Taseko Mines Limited (TGB)

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Taseko Mines (TGB)

Q4 2012 Earnings Call

February 22, 2013 10:30 am ET

Executives

Brian Bergot

Russell Edward Hallbauer - Chief Executive Officer, President, Director, Chairman of Executive Committee and Chairman of Investment Committee

Peter C. Mitchell - Chief Financial Officer

John W. McManus - Senior Vice President of Operations

Analysts

Brett M. Levy - Jefferies & Company, Inc. Fixed Income Research

Steve Parsons - National Bank Financial, Inc., Research Division

Samar Sidhu

Tom Bishop - BI Research

David Olkovetsky - Jefferies & Company, Inc. Fixed Income Research

Aleem Ladak - PI Financial Corp., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Taseko Mines 2012 Year-End Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Brian Bergot, Director of Investor Relations. Sir, you may begin.

Brian Bergot

Thank you, Kate. Good morning, ladies and gentlemen, and welcome to Taseko Mines 2012 Fourth Quarter and Annual Results Conference Call. My name is Brian Bergot, and I am the Director of Investor Relations for Taseko. With me today in Vancouver is Russ Hallbauer, President and CEO of Taseko; John McManus, Senior Vice President, Operations; and Peter Mitchell, Taseko’s Chief Financial Officer.

After opening remarks by management, which will review 2012 business and operational results, we'll open up the phone lines to analysts and investors for a question-and-answer session. Accompanying management’s discussion will be presentation slides for our webcast participants. Alternatively, the presentation can be found in the Investor Relations section of our website.

I would also like to remind our listeners that our comments and answers to your questions may contain forward-looking information. This information, by its nature, is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome. Please refer to the bottom of our latest news release for more information.

I will now turn the call over to Russ for his remarks.

Russell Edward Hallbauer

Thank you, Brian. Good morning, everyone. Thank you for joining us today to discuss our fourth quarter and year-end results and to provide you with an update on Gibraltar and the various activities that have been on the goal for the last quarter.

Gross profit for the year was roughly $52 million from our sale of 66 million pounds of copper and 1 million pounds of molybdenum on our 75% ownership of Gibraltar's 90 million pounds of copper and 1.3 million pounds of molybdenum. Peter will speak more to the financials in his presentation.

In reviewing 2012, concentrate production was affected as a result of lost production in Q1 related to water issues in our granite pit. Water affected ore release and ore fragmentation, which, in turn, hindered throughput through our SAG mill. Resolving the water incursion and getting new operational plan back on track and the operating issues resolved took us well into the second quarter.

In the second half of the year, throughput increased. However, we were affected by lower mill availability and subsequent operating time as a consequence of our GDP3 tie in. These events are behind us now as operations are stable. We've gotten our GDP concentrator producing the hourly rates we expect, and now it's a question of methodically increasing our recovery rates and obtaining the mill availability targets as we're not hindered by GDP3 tie-ins, a much simpler task now than what was presented to us in early 2012.

There's always commentary around concentrator efficiencies and design criteria in terms of throughput. And you see many new mining operations after running for a while moving to add secondary crushing systems between their primary crushers and the SAG mills to increase throughput after they have had trouble hitting projected milling rates. To be clear in this matter, when this type of situation occurs, it indicates that the front-end engineering design and flow sheets design were flawed. Not enough work was undertaken on the feasibility study, metallurgy and grinding. Effectively what you are doing when you're adding a secondary crusher behind a primary crusher to feed a SAG mill is you're turning your SAG mill into a big ball mill.

The costs rise from about $0.15 to $0.20 per ton milled for the primary crusher and secondary crusher system to $1.20 per ton milled. Secondary crushers were what was used in the 1970s before the introduction of SAG mills. They're inefficient and costly, and that's why we replaced ours a number of years ago. This issue has been raised with myself on a number of occasions, and in our instance, we do not need a secondary crusher. We did the proper engineering and analysis before we built our SAG, and we have plenty of horsepower in our GDP SAG mill and more than enough in our GDP3 concentrator to obtain throughput rates.

Like I said before, those who need secondary crushers do not have that horsepower in the correct location, and it's a reflection of the original design criteria and mistaken design that were in the feasibility study.

Looking at our first page, first slide on Slide 4 regarding some important statistics for the company. We mined 66.2 million tons in 2012 versus 57.5 million tons. And tons declined by 1.1 million tons through the concentrator over 2011. However, recoveries, as you can see, dropped from 88% to 85% as we moved to higher hourly throughput rates.

Target hourly rate of 2,450 tons per hour is being achieved. However, we are now balancing throughput with recoveries to produce the most metal possible at the optimum throughput as we work on increasing recoveries to design levels. As I have spoken about in the last conference call, we do have work to do on increasing our recoveries but that will be resolved in the near future.

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