Taseko Mines Limited (TGB) Q4 2022 Earnings Call Transcript

Taseko Mines Limited (NYSE:TGB) Q4 2022 Results Conference Call February 24, 2023 11:00 AM ET

Company Participants

Brian Bergot - VP, IR

Stuart McDonald - President, CEO

Bryce Hamming - CFO

Conference Call Participants

Craig Hutchison - TD Securities

Alex Terentiew - Stifel

Operator

Good morning, and invited everyone to Taseko's 2022 Year-End Earnings Conference Call. [Operator Instructions]

I would for illustration to move nan convention complete to Mr. Bergot. You whitethorn statesman your conference.

Brian Bergot

Thank you, Sergio. Welcome, everyone, and convey you for joining Taseko's Fourth Quarter and Full Year 2022 Conference Call. The news merchandise and regulatory filing announcing our financial and operational results was issued yesterday aft marketplace adjacent and is disposable connected our website astatine tasekomines.com and connected SEDAR.

I americium joined coming successful Vancouver by Taseko's President and CEO, Stuart McDonald; Taseko's Chief Financial Officer, Bryce Hamming; and our Senior VP, Operations, Richard Tremblay.

As usual, earlier we get into opening remarks by management, I would for illustration to punctual our listeners that our comments and answers to your questions will incorporate forward-looking information. This information, by its nature, is taxable to risks and uncertainties that whitethorn origin nan stated result to disagree materially from nan existent outcome. For further accusation connected these risks and uncertainties, I promote you to publication nan cautionary statement that accompanies our 4th fourth MD&A and nan related news release, arsenic good arsenic nan consequence factors peculiar to our company.

I would besides for illustration to constituent retired we will usage various non-GAAP measures during nan call. You tin find explanations and reconciliations regarding these measures successful nan related news release. Following opening remarks, we will unfastened nan telephone lines to analysts and investors for questions.

I will now move nan telephone complete to Stuart.

Stuart McDonald

Okay. Thank you, Brian, and bully morning, everyone. Thanks for joining our 4th fourth net call. I'll commencement pinch immoderate high-level comments astir nan 4th and a task update, and past I'll move it complete to Bryce for immoderate specifics connected our caller financials.

In nan 4th quarter, we continued to use from a strong copper value environment, nan value averaging astir $3.65 per pound, modestly higher than nan mean value for Q3. But nan inclination was upwards, ending nan twelvemonth astatine $3.80 per lb and coming sitting correct astir $4. Molybdenum prices person besides risen dramatically complete nan past 6 months and coming are sitting astatine astir $37 a pound. That's double nan value of a twelvemonth ago, and moly continues to correspond an important byproduct in installments astatine Gibraltar, astir $0.40 a lb successful Q4.

We generated adjusted EBITDA of $35 cardinal successful nan 4th fourth and for nan afloat twelvemonth $110 million. The 4th fourth was a flimsy betterment complete nan 3rd quarter, and nan mostly of our EBITDA for nan twelvemonth was generated successful nan 2nd half arsenic caput people and accumulation successful nan first half of nan twelvemonth were unusually low. Operating rate flows for nan twelvemonth were $82 million, and Bryce will supply immoderate further specifications connected nan rate flows and net successful a minute.

In position of Gibraltar operations, we had a beardown commencement to nan quarter, but were deed pinch mill readiness issues successful December. The main rumor resulted from a site-wide powerfulness outage that we property released successful January. This was caused by utmost upwind conditions. And though nan existent powerfulness outage only lasted 24 hours, temperatures astatine minus 35 Celsius caused stiff lines successful nan mill and astir a week of downtime.

The effect of that and mining dilution resulted successful 4th fourth copper accumulation of 27 cardinal pounds, which was little than we expected. For nan year, Gibraltar's accumulation was 97 cardinal pounds connected a 100% basis. In position of production, it was decidedly a reliable twelvemonth from commencement to finish. But I do deliberation successful position of nan excavation plan, we're successful a overmuch amended position coming than we were past twelvemonth astatine this time. Mining operations person precocious deeper into nan Gibraltar pit, and we're now good situated successful nan ore body, which is nan sole root of ore for 2023.

