Earnings Call Transcript - TGB Q4 2024

Operator, Operator

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

Brian Bergot, Vice President of Investor Relations

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

Stuart McDonald, President and CEO

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

Richard Tremblay, Chief Operating Officer

Thank you, Stuart. Gibraltar produced 106 million pounds of copper and 1.4 million pounds of molybdenum in 2024. Scheduled project work and maintenance, along with an unexpected labor strike, led to reduced mill operating hours for the year, resulting in approximately 15 million pounds of lost copper production. This shortfall is similar to the reductions seen in 2023, but we expect to recover this production in 2025 as mill availability normalizes. The operation concluded the year strongly, producing 29 million pounds of copper in the fourth quarter at a cash cost of US$2.42 per pound. Mill throughput averaged 89,700 tons per day, exceeding the design capacity of 85,000 tons per day, marking the best quarter in Gibraltar's history, partly due to stockpiled ore in the Connector pit. Mill recoveries during the quarter were affected by transition ore with higher oxide content as we continue mining the upper benches of the Connector pit. We anticipate processing through this material by the second half of this year. Molybdenum production in the fourth quarter was nearly 600,000 pounds, the highest since 2021. The Connector pit has better molybdenum grades than the Gibraltar pit, so we expect production to remain at these levels in 2025. Combined with strong molybdenum prices, this will provide a significant byproduct credit, which was US$0.42 per pound in the fourth quarter. With no major mill downtime planned for 2025, we aim to return to life-of-mine average production levels. Our guidance is for 120 million pounds to 130 million pounds for the year, but it's important to note that production will be weighted towards the second half of the year. We estimate a 40-60 split between the first half and the second half. The first quarter will be the weakest as we start a new pushback in the Connector pit. During this time, mined ore will be supplemented with low-grade stockpiled ore. Head grades in the first quarter will be below 0.2%, but we expect improvement in the second quarter. In the second half of the year, head grades should be significantly higher than our 0.25% reserve grade and better than what we've mined on a sustained basis in several years. We just need to get past the first quarter, after which we will see a consistent increase in production. The SX/EW plant at Gibraltar, which has been inactive for nearly 10 years, is currently being refurbished and readied for restart. We have recharged heap leach pads with ore from the oxide cap on the Connector pit. We expect to restart the SX/EW plant in the second quarter of this year, providing additional production alongside copper concentrate production. This year, we anticipate cathode production between 3 million pounds to 4 million pounds, increasing to 4 million pounds to 6 million pounds per year going forward, representing an important future revenue stream for us. Regarding Florence, construction is progressing smoothly and on schedule. We provided a detailed construction update a few weeks ago, so there's not much new information to share today. The construction of surface infrastructure and wellfield drilling is advancing as per schedule and within our previous cost guidance. The project is currently over 60% complete, and we’re approximately 10 months away from first production, a significant milestone for the company. So far, our capital expenditure related to the commercial facility for this year has reached US$155 million. This quarter will see peak construction and spending, after which activity and spending will start to decline as we transition into operations. There will be a ramp-up period for Florence, primarily throughout 2026, during which we anticipate production of 40 million to 50 million pounds, and by 2027, production levels could reach 80 million pounds or more. It's an exciting time for us, but we still have considerable work ahead, and achieving full execution at Florence means ramping up to an annual production capacity of 85 million pounds. Additionally, I want to provide a brief update on our long-term projects. Our Yellowhead project is a significant growth opportunity for Taseko’s North American copper business, and we plan to advance project permitting this year. It's a pivotal period in Canada with the potential of US tariffs, and in BC, the government is focused on responses to strengthen our economy. One initiative underway in BC is aimed at reducing permitting timelines, which could benefit Yellowhead, and we are closely monitoring this opportunity. We also plan to publish an updated technical report for Yellowhead in the second quarter of this year, as the current report is now five years old, and the metal price assumptions we used were US$3.10 per pound copper, US$1,350 per ounce gold, and US$18 per ounce silver, which are considerably below current long-term price estimates. We will be updating metal prices, as well as capital and operating costs in the new report. Furthermore, there’s a new Canadian tax credit for copper mine development that will be factored into the updated technical report, which we expect will positively impact project economics. Lastly, regarding New Prosperity, we have been in discussions with the Tsilhqot'in Nation and the BC provincial government. Progress was made last summer, but discussions were paused during the BC provincial election in October. We have recently reengaged and remain optimistic about reaching a successful conclusion.

Bryce Hamming, Chief Financial Officer

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

Operator, Operator

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

Alex Bedwany, Analyst

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

Bryce Hamming, Chief Financial Officer

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

Richard Tremblay, Chief Operating Officer

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

Alex Bedwany, Analyst

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

Richard Tremblay, Chief Operating Officer

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

Alex Bedwany, Analyst

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

Richard Tremblay, Chief Operating Officer

Thank you.

Operator, Operator

Thank you. Our next question is from Duncan Hay with Panmure Liberum. Please proceed.

Duncan Hay, Analyst

Thank you. I have a couple of questions. First, regarding the well costs, I noticed the update on the number of wells you drilled at Florence. How are the costs tracking and what are the rates looking like compared to your forecasts? Secondly, I missed the end of Alex's question about the situation with acid, particularly in terms of securing it and how pricing is trending in the region. Thank you.

Richard Tremblay, Chief Operating Officer

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

Duncan Hay, Analyst

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

Richard Tremblay, Chief Operating Officer

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

Duncan Hay, Analyst

Okay. Thanks.

Operator, Operator

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

Bryce Hamming, Chief Financial Officer

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

Operator, Operator

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