted net income (loss) and Adjusted EPS
| (Cdn$ in thousands, except per share amounts) | 2024 Q3 |
2024 Q2 |
2024 Q1 |
2023 Q4 |
||||||||
| Net (loss) income | (180 | ) | (10,953 | ) | 18,896 | 38,076 | ||||||
| Unrealized foreign exchange (gain) loss | (7,259 | ) | 5,408 | 13,688 | (14,541 | ) | ||||||
| Unrealized loss on derivatives | 1,821 | 10,033 | 3,519 | 1,636 | ||||||||
| Other operating costs | 4,098 | 10,435 | - | - | ||||||||
| Call premium on settlement of debt | - | 9,571 | - | - | ||||||||
| Loss on settlement of long-term debt, net of capitalized interest |
- | 2,904 | - | - | ||||||||
| Gain on Cariboo acquisition | - | - | (47,426 | ) | - | |||||||
| Gain on acquisition of control of Gibraltar** | - | - | (14,982 | ) | - | |||||||
| Realized gain on sale of inventory*** | - | 3,768 | 13,354 | - | ||||||||
| Inventory write-ups to net realizable value that was sold or processed**** |
3,266 | 4,056 | - | - | ||||||||
| Accretion and fair value adjustment on Florence royalty obligation |
3,703 | 2,132 | 3,416 | - | ||||||||
| Accretion and fair value adjustment on consideration payable to Cariboo |
9,423 | 8,399 | 1,555 | (916 | ) | |||||||
| Non-recurring other expenses for Cariboo acquisition | - | 394 | 138 | - | ||||||||
| Estimated tax effect of adjustments | (6,644 | ) | (15,644 | ) | 15,570 | (195 | ) |
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
| Adjusted net income | 8,228 | 30,503 | 7,728 | 24,060 | ||||||||
| Adjusted EPS | 0.03 | 0.10 | 0.03 | 0.08 |
| (Cdn$ in thousands, except per share amounts) | 2023 Q3 |
2023 Q2 |
2023 Q1 |
2022 Q4 |
||||||||
| Net income (loss) | 871 | 9,991 | 33,788 | (2,275 | ) | |||||||
| Unrealized foreign exchange loss (gain) | 14,582 | (10,966 | ) | (950 | ) | (5,279 | ) | |||||
| Unrealized loss (gain) on derivatives | 4,518 | (6,470 | ) | 2,190 | 20,137 | |||||||
| Gain on Cariboo acquisition | - | - | (46,212 | ) | - | |||||||
| Accretion and fair value adjustment on consideration payable to Cariboo |
1,244 | 1,451 | - | - | ||||||||
| Non-recurring other expenses for Cariboo acquisition | - | 263 | - | - | ||||||||
| Estimated tax effect of adjustments | (1,556 | ) | 1,355 | 16,272 | (5,437 | ) | ||||||
| Adjusted net income (loss) | 19,659 | (4,376 | ) | 5,088 | 7,146 | |||||||
| Adjusted EPS | 0.07 | (0.02 | ) | 0.02 | 0.02 |
** The $15.0 million gain on acquisition of control of Gibraltar in Q1 2024 relates to the write-up of finished copper concentrate inventory for Taseko's 87.5% share to its fair value at March 25, 2024.
*** Cost of sales for the nine months ended September 30, 2024 included $17.1 million in write-ups to net realizable value for concentrate inventory held at the date of acquisition of control of Gibraltar (March 25, 2024) that were subsequently sold. The realized portion of the gains recorded in the first quarter for GAAP purposes was $13.4 million and for the second quarter were $3.8 million and have been included in Adjusted net income in the period they were sold.
**** Write-ups to net realizable value for inventory held at the date of acquisition of control of Gibraltar (March 25, 2024) totaled $9.2 million. The inventory write-ups in the first quarter for GAAP purposes have been included in Adjusted net income in the period they were sold or processed. Cost of sales for the nine months ended September 30, 2024 included $7.3 million in inventory write-ups that were subsequently sold or processed in the second and third quarters.
Adjusted EBITDA
Adjusted EBITDA is presented as a supplemental measure of the Company's performance and ability to service debt. Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, many of which present Adjusted EBITDA when reporting their results. Issuers of "high yield" securities also present Adjusted EBITDA because investors, analysts and rating agencies consider it useful in measuring the ability of those issuers to meet debt service obligations.
