Taseko Mines Limited (TGB)

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Taseko Mines (TGB)

Q4 2013 Earnings Call

February 20, 2014 11:00 am ET

Executives

Brian Bergot - Director of Investor Relations

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

Stuart McDonald - Chief Financial Officer

John W. McManus - Chief Operating Officer

Analysts

Christopher Chang - Laurentian Bank Securities, Inc., Research Division

Mark Turner - Scotiabank Global Banking and Markets, Research Division

Jackie Przybylowski - Desjardins Securities Inc., Research Division

Adam Low - Raymond James Ltd., Research Division

Adam P. Graf - Cowen Securities LLC, Research Division

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

Presentation

Operator

Good day, ladies and gentlemen, and welcome to Taseko Mines Fourth Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Brian Bergot of Investor Relations. Sir, you may begin.

Brian Bergot

Good morning, Saeed. Good morning, ladies and gentlemen. Welcome to Taseko Mines Fourth Quarter and Annual 2013 Results Conference Call. My name is Brian Bergot, and I'm the Vice President, Relation -- Vice President for -- Vice President, Investor Relations for Taseko. With me today in Vancouver is Russ Hallbauer, President and CEO of Taseko; John McManus, Chief Operating Officer; and Stuart McDonald, Taseko's Chief Financial Officer. After opening remarks by management, which will review the fourth quarter business and operational results, we will open 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.

We're very pleased with our performance in 2013. We completed our GDP expansion on time and on budget, and we ramped it up to full production capacity much quicker than just about anyone else in the world has done or completed on similar projects. So we feel pretty good about our ability to execute and fulfill the expectations of our shareholders and our employees when it comes to projects. Our revenue of $290 million increased by roughly $36.5 million over 2012. Our tons mined increased by nearly 23 million tons, and our tons milled increased by 8.2 million tons, which resulted in yearly production out of Gibraltar of a little over 120 million pounds of copper, up from the 89 million pounds produced in 2012, a very notable accomplishment for us.

As a professional mining engineer, looking at our execution with all the moving parts, we did more than a dream job over the year if we look at what's been going on in this business worldwide. Actually, it's kind of a poor reflection, so under my profession, of badly most companies have executed over the past few years. And frankly, it's not the kind of performance that will attract investors to the space. However, there are companies like ours that stays in their means and fulfill their commitment with respect to capital discipline and execution. We look at the transition of our earnings from operations, i.e. operating profit were metric [ph] right in the company of $25 million in the first quarter, generating cash flows of nearly $33 million, including working capital adjustment in terms of moving forward with our business plan. We are well positioned in following our business and strategic plan laid out by my board a number of years ago.

Turning to the slide presentation, looking at Slide 4. We are experiencing what we've termed internally as a superfecta. In horse racing, where each horse comes in sequentially 1, 2, 3, 4, and we are going to be the benefactors of this superfecta in 2014. And certainly, it's the first time, McManus's and my 35-year career, where it has occurred. We have increasing production that I spoke about earlier, 34% increase in 2013 versus 2012. We have a decreasing operating cost in terms of cost per ton milled, 20% in 2013. We have a weakening Canadian dollar, which we will speak about later in the presentation. And we have a strong and stable copper price regime. So looking back, all in all, a very progressive year.

As illustrated in Slide 5, tons mined up -- are up 21% and tons milled up 81% on a year-over-year basis. In Q4 2013, our tons milled was in 2% of our expected life mine estimation, while, at the same time, mill availability and head grades are well below what we know is achievable. And our efforts are now focused on increasing mill availability and getting recoveries to where they should be. So we have more upside even though we produced 58% more copper year-over-year. One thing we need to improve on is ensuring that we keep quarter-end inventories at a minimum, which is, we believe, somewhere between 2.5 and 3.5 million pounds. The last 2 quarters have been somewhat problematic for us in a -- for a number of reasons, but we believe we have the solution in the pipeline to get a normal amount of inventory in the transportation pipeline corridor. Obviously, it's not in our economic interest to have this working capital tied up, as we have had in the last 2 quarters.

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