Earnings Call Transcript - TGB Q4 2025

Operator, Operator

Ladies and gentlemen, thank you for being here. My name is Jericho, and I will be your conference operator today. I would like to welcome everyone to the Taseko Mines 2025 Q4 Earnings Conference Call. I will now hand the conference over to Brian Bergot, Vice President of Investor Relations. Please proceed.

Brian Bergot, Vice President of Investor Relations

Thank you, Jericho. Welcome, everyone, and thank you for joining Taseko's 2025 Fourth Quarter and Annual Results Conference Call. The news release and regulatory filing announcing our annual financial and operational results was issued yesterday after market close and is available on our website at tasekomines.com and on SEDAR+. I am joined today in Vancouver by Taseko's President and CEO, Stuart McDonald; Taseko's Chief Financial Officer, Bryce Hamming; and our COO, Richard Tremblay. As usual, before we get into opening remarks by management, I would like to remind our listeners that our comments and answers to your questions will contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties. As such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our fourth quarter MD&A and the related news release as well as the risk factors particular to our company. These documents can be found on our website and also on SEDAR+. I would also like to point out that we will use various non-GAAP measures during the call. You can find explanations and reconciliations regarding these measures in the related news release. And finally, all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified. Following opening remarks, we'll open the phone lines to analysts and investors for questions. I'll now turn the call over to Stuart for his remarks.

Stuart McDonald, President and CEO

Great. Okay. Thanks, Brian, and good morning, everyone. Thanks for joining our call today to discuss our fourth quarter and 2025 annual results, which were released yesterday. As usual, I'll start by providing some comments and additional detail on the operational aspects of our business, and then Bryce will review the recent financial performance. So I'm going to jump straight to the exciting news that we announced yesterday. Florence Copper is now producing copper as of just a few days ago when we turned on the electrowinning circuit. Copper is now being plated, and we're just a few days away from harvesting the first cathodes. This is a great achievement for everyone at Taseko and especially the construction and operating teams at Florence. As we've talked about, wellfield operations commenced in the fourth quarter, so we've actually had solutions flowing in the commercial wellfield for about 3 months now. Initial results from the wellfield have been very positive as we've been able to achieve higher injection flow rates than expected in these first few months. As a result of those higher flows, the acidification of the ore body has been faster than planned and the grade of copper recovered in solution or PLS has actually ramped up faster than expected. So it's still early days, but the initial leaching results have been quite positive. And actually, our PLS grade was high enough to begin copper production several weeks ago, but the commissioning of the SX/EW plant took a few weeks longer than planned. We're expecting Florence to produce approximately 30 million to 35 million pounds of copper this year. And by the time we report first quarter earnings, we'll be in a good position to provide some operating metrics in terms of flow rates, PLS grade and production from the initial wells. A key factor in the ramp-up will be our ability to expand the wellfield and bring on new wells through the year. Drilling resumed in the fourth quarter, and there are now 3 drill rigs running. It's taken some time for the new drilling crews to get ramped up. We have a fourth drill rig being added in the next week or so and expect to see improved drilling productivity going forward. Before we turn to Gibraltar, I'd like to start by commenting that safety is a core value at Taseko. Nothing is more important than ensuring that the people who work at our operations go home each day the same way they arrived. In November, a tragic accident occurred at Gibraltar that resulted in the death of a contract worker. We're deeply saddened by the loss of a colleague and again, offer our condolences to the coworkers, friends, and family of the individual. Findings from that incident are in the process of being reviewed with employees on site. In terms of production at Gibraltar, in the fourth quarter, we saw copper head grades increase to 0.26% and recoveries of 81%, which led to 31 million pounds of copper production. So it was a strong production quarter. The higher grades and recoveries were slightly offset by throughput, which was about 8% under design capacity for the period due to unscheduled mill downtime. Molybdenum production was 800,000 pounds and also benefited from higher grades and recoveries. Copper and moly production for the quarter was the highest level of 2025 as we expected it would be. And for molybdenum, it was actually the best production quarter in the history of the mine. With higher production, our total operating costs dropped to USD 2.47 per pound in Q4. For the year, Gibraltar produced a total of 98 million pounds of copper and 1.9 million pounds of molybdenum at a cost of $2.66 per pound. Production was heavily weighted to the second half of the year as we mined deeper into the connector pit to access higher grades and better ore quality in the third and fourth quarters. Looking ahead to 2026, mining operations are much better situated in the Connector pit, so we expect higher annual production and much less quarterly variability than last year. We are, however, taking a more conservative view on copper grades due to the impact of small higher-grade zones that have not been realized through our mining so far in the Connector pit. Over the last 18 months, we've also encountered more oxide and supergene and transitionary ore in the Connector pit than we originally expected. The oxide ore has been stacked on leach pads and would be processed through the Gibraltar SX/EW plant. But the supergene ore goes through the concentrator with lower recoveries. For 2026, we're expecting average recoveries between 75% to 80%. And that's really a similar level to what we saw in the second half of 2025. Taking all of this into account, we're expecting Gibraltar to produce 110 million to 115 million pounds of copper this year. And given that the Connector pit will be the primary source of ore for the next 3 years, we expect annual production will remain in the same range, plus or minus 5% through the end of 2028. With copper prices now roughly 25% higher than last year's average price, we are well positioned to benefit from our copper price leverage supported by higher production from Gibraltar and production growth at Florence. Tight supply due to global mine disruptions, combined with strong demand from traditional end users and new demand from AI data centers and grid modernization all support continued strong copper prices. So Taseko is very well positioned for cash flow growth in the future. We also have significant long-term optionality and value in our other projects. And in 2025, we achieved some significant milestones at both Yellowhead and New Prosperity. The new technical report from Yellowhead confirms strong economics, and we will continue to advance the project towards an ultimate construction decision and begin unlocking the net present value. And talking about leverage to copper, that NPV also benefits from a strong copper price environment. When we published our report in June, we used a price of $4.25 per pound, which gave us a $2 billion NPV. At today's pricing, that's more like $4 billion after-tax NPV or even higher. So the project is getting a lot of attention from potential partners. And when you consider the lack of large-scale open pit copper projects in North America that can be brought online in this time frame, these opportunities are very rare. So it's a great asset, I think, for the company going forward. Permitting efforts are very active, and we continue to engage with the local communities and open houses in recent months with no major issues arising so far. Our Yellowhead project team is also preparing the detailed project description that will be filed later this year. So 2026 promises to be another busy and productive year on many fronts. And with that, I'll turn the call over to Bryce for some commentary on the financials.