We've made caller advancement connected addressing nan higher-than-normal mining dilution. A number of operating initiatives person been identified and we're successful nan process of implementing and expect improvements to summation mill caput grades going forward. As we've spoken astir previously, arsenic we excavation deeper into nan Gibraltar pit, this rumor people improves pinch nan larger and much continuous ore zones. So we expect higher grades successful 2023.

We've already seen nan benefits of nan softer ore successful Gibraltar pit. Prior to December, we ran for 5 months astatine astir 89,000 tons per day, and that level should beryllium achievable going forward. Also successful Q4, we saw improved copper recoveries complete 83%, which was a agleam spot for nan 4th and continues to beryllium a attraction for further betterment going forward. So for nan twelvemonth ahead, we're expecting to use from higher grades and milling opportunities.

One offset will beryllium a 2-week shutdown of mill #1 successful nan 3rd 4th erstwhile nan in-pit crushers relocated. That needs to hap to let stripping activity to beforehand successful nan connector pit. But taking that into account, we expect 2023 copper accumulation to amended to 115 cardinal pounds, positive aliases minus 5%. On nan costs side, our C1 costs successful 2022 were impacted by a number of factors, including debased copper production, little superior portion allocation and higher diesel costs and TC/RCs. Bryce will supply much specifications connected that successful a minute. But arsenic accumulation improves successful 2023, we should people spot a important simplification successful portion operating costs per pound.

In summation to nan expected accumulation improvements astatine nan excavation level this year, we're besides going to get contiguous accumulation maturation from our acquisition of a further 12.5% liking successful nan mine. This week, we signed an statement pinch Sojitz to get their 50% liking successful Cariboo Copper, which is simply a holding institution that owns 25% of nan associated task liking successful Gibraltar. This is simply a awesome woody for Taseko. It's instantly accretive, and nan deferred costs building allows america to protect our rate balance.

Consideration is simply a minimum magnitude of CAD 60 cardinal payable complete 5 years. We're bullish connected copper prices complete that play and expect location will beryllium further contingent amounts paid, but those should beryllium covered by rate flows from nan acquired 12.5% interest, and nan full costs is capped astatine CAD 117 million.

Shifting complete to Florence now, to item different important transaction that we announced successful December, we entered into a strategical business pinch Mitsui for that project. And nether nan position of nan deal, they will supply an first USD 50 cardinal finance to money building of nan commercialized facility. They besides person nan action to put an further USD 50 cardinal for a full of USD 100 million, which would person into a 10% JV liking successful Florence. Mitsui is simply a world leader successful exertion invention pinch a attraction connected sustainability and nan power transition, and their existing U.S. cathode trading business is different logic why nan business is simply a awesome fresh for this project.

The woody implies a early valuation for Florence of USD 1 billion, which shows nan imaginable opportunity for shareholders arsenic we proceed to beforehand nan task towards production. Most of nan awesome components for nan SX/EW works person been acquired and are now connected site. Detailed engineering is complete and discussions pinch building and drilling contractors are good advanced. We're readying to record an updated method study and superior costs estimate later successful March, and we'll beryllium fresh to spell erstwhile nan last Underground Injection Control licence is issued.

Based connected our discussions pinch nan EPA, we cognize they are actively moving nan process forward. We're not alert of immoderate caller issues arising and expect nan thorough process to reason successful nan adjacent fewer months.

On nan financing front, successful summation to nan Mitsui news, we besides announced a $25 cardinal instrumentality lease committedness from Bank of America and an hold of our firm revolver that now includes an accordion for imaginable upsize to USD 80 million. Taseko presently has CAD 190 cardinal of disposable liquidity, and we're successful a beardown position to money nan improvement of Florence.

We stay optimistic connected copper prices going forward, but we'll proceed to protect nan downside and our value protection strategy is simply a cardinal portion of nan Florence backing plan. We person a level value of $3.75 successful spot for astir of Gibraltar accumulation done nan extremity of this year.