Adjusted EBITDA represents net income before interest, income taxes, and depreciation and also eliminates the impact of a number of items that are not considered indicative of ongoing operating performance. Certain items of expense are added and certain items of income are deducted from net income that are not likely to recur or are not indicative of the Company's underlying operating results for the reporting periods presented or for future operating performance and consist of:
- Unrealized foreign exchange gains/losses;
- Unrealized gain/loss on derivatives;
- Amortization of share-based compensation expense;
- Other operating costs;
- Call premium on settlement of debt;
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
- Loss on settlement of long-term debt;
- Gain on Cariboo acquisition;
- Gain on acquisition of control of Gibraltar;
- Realized gain on sale of inventory;
- Inventory write-ups to net realizable value that was sold or processed; and
- Finance and other non-recurring costs for Cariboo acquisition.
| (Cdn$ in thousands) | 2024 Q3 |
2024 Q2 |
2024 Q1 |
2023 Q4 |
||||||||
| Net (loss) income | (180 | ) | (10,953 | ) | 18,896 | 38,076 | ||||||
| Add: | ||||||||||||
| Depletion and amortization | 20,466 | 13,721 | 15,024 | 13,326 | ||||||||
| Finance expense | 25,685 | 21,271 | 19,849 | 12,804 | ||||||||
| Finance income | (1,504 | ) | (911 | ) | (1,086 | ) | (972 | ) | ||||
| Income tax (recovery) expense | (200 | ) | (3,247 | ) | 23,282 | 17,205 | ||||||
| Unrealized foreign exchange (gain) loss | (7,259 | ) | 5,408 | 13,688 | (14,541 | ) | ||||||
| Unrealized loss on derivatives | 1,821 | 10,033 | 3,519 | 1,636 | ||||||||
| Amortization of share-based compensation expense | 1,496 | 2,585 | 5,667 | 1,573 | ||||||||
| Other operating costs | 4,098 | 10,435 | - | - | ||||||||
| Call premium on settlement of debt | - | 9,571 | - | - | ||||||||
| Loss on settlement of long-term debt | - | 4,646 | - | - | ||||||||
| Gain on Cariboo acquisition | - | - | (47,426 | ) | - | |||||||
| Gain on acquisition of control of Gibraltar** | - | - | (14,982 | ) | - | |||||||
| Realized gain on sale of inventory*** | - | 3,768 | 13,354 | - | ||||||||
| Inventory write-ups to net realizable value that was sold or processed**** | 3,266 | 4,056 | - | - | ||||||||
| Non-recurring other expenses for Cariboo acquisition | - | 394 | 138 | - | ||||||||
| Adjusted EBITDA | 47,689 | 70,777 | 49,923 | 69,107 |
** The $15.0 million gain on acquisition of control of Gibraltar in Q1 2024 relates to the write-up of finished copper concentrate inventory for Taseko's 87.5% share to its fair value at March 25, 2024.
*** Cost of sales for the nine months ended September 30, 2024 included $17.1 million in write-ups to net realizable value for concentrate inventory held at the date of acquisition of control of Gibraltar (March 25, 2024) that were subsequently sold. The realized portion of the gains recorded in the first quarter for GAAP purposes was $13.4 million and for the second quarter were $3.8 million and have been included in Adjusted net income in the period they were sold.