Bryce Hamming, Chief Financial Officer

Thank you, Stuart, and again, welcome, everyone. I'll give some further color on some financial details before we get into any questions. Total copper sales for the fourth quarter were 32 million pounds, including 800,000 pounds of cathode from Gibraltar's SX/EW facility at an average realized price of $5.13 per pound. Including $25 million of revenue from moly, we generated revenue of $244 million in the quarter. For the year, revenues of $673 million were recorded for the sale of 99 million pounds of copper and 1.9 million pounds of moly. The average realized copper price in 2025 was robust at USD 4.61 per pound, and we benefited from a generally weaker Canadian dollar. Both quarterly and annual revenue are the highest Taseko has ever recorded now that we own 100% of it. For the quarter, we recorded net income of $4.5 million or $0.01 per share. And on an adjusted basis, after removing unrealized marks on our liabilities, which are tied to the higher copper price and other unrealized items, it was $42 million or $0.11 per share of adjusted earnings. Adjusted EBITDA in the fourth quarter was $116 million as compared to $56 million in the same quarter in 2024 and $62 million in Q3. For the year, adjusted EBITDA was $230 million, slightly higher than the prior year. So production in Q4 contributed to half of our annual earnings. Also for the quarter, cash flow from operations was $101 million, which was significantly higher than previous quarters, with Gibraltar contributing free cash flow of $72 million. For the year, $220 million of cash flow from operations was generated from Gibraltar. Overall, financial performance was strong and definitely benefited from the higher copper pricing in the second half of the year with improved production and sales levels. I will remind everyone that we do have copper price collars in place that we put in place to support our Florence copper project development and project finance. It has a ceiling price of $5.40 per pound until the end of June, which had a mark at year-end of $22 million. For Q3 of 2026, we have added copper price collars that have secured a minimum price of $4.75 per pound for 8 million pounds per month in the third quarter, and that have much higher ceiling prices of $7.50 and $8.50 per pound. As we move beyond the ramp-up of Florence, we do plan to revert to our longer-term strategy of just buying copper put options over shorter-term time horizons and leaving the entire upside to copper price open with 2 mines running. Now on to Florence, where things have been going very well, as Stuart mentioned, we completed the capital project in the fourth quarter. Capital spending decreased dramatically from prior quarters to just USD 8 million in the quarter as construction activity started winding down. Final capital costs for the commercial facility were USD 275 million, which was approximately 3% over the revised budget from early 2024 when we started construction. In the fourth quarter, $60 million of site operating costs and commissioning costs were capitalized for Florence. With cathode production now underway, we will begin expensing operating costs, which to date have been capitalized significantly still in the first quarter. We ended the year with a cash balance of $188 million plus our undrawn revolving credit facility for USD 110 million. So that brings our total liquidity to a very strong $340 million. With strong cash flows expected from Gibraltar in 2026 and the development capital spending behind us at Florence, our balance sheet will improve throughout the year in the current copper price environment. As Florence Copper begins to provide cash flow as the second operating mine, our credit rating will naturally re-rate, and we will prioritize delevering the balance sheet with our excess cash later this year. And with that, operator, I'll open the lines for questions. Thank you.

Ernad Sijercic, Analyst

Congratulations guys on Florence. Just a quick question here. What should we expect for CapEx and stripping this year?