Before I manus nan telephone complete to Bryce, I want to make a fewer speedy comments astir our longer-term improvement pipeline. We walk astir of our clip connected these calls talking astir Gibraltar and Florence, but I really deliberation what makes our institution unsocial is that we besides person longer-dated maturation options successful our portfolio, almost 15 cardinal pounds of copper successful reserves. That's much than immoderate of our peers successful nan mid-cap copper abstraction and each of it located successful North America.

At Yellowhead, we're advancing into an EA process this twelvemonth and focused connected organization engagement. At New Prosperity, nan facilitated speech has made advancement complete nan past 12 months, but isn't completed. The standstill statement pinch nan Tsilhqot'in National Government has been extended again, and we spot a early opportunity to resoluteness that conflict pinch a affirmative outcome. And astatine our Aley Niobium Project, we've initiated a study to look astatine niobium oxide production, which could proviso nan fast-growing marketplace for niobium-based artillery materials.

So there's a batch happening successful nan inheritance connected those projects. It takes clip to create them, but each of them has nan imaginable to create important worth for shareholders successful nan future. And pinch that, I'll move nan telephone complete to Bryce.

Bryce Hamming

Thank you, Stuart. Good morning, everyone. I will now supply immoderate further colour connected our 4th fourth and yearly financial results.

Copper income for nan 4th fourth were 26 cardinal pounds connected a 100% ground astatine an mean realized value of $3.66 per pound. For nan year, Gibraltar sold 101 cardinal pounds astatine an mean realized value of $3.96 per pound. Our proportionate stock of income generated gross of $392 cardinal for nan year. In fact, it is nan 2nd highest gross we person had arsenic a institution aft a grounds twelvemonth past year. It's really very comparable to 2021 revenues erstwhile you relationship for nan truth that this reported gross for 2022 didn't see proceeds from our copper puts, which were $23 cardinal successful 2022.

2022 was a communicative of 2 years successful 1, pinch nan first half benefiting from grounds copper prices that peaked astatine complete $5 successful March, followed by a crisp driblet successful mid-June pinch prices holding successful nan mid-$3 scope successful nan 2nd half of 2022. This volatility we saw underpins our semipermanent strategy of purchasing copper value protection. We don't effort to clip it perfectly, but alternatively beryllium accordant successful our put purchases and purpose to execute trades erstwhile nan copper value is recovering, for illustration we did successful June of past twelvemonth and successful February of this year. This consistency protects if and erstwhile copper pulls back, moreover arsenic it is today. We person 72 cardinal pounds of copper protected for 2023 astatine a put value of $3.75 per pound, and we will look to adhd to this arsenic we hole for further superior programs astatine Florence.

The communicative successful '22 was each astir costs and nan effect of ostentation connected our business. We saw full tract spending which includes capitalized portion for Taseko's 75% stock accrued $40 cardinal aliases 15% successful '22 from $262 cardinal to $301 million. Diesel costs unsocial accounted for $23 cardinal of that summation arsenic we saw prices emergence much than $0.70 per liter, higher than humanities levels. Pre-COVID, they were typically astir $1 per liter. And we devour astir 40 cardinal liters per twelvemonth astatine Gibraltar. We besides saw different input costs summation for illustration alloy and our grinding media. Today, site-landed diesel costs are down to astir $1.35 per liter. So we expect if that continues, that would prevention Taseko $12 cardinal unsocial successful 2023.

With our stock of full tract spending astatine $302 cardinal per year, that results successful a quarterly mean of $75 cardinal a quarter, which is nan tally complaint we expect into 2023 for quarterly full tract spend. Total tract spending successful nan 4th fourth was $80 cardinal and was higher than nan quarterly mean by $5 cardinal owed to elevated diesel costs, nan timing of repairs connected our instrumentality and immoderate wage-related costs.

To protect against diesel value risks, we did acquisition diesel telephone options for 2023 for nan afloat year, providing a ceiling for diesel costs astatine Gibraltar, efficaciously astatine astir $1.75 per liter. As always, conscionable arsenic important arsenic having downside copper value protection successful place, locking successful aliases capping costs wherever we tin supply certainty for our costs structure.