**** Write-ups to net realizable value for inventory held at the date of acquisition of control of Gibraltar (March 25, 2024) totaled $9.2 million. The inventory write-ups in the first quarter for GAAP purposes have been included in Adjusted net income in the period they were sold or processed. Cost of sales for the nine months ended September 30, 2024 included $7.3 million in inventory write-ups that were subsequently sold or processed in the second and third quarters.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
| (Cdn$ in thousands) | 2023 Q3 |
2023 Q2 |
2023 Q1 |
2022 Q4 |
||||||||
| Net income (loss) | 871 | 9,991 | 33,788 | (2,275 | ) | |||||||
| Add: | ||||||||||||
| Depletion and amortization | 15,993 | 15,594 | 12,027 | 10,147 | ||||||||
| Finance expense | 14,285 | 13,468 | 12,309 | 10,135 | ||||||||
| Finance income | (322 | ) | (757 | ) | (921 | ) | (700 | ) | ||||
| Income tax expense | 12,041 | 678 | 20,219 | 1,222 | ||||||||
| Unrealized foreign exchange loss (gain) | 14,582 | (10,966 | ) | (950 | ) | (5,279 | ) | |||||
| Unrealized loss (gain) on derivatives | 4,518 | (6,470 | ) | 2,190 | 20,137 | |||||||
| Amortization of share-based compensation expense | 727 | 417 | 3,609 | 1,794 | ||||||||
| Gain on Cariboo acquisition | - | - | (46,212 | ) | - | |||||||
| Non-recurring other expenses for Cariboo acquisition | - | 263 | - | - | ||||||||
| Adjusted EBITDA | 62,695 | 22,218 | 36,059 | 35,181 |
Earnings from mining operations before depletion, amortization and non-recurring items
Earnings from mining operations before depletion, amortization and non-recurring items is earnings from mining operations with depletion and amortization, and any items that are not considered indicative of ongoing operating performance added back. The Company discloses this measure, which has been derived from our financial statements and applied on a consistent basis, to assist in understanding the results of the Company's operations and financial position and it is meant to provide further information about the financial results to investors.
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
| (Cdn$ in thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||
| Earnings from mining operations | 26,686 | 49,452 | 96,053 | 90,634 | ||||||||
| Add: | ||||||||||||
| Depletion and amortization | 20,466 | 15,993 | 49,211 | 43,614 | ||||||||
| Realized gain on sale of inventory | - | - | 17,122 | - | ||||||||
| Inventory write-ups to net realizable value that was sold or processed |
3,266 | - | 7,322 | - | ||||||||
| Other operating costs | 4,098 | - | 14,533 | - | ||||||||
| Earnings from mining operations before depletion, amortization and non-recurring items |
54,516 | 65,445 | 184,241 | 134,248 | ||||||||
During the nine months ended September 30, 2024, the realized gain on sale of inventory and inventory write-ups to net realizable value that was sold or processed, relates to inventory held at the date of acquisition of control of Gibraltar (March 25, 2024) that was written-up from book value to net realizable value and subsequently sold or processed.
|
TASEKO MINES LIMITED Management's Discussion and Analysis |
Site operating costs per ton milled
The Company discloses this measure, which has been derived from our financial statements and applied on a consistent basis, to provide assistance in understanding the Company's site operations on a tons milled basis.
| (Cdn$ in thousands, except per ton milled amounts) | 2024 Q3 |
2024 Q2 |
2024 Q11 |
2023 Q41 |
2023 Q31 |
||||||||||
| Site operating costs (included in cost of sales) - Taseko share | 107,712 | 79,804 | 79,678 | 64,845 | 87,148 | ||||||||||
| Site operating costs - 100% basis | 107,712 | 79,804 | 90,040 | 74,109 | 99,598 | ||||||||||
| Tons milled (thousands) | 7,572 | 5,728 | 7,677 | 7,626 | 8,041 | ||||||||||
| Site operating costs per ton milled | $ | 14.23 | $ | 13.93 | $ | 11.73 | $ | 9.72 | $ | 12.39 |
1 Q3 and Q4 2023 includes the impact from the March 15, 2023 acquisition of Cariboo from Sojitz, which increased the Company's Gibraltar ownership from 75% to 87.5%. Q1 2024 includes the impact from the March 25, 2024 acquisition of Cariboo from Dowa and Furukawa, which increased the Company's Gibraltar ownership from 87.5% to 100%.
Technical Information
The technical information contained in this MD&A related to the Florence Copper Project is based upon the report entitled: "NI 43-101 Technical Report - Florence Copper Project, Pinal County, Arizona" issued March 30, 2023 with an effective date of March 15, 2023 which is available on SEDAR+. The Florence Copper Project Technical Report was prepared under the supervision of Richard Tremblay, P.Eng., MBA, Richard Weymark, P.Eng., MBA, and Robert Rotzinger, P.Eng. Mr. Tremblay is employed by the Company as Chief Operating Officer, Mr. Weymark is Vice President Engineering, and Robert Rotzinger is Vice President Capital Projects. All three are Qualified Persons as defined by NI 43-101.