Bryce Hamming, Chief Financial Officer

It's Bryce. Regarding CapEx, last year we had $80 million in capitalized stripping, and we'll have a bit less this year since we've moved past some of the more intensive stripping phases at Gibraltar. Therefore, we anticipate a decrease in that aspect. On the sustaining CapEx side, the key focus will be additional tailings work planned for this year, but that should be manageable as well. Overall, there isn't anything particularly unusual compared to some of the capital projects we've undertaken in previous years, like the crusher relocation.

Ernad Sijercic, Analyst

Great. And just one follow-up. How should we think about grade and throughput this year as it relates to your guidance?

Stuart McDonald, President and CEO

I think we're always aiming to achieve throughput in the range of our design capacity, which is 85,000 tonnes a day, totaling just over 30 million tonnes for the year. That's always our goal, and I believe we were successful in achieving that last year. Regarding grade, the reserve grade in the Connector pit is 0.25, but we've noticed that it has been somewhat affected by smaller high-grade zones. Therefore, we're being more conservative in our expectations and anticipating that it might be 5% to 10% lower than that. This is generally how we arrive at our guidance figures.

Dalton Baretto, Analyst

Congratulations on Florence. To start off, Stuart, as you consider the ramp-up moving forward, what risks are you aware of? What aspects are you monitoring? Is it mainly related to wellfield expansion, or do you have concerns about the uniformity of the ore body? What are your main focus areas?

Stuart McDonald, President and CEO

Yes, we are very pleased with the initial leaching results and our ability to solidify new sections of the wellfield, which is helping improve our PLS grade. However, we still have considerable work to do to stabilize the entire process from the wellfield to the actual copper plating. It’s still very much a ramp-up phase, but early indicators are positive. Regarding the ramp-up, as you mentioned, the drilling aspect is crucial. We need to add new wells, and in our mining plan, we intend to add 80 to 100 new wells each year for at least the next decade. This will be a normal part of operations at Florence and is a significant component of the ramp-up. Richard, do you have any comments?

Richard Tremblay, COO

Yes. No, that is exactly, Stuart. Really, the thing we're watching closely is just the drilling performance and how the drilling is moving forward to bring on the new wells that we know we need as the production profile increases.

Dalton Baretto, Analyst

That's great, guys. And then maybe switching gears to Gibraltar. Can you talk a little bit about some of these issues you're seeing at the Connector pit? I mean what happened? Why aren't you picking up some of those higher-grade zones? And maybe why some of the higher oxide and supergene material was maybe missed in the reserve?

Richard Tremblay, COO

Yes. The best way to describe the high-grade zone is that there are some isolated exploration drill hole results that are impacting the geological model. We are currently reevaluating these drill holes. As a result, we expect the grade we are encountering to be lower because we have mined through several areas and did not find the grade we anticipated. We recognize that the model needs adjustments to account for the ultra-high grade pockets, and we are working on this, which is why we issued the guidance today.

Dalton Baretto, Analyst

And what about on the supergene and oxide material? It sounds like you're seeing more of it than you anticipated.

Richard Tremblay, COO

Yes. The oxide has positively impacted our ability to access the oxide dumps and will enable us to operate the SX/EW plant for a longer period than initially planned. This is indeed a favorable outcome from the overall cathode production viewpoint. The transition zone between supergene and hypogene has various interpretations, and in some instances, the actual presence of supergene is more extensive than indicated in our model. We need to make adjustments to accurately reflect what we are observing.

Dalton Baretto, Analyst

Got it. And if I could just squeeze in another one here just on the portfolio. I mean, in this environment, clearly, Yellowhead and Prosperity are very valuable assets and niobium looks like it's going to have its day in the sun as well. Stuart, how are you thinking about next steps for each of those?

Stuart McDonald, President and CEO

Yellowhead is currently focused on permitting. We have a dedicated team working closely with regulators and the community, and we believe we have built solid relationships there. Over the next year or two, we anticipate advancing discussions with potential joint venture partners, especially given the interest in the current copper price market. This project is a significant opportunity as there are very few large-scale open-pit greenfield projects in North America that can be developed in the next four to five years. Regarding New Prosperity, we made significant progress last year by signing an agreement with the Tsilhqot'in Nation in British Columbia. This deposit is highly valuable, but we must secure the consent of the Tsilhqot'in Nation to move forward, which our agreement clarified last summer. We are allowing their land use planning process to proceed and will respect and be patient with it. As for niobium, while it might be lesser-known to some investors, it's a major open-pit niobium deposit in Northern British Columbia and one of the largest undeveloped niobium deposits globally. We continue to make progress in the background, working with our strong technical team and seeking out potential offtake partners to help advance that project. Overall, we have immediate growth opportunities with Florence and several long-term prospects in our portfolio, which is quite exciting for us.

Operator, Operator

There are no further questions at this time. That concludes the question-and-answer session. I would like to turn the call back over to the Taseko management for closing remarks.

Stuart McDonald, President and CEO

Great. Okay. Well, thanks again, everyone, for joining. Yes, we will continue to keep you updated as the Florence ramp-up progresses and obviously look forward to talking again next quarter. Thanks.

Operator, Operator

This concludes today's conference call. Thank you for joining. You may now disconnect.