Taseko Mines Limited (TGB)

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Taseko Mines (TGB)

Q1 2013 Earnings Call

May 03, 2013 11:00 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

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

John Pace

Joseph Gallucci - Dundee Capital Markets Inc., Research Division

Adam Low - Raymond James Ltd., Research Division

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

Mark Turner - Scotiabank Global Banking and Markets, Research Division

Matthew Gibson - CIBC World Markets Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and thank you for standing by, and welcome to Taseko Mines First Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference may be recorded. It's now my pleasure to turn the floor over to Brian Bergot. Sir, please go ahead.

Brian Bergot

Thank you, Hugh. Good morning, ladies and gentlemen, and welcome to Taseko Mines First Quarter 2013 Results Conference Call. My name is Brian Bergot, and I'm 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 first quarter business and operational results, we'll open the phone lines to analysts and investors for a question-and-answer session.

Accompanying management’s discussion today 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 first quarter results and to update you on Gibraltar and our other projects. Gross profit for the quarter was roughly $13 million, and considering the work undertaken over the first 3 months of the year, we are not disappointed in that performance, as it bodes well for how we expect things to unfold in the months ahead. I think as we present a few slides over the next 10 or 15 minutes, you all hope we can get an appreciation for where the company is heading in Gibraltar, and what we expect on the next wow [ph ]on our projects at Prosperity and Aley. As we spoke about in the last year, many folks understand as well that 2012 was a transition year for Gibraltar. During the first quarter, if we look at Slide #4, Gibraltar production, I'd like to draw your attention to the tons mined be between Q1 2013 and Q4 2012, where we mined nearly 5 million extra tons of waste, producing $23 million per ton of copper. In spite of moving an extra 5 million ton of waste, our unit cost of production per pound of copper produced decreased from the prior quarter. Now we have Concentrator #1 heading back to the kind of availability numbers we expect, now that we have -- are not being interrupted by our GDP3 tie-ins. And with the addition of mill #2, there will be no holding the operation back. So what we've done -- what we brought into production is a brand-new 30,000 ton per day concentrator for roughly $200 million. Most folks do not realize in the $225 million that we originally budgeted, and we have spoken about in the past, nearly $30 million of this was spent on a brand-new moly plant. So not only have we accomplished all of this in the past 20 months, because we have managed the commissioning properly, based on experiences, we have effectively ramped up our new mills in design capacity in a little over 6 weeks. I can't find one other mining company that [indiscernible] that has done any of that, either in the -- either the first, i.e., building something on-time and on budget, nor ramping the design like we have. That is the difference between what we experienced with GDP1 and 2 and this latest capital undertaking. Primarily, as a result of us having a less complex project than expanding or operating our old mill and building a new one at the same time. All the generated knowledge in the past years on SAG mill design and the #2 construction and operation is helping us immensely today on our second mill. As you can see in Slide #5, we know recovery is very dependent on mill 1 throughput, and we now over time, we will increase the recovery percentage we now have to those we have seen in the past. As you can see, Q1 and Q2 have a slightly lower tonnages in 2012, and you can see the recovery percentages as compared to where we were as we increased production in Q4 of 2012 and Q1 of 2013. So certainly, there's an opportunity for us in that area and we all recognize that. In Slide 6, our strip ratio is rising while our mining cost decreased, and that is a function of productivity improvements on our [indiscernible] roots, as result of finally getting permit approval for our #7 dump. This dump will take roughly 300 million tons of waste over its lifetime, short and productive. But while we have spoken about 2012 being the transition year, the proof is obviously in the pudding, and that is illustrated in Slide #7. In most cases, executive management pushes [indiscernible] have to announce that their new mine is operational, when actually it isn't. In keeping with their plan, we sequentially worked back from the tailings pond to the crusher over a 10-week period. This time period ended on March 28, when the new mill was turned over from -- the construction fellows to operations. After March 28 to basically the middle of April, mill 2 ramped up to nearly design capacity for throughput. So not only did we build our machine on-time and on budget, we are now operating it at nearly 95% of its capacity within weeks of pushing the green button. Let's quickly look at the next slide at our operating -- at our production. Turning to Slide 8, we expect, to go in Q2 and Q3, when we have figure we have both of the mills operating for tons of mill throughput. As you can see, there's a dramatic increase heading into Q3 and into Q4, as we attain our total production capacities. Let's quickly look at our operating costs and how those are affected. $0.22 of a pound was assigned to -- well, there's our operating cost, and another slide here. Looking at our overall operating cost between Q1 2013 and Q4 2012, you can see we're on a path downwards, from $2.30 a pound to $2.07 a pound. That is a significant productivity and cost improvement that's apparent in the direction that we're heading in the months ahead. If we look at the next slide, in terms of our cost. I spoke a little bit about this last quarter, and the impact that it has on our overall cost structure in terms of our labor unit cost, which was assigned to -- which will be assigned to GDP2 and prior to the expansion of $0.22 a pound. And that was all mostly as a labor component. These dollars will now be spent on producing copper under our new expanded facility. Our long-term cost for maintenance have also decreased. They've been spent and going forward, we will not see these expenses for 20,000 to 30,000 more hours. Another important consideration is obviously diesel and explosives, would nearly makeup 20% of our overall cost, and these are heading down, thanks to our new waste dump as I spoke about earlier, and our explosive cost is being managed to deliver optimum material at the lowest possible cost, and this has taken a number of months to get into this position. So if you look at all these factors and include the increased by-product credit we will get from our new moly plant, you can see objectively where our costs could end up in the next months ahead. If we look at the broader operational issues that we're focused on, we've committed to work with our First Nation friends in the local area. We signed an agreement, an important agreement last month with the Williams Lake Indian Band, and this is the second cooperation agreement we've entered into with First Nations locally here at Gibraltar, and in the north -- at our Aley Project. So we're very happy with that -- that relationship is continuing to develop. Looking at Slide 5, or sorry, looking at Slide 12. Talking about Prosperity. As we all know, we had 50 Information Requests, was submitted back from the panel to us on February 28. The panel reviewed that with the public, and they issued 10 more Supplemental Information Requests to us. Primarily, the big considerations were the groundwater interaction between Fish Lake and the designed pit, and effects on navigable waters in Fish Creek, and our folks have been working on those for the last month or so, dealing with Natural Resources Canada, and other agencies, and we'll be submitting a response shortly back to the panel in that regard. We expect the panel with then determine that everything is done and proceed to panel hearings in the near future. Looking at our last slide, on Aley. I believe it's the last slide. If we look at the last slide, we've been working very diligently on the metallurgical recoveries at Aley. Just recently, probably about 6 weeks ago, we produced a niobium concentrate, as indicated in the slide, and that was shipped to a lab for conversion into metal and on April 25, we produced our first ferroniobium and you can see that in the picture. That is the product that ultimately, should the rest of the flowsheet come together on Aley that material that we will be producing. We expect to produce and build a small pilot plant in the next coming weeks, and further expand on that design requirement. Along with that, we are working diligently on the fieldwork season, planning for that, which will lead us to the information requirements for our EA. I'd like to now turn the call over to Peter to talk about our finances.

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