With nan little accumulation successful 2022, our C1 costs per lb besides accrued from $1.90 to $2.98 per pound. Our MD&A includes a span graph, which provides a bully breakdown of really this dollar per lb summation is explained. In summation to nan 15 cardinal less pounds produced astatine Gibraltar, we besides capitalized noticeably little mining costs successful 2022 arsenic mining was focused successful nan Gibraltar pit. This was 28 cardinal little than 2021.

For 2023, we expect importantly much of our tract costs to beryllium allocated to capitalized portion arsenic stripping originates successful nan caller connector zone. C1 costs successful nan 4th fourth were successful statement pinch nan 3rd 4th astatine $2.75 per pound. Unit costs were little by 17% successful nan 2nd half of nan twelvemonth compared to nan first half owed to nan higher production. We expect C1 costs per lb to alteration further into 2023 pinch further improvements successful accumulation arsenic much stripping costs are capitalized and pinch immoderate ostentation alleviation seen successful diesel and different inputs.

Also of statement is that nan caller move successful moly price, which is presently $37 per lb has been rather significant. And successful nan 4th quarter, generated a affirmative provisional value accommodation of $4 million. Earnings from excavation operations earlier depreciation successful nan 4th fourth was $38 million, $19 cardinal higher than nan 3rd quarter. For nan year, net from excavation operations earlier depreciation for Taseko stock was $106 cardinal aliases astir $1.05 per pound.

In 2022, we had GAAP nett nonaccomplishment of $26 cardinal aliases $0.09 per share. This included an unrealized $30 cardinal overseas speech nonaccomplishment associated pinch our U.S. dollar-denominated notes. On an adjusted basis, we had nett net of $2 cardinal for nan twelvemonth aliases [indiscernible] per share. For nan 4th quarter, we reported adjusted nett income of $7 cardinal aliases $0.025 per share.

Cash travel from operating activities successful nan twelvemonth were $81 cardinal and nominal successful nan 4th quarter. Fourth 4th rate travel was impacted by a number of moving superior adjustments totaling $32 million. They related to accrued inventories for vanished goods, but astir notably our stockpiles arsenic good arsenic a salary down of our accounts payable successful nan quarter.

In nan 4th quarter, a full of $42 cardinal was spent connected superior programs pinch $13 cardinal astatine Gibraltar and $29 cardinal for improvement costs astatine Florence. For nan afloat year, we invested $181 cardinal into CapEx, including $100 cardinal of that, that was spent astatine Florence, astir of which was related to nan acquisition of instrumentality for nan commercialized facility. This walk connected Florence caused our wide rate equilibrium to alteration since December of past year.

During nan 4th quarter, we refinanced immoderate of our mining instrumentality astatine Gibraltar arsenic we person been paying this down complete nan past 4 years. Net proceeds from this financing was $25 cardinal to Taseko's account. Cash connected manus astatine December 31 was $121 million. And including our undrawn USD 50 cardinal in installments facility, nan institution has astir $190 cardinal of disposable liquidity.

In January, we extended nan maturity day of our revolving in installments installation by an further twelvemonth to July of 2026. In summation to nan hold of nan facility, we added an accordion feature, which will let america nan magnitude of nan installation to summation by an further $30 cardinal for a full of $80 cardinal arsenic allowed nether our enslaved indenture. We will beryllium reaching retired to banks successful nan coming months for in installments to upsize nan installation to this larger size.

We are opening 2023 successful a bully spot financially, particularly pinch nan maturation that has travel from nan acquisition of 17% much astatine Gibraltar production. As we get person to starting building astatine Florence, we whitethorn adhd further sources of backing astatine Florence level, for illustration a mini indebtedness installation aliases royalty to supplement nan finance from Mitsui and nan installation committedness from nan Bank of America. We proceed to support options open.

With that, we are fresh to return questions, operator.

Question-and-Answer Session

Operator

[Operator Instructions] Your first mobility comes from Craig Hutchison from TD Securities.

Craig Hutchison

Just a mobility connected nan Sojitz transaction. Is that retroactive to nan commencement of nan year?

Stuart McDonald

Yes, that will beryllium -- for illustration we signed nan agreement, but we still person to close. It will beryllium effective arsenic of nan close. That's really I position it.

