VANCOUVER, Nov. 6, 2019 /CNW/ - Taseko Mines Limited (TSX: TKO; NYSE American: TGB) ("Taseko" or the "Company") reports earnings from mining operations before depletion and amortization* of $12.3 million and adjusted EBITDA* of $7.9 million for the three months ended September 30, 2019.
The third quarter copper production at Gibraltar of 33 million pounds was on plan, with grades, mill throughput and recoveries all in line with management expectations. We expect to achieve the original 2019 guidance of 130 million pounds (+/-5%) of copper, and 2020 should be a similar production year. An updated mineral reserve estimate for Gibraltar has been completed (details included below), and a new NI 43-101 technical report was filed on SEDAR today.
Russell Hallbauer, CEO and Director of Taseko, commented, "The Gibraltar Mine continues to be a cornerstone asset for our Company. We're pursuing and evaluating a number of improvements, with a focus on opportunities to increase mill throughput and recoveries, as well as mining related enhancements. Mining and milling technology is constantly evolving which provides opportunities for a steady-state mine, like Gibraltar, to improve."
"We continued to make great strides forward at our Florence Copper Project this quarter and copper production at the project test facility continues to increase. We're gaining valuable operating experience which will benefit us with the commercial facility development and we continue to maintain compliance with all environmental guidelines. Florence Copper has the potential to transform Taseko's production profile in the coming years, and dramatically reduce our consolidated unit costs. We recently announced our intention to list Taseko on the London Stock Exchange ("LSE") Main Market, and as part of the listing process we engaged an independent engineering firm, Roscoe Postle Associates Inc. ("RPA"), to prepare a Competent Persons Report ("CPR") on the Florence Copper Project. The CPR confirms a project with a production capacity of 85 million pounds of copper over a 20 year mine life, with an after-tax NPV (at 8%) of US$670 million and an IRR of 40%. RPA's findings represent a strong independent third party endorsement for the project and the previous technical work we have completed," concluded Stuart McDonald, President of Taseko.
*Non-GAAP performance measure. See end of news release.
Third Quarter Review
Third quarter earnings from mining operations before depletion and amortization* were $12.3 million, and Adjusted EBITDA was $7.9 million;
Cash flow from operations was $15.2 million, a 37% increase over the second quarter of 2019;
The Company's cash balance at September 30, 2019 was $42.0 million, unchanged from the prior quarter;
Copper production in the third quarter was steady at 33.0 million pounds and copper sales were 33.5 million pounds (100% basis);
Molybdenum production was 620 thousand pounds in line with plan; molybdenum prices averaged US$11.83 per pound during the quarter;
Site operating costs, net of by-product credits* were US$1.72 per pound produced, comparable to the second quarter of 2019 of US$1.71 per pound;
Net loss was $24.5 million ($0.10 per share) and adjusted net loss* was $20.6 million ($0.08 per share);
The Florence Copper project continues to advance its production test facility operation with the focus turning to testing different wellfield operating strategies, including adjusting pumping rates, solution strength, flow direction and the use of packers in recovery and injection wells to isolate different zones of the orebody. During the quarter, Florence delivered its first shipment of LME grade A copper cathode; and
Finished goods inventory at September 30, 2019 at Gibraltar (100% basis) includes 5 million pounds of copper and 129 thousand pounds of molybdenum with a sales value for Taseko's share of approximately $12.0 million.
Competent Person Reports for LSE Listing
As a requirement of the LSE listing process, the Company engaged Roscoe Postle Associates Inc. ("RPA") to prepare an independent Competent Persons Report ("CPR") for the Gibraltar Mine and the Florence Copper Project. The Gibraltar Mine CPR confirmed the Company's mineral reserve estimate in its 43-101 Technical Report dated November 6, 2019, and contains no other significant findings.
The Florence Copper Project CPR contains a number of estimates which are different than the estimates in the 2017 Florence Technical Report dated January 16, 2017 (the "2017 Technical Report"), and the key differences are summarized as follows:
The mineral reserve estimate in the CPR is the same as the 2017 Technical Report, however, RPA lowered the estimate of total copper recovery to 65% (compared to 70% in the 2017 Technical Report), based on a more conservative interpretation of previous metallurgical test work.
The CPR assumes accelerated wellfield development to maintain annual copper production capacity of 85 million pounds over a mine life of 21 years.
RPA reviewed the initial start-up results of the Florence Production Test Facility in mid-2019 but opined the results were too preliminary in nature to make firm judgements at that time. Accordingly, the CPR does not reflect any updates to reflect these test facility operations.
Capital and operating cost estimates were escalated to June 2019 US dollar basis using a combination of cost indexes and updated reagent, power and labour costs. Initial capital costs in the CPR increased to US$227 million from US$204 million in the 2017 Technical Report. Cash requirements for reclamation bonding reduced to US$9 million from US$ 22 million in the 2017 Technical Report. Operating costs increased to US$1.13/lb of copper produced, from US$ 1.10/lb in the 2017 Technical Report.
An economic analysis was completed by RPA using the mine plan included in the 2017 Technical Report and their updated capital and operating cost estimates. RPA also incorporated current federal US tax law changes resulting from the 'Tax Cuts and Jobs Act' (TCJA) signed into law on December 22, 2017. Using a copper price of US$3.10/lb and an 8% discount rate results in an after-tax NPV of US$667 million (versus US$680 million in the 2017 Technical Report). The Project has an after-tax Internal Rate of Return (IRR) of 40.2% and payback period of 2.3 years from start of commercial operations (versus 37% and 2.5 years in the 2017 Technical Report).
The CPR includes a resource estimate prepared in accordance with NI 43-101 utilizing CIM definitions. The resource estimate includes 296 million tons of Indicated resources grading 0.35% Cu, that were reclassified from the Measured resource category in the 2017 Technical Report, based on RPA's assessment that there was not sufficient density information in their opinion to support categorization as Measured resources. The total measured and indicated resource estimate is the same as in the 2017 Technical Report.
*Non-GAAP performance measure. See end of news release.
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