Taseko Mines Limited (TGB)

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Taseko Mines Limited (TGB)

CIBC Whistler Institutional Investor Conference

January 23, 2014 05:05 PM ET


Russell Hallbauer - President and CEO


Tom Meyer - CIBC


Tom Meyer - CIBC

Our next presentation is from Taseko Mines. We have Russ Hallbauer, President and CEO who is going to present on the company and give us an update what’s going on there. Russ, over to you.

Russell Hallbauer

Thanks, Tom. Looks like there is not many, too many copper balls around these days, I mean it’s a pretty skinny room for what’s happening in the business right now. And I think if -- when I walk through this you guys will be happy that you stayed, get a little insight in terms of what we're doing and where we're headed. We like to call this a super factor. I have been in the business for nearly 35 years now and I have yet to see, and maybe Jim is a little older than me but maybe he's seen this line up. But we have the opportunity for production increases, operating cost reductions, Canadian dollar weakness and strong copper prices and where that leads us particularly with this company.

So, like I said we got increase in production, we got a modern world-class mine and low geopolitical risk. If you look on the operating side, we got decrease in operating costs and steady state operations to provide further reductions, big impact now and we'll talk about it little later in this presentation as the weakening Canadian dollar and it’s obviously a significant benefit to Canadian producers. And obviously strong stable metal price regime and that’s supported by decline in inventories both on the concentrate side and in the metal side.

If we look at where we were now in terms of our production profile, 2013, we're just a little over $9 per ton milled, that’s significantly down from where we were in 2008. And in fact our operating costs are back nearly to 2006 levels. You see in the middle there around 2008, 2009, let’s see that forward way barely, that was some of the outcome of the financial crisis when we had to reduce our strip ratio and try and survive period of time. But if you look at the trend line our trend line continues to decrease with our copper production on a quarterly basis increases so obviously the combination of mill throughput and copper production is continuing to drive our cost down.

Let’s go to the next slide here, gives you a little bit of idea of the impact. We’re going to process over roughly 30 million tons through our concentrator a year. If we reduce our operating cost from $10 a ton to $9 a ton, that’s about -- or 75% of it is just under $25 million directly to the bottom line with no increase in cost. So, now you start to see this correct factor or super factor starting to line up, it’s when each horse and a horse race comes in one, two, three, four.

Now obviously the Canadian dollar I guess here is the projections that we’ve got just a week or two ago and obviously we shot through those certainly who knows where it’s going to end up but it certainly looks like that the Governor of the Bank of Canada is sure not going to intervene and the Canadian government is not going to intervene and who knows where copper -- the Canadian dollar is going to end up. But it certainly bodes well for Canadian producers.

Now let’s look a little bit here in sensitivity to foreign exchange. This is effectively our 2013 revenue at $3.20 copper and we haven’t put out our financial numbers yet but this is just a basic estimate and we were somewhere between $0.97 and $0.98 last year. With our new production this year, we’re going to be a little over $400 million in revenue; this is just strictly on the copper side nothing to do with the moly. And as you can see that’s at 103 FX and a $3.30 copper, so a little bit higher price than what we achieved in 2013. But the important thing to look at is what happens if currency reduces based up what we think we’re going to produce this year.

So our revenue from last year will increase by $125 million, a 41% increase. We go to where about the Canadian dollar is today, and that’s a $140 million that’s a 47% increase. And if we go to a $1.15 which the indications are that’s an $0.87 - $0.88 you can see the impact this is going to have on our mining operations or on our cash flow generating ability and our gross revenue. So that little wedge there is all margin because our cost 80% -- of our cost are fixed. So well it’s hard on your vacation going to Hawaii or Palm Springs or Florida with the exchange rate, it certainly boards well for Canadian producers.

So looking just pretty simplistically $0.01 change in the U.S. dollar and this has happened very precipitously as we all know. We’ll add $4 million to our operating cash flow. The dollar is effectively down $0.10 since this time last year over what we saw in 2013. And so that would effectively add nearly $40 million to our bottom line. Like I said earlier $0.25 per ton decrease in our cost per ton milled and that will add $5.5 million and increase in cash flow, again right to the bottom line and a $0.10 copper price increase adds 12 million. So if you combine those things up with no changes from where we were last year, our profitability has significantly increased.

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