Craig Hutchison

Do you expect it to adjacent this 4th aliases --

Stuart McDonald

Yes, we do.

Craig Hutchison

Okay. And past possibly a 2nd mobility connected that. Will that trigger immoderate alteration to nan accounting that you guys have? Right now, I deliberation you usage proportional accounting. Would that make immoderate alteration fixed your accrued interest?

Bryce Hamming

Yes, Craig, this is Bryce. Yes, nan accounting, we're still reviewing that. I deliberation our anticipation astatine this shape is that it's going to beryllium proportionate consolidation arsenic we're only requiring 50% of Cariboo and therefore, not control. So we expect to beryllium proportionately consolidating 87.5% going forward.

Craig Hutchison

Okay. Perfect. And past conscionable for Gibraltar, successful position of -- you mentioned location will beryllium a higher grade of capitalized stripping this year. So C1 costs will spell down. But conscionable successful position of wide costs, tin you springiness america a consciousness of possibly conscionable what you're reasoning successful position of full capital, including stripping, sustaining and different superior projects astatine Gibraltar?

Bryce Hamming

Yes. So it's Bryce again. So I deliberation for this upcoming year, erstwhile we look astatine full capital, I deliberation what's first and foremost is nan crusher activity that we're doing. That was a programme we started past year.

In our CapEx, you spot location that we incurred astir conscionable awkward of $25 cardinal connected a 100% basis. And we person astir that magnitude to spell guardant for nan crusher move and immoderate ancillary projects there. So that's, again, connected a 100% ground Canadian for this upcoming year. That's a task we're committed to.

I deliberation sustaining superior will beryllium a akin level arsenic past twelvemonth is what we saw successful 2022. And past I deliberation arsenic we said, nan capitalized portion will beryllium a spot higher. Last twelvemonth was a spot lower. So I deliberation we're going to beryllium another, telephone it, $0.15 per lb aliases $0.20 a lb location successful capitalized strip.

Operator

Your adjacent mobility comes from Alex Terentiew from Stifel.

Alex Terentiew

I conscionable had a follow-up mobility akin to Craig's location connected nan cost. At nan opening of nan telephone you mentioned a bunch of on-site operating costs, different allocation betwixt operating and capitalized strip. Can you conscionable punctual maine benignant of what you said location astir those numbers?

I conscionable wanted to -- conscionable fixed that Florence is hopefully astir nan area and nan further liking successful Gibraltar, I conscionable wanted to return a look astatine my numbers to make judge I benignant of sewage bully grip connected rate travel expectations for this year?

Stuart McDonald

Yes, Alex, I'll return that one. It's Stuart speaking. Yes, generally, erstwhile we look astatine our tract spending, we deliberation astir it successful position of nan full of operating -- tract operating costs and capitalized strip. And that number is going to proceed astatine fundamentally astir nan aforesaid level that you've seen successful caller months that you saw successful Q4 successful our MD&A.

Now arsenic we noted that location is an allocation rumor location betwixt what's capitalized and what's operating, we deliberation a higher proportionality of that will beryllium capitalized this year. But conscionable reasoning astir rate flow, that's nan measurement you should beryllium reasoning astir it astatine nan Gibraltar level.

Alex Terentiew

Okay, makes sense. And past Florence, I deliberation you said you spent astir $100 cardinal past year. Is that money that was really spent? Or is it conscionable benignant of orders placed for that amount?

Stuart McDonald

Yes, that was -- first of all, that was successful Canadian funds. But that was nan full walk past year. We don't person a batch near from that program, conscionable small spot of instrumentality present and there, but thing significant. Most of it's been spent, truthful that was CAD 100 million. And astir of that was for nan equipment. There were immoderate tract costs successful location arsenic well.

Operator

[Operator Instructions]

Brian Bergot

Okay, it sounds for illustration there's not immoderate different questions astatine this time. So I deliberation we'll wrap it up there. And yes, look guardant to talking to you each again adjacent quarter. Thanks, everyone. Bye now.

Operator

Ladies and gentlemen, this concludes your convention telephone for today. We convey you for participating and inquire that you please disconnect your lines.