Hudbay Minerals Inc. press release

TASEKO REPORTS FOURTH QUARTER AND ANNUAL EARNINGS

2023-02-24

TSX - Toronto Stock Exchange · Copper · Molybdenum · Gold · Silver · Sulfur · Zinc · Canada · Corporate Finance

Canada NewsWire

| This release should be read with the Company's Financial Statements and Management Discussion & Analysis ("MD&A"), available at www.tasekomines.com and filed on www.sedar.com . Except where otherwise noted, all currency amounts are stated in Canadian dollars. Taseko's 75% owned Gibraltar Mine is located north of the City of Williams Lake in south-central British Columbia. Production and sales volumes stated in this release are on a 100% basis unless otherwise indicated. |

VANCOUVER, BC , Feb. 23, 2023 /CNW/ - Taseko Mines Limited (TSX: TKO) (NYSE American: TGB) (LSE: TKO) ("Taseko" or the "Company") reports Adjusted EBITDA* of $109 million and Earnings from mining operations before depletion* of $106 million for the full year 2022. Revenues for the year were $392 million and Adjusted net income* was $1.7 million , or $0.01 per share. In the fourth quarter 2022, Taseko generated Adjusted EBITDA* of $35 million , $38 million of earnings from mining operations before depletion* and Adjusted net income* of $7 million , or $0.02 per share.

Stuart McDonald , President and CEO of Taseko, commented, "The upward move in copper and molybdenum prices during the fourth quarter helped drive stronger financial performance in the period. Fourth quarter earnings from mining operations before depletion were 103% higher than the third quarter and Adjusted EBITDA was 3% higher. Annual earnings for 2022 were affected by lower average copper prices ( US$3.99 /lb. compared to US$4.23 /lb. in 2021) and higher production costs related to fuel price increases and lower production.

Average head grade for the year was 20% below the life of mine reserve average, and a site-wide power outage late in the year also contributed to the lower annual copper production of 97 million pounds. Despite the mill downtime in the fourth quarter, Gibraltar produced 27 million pounds of copper. Recoveries in the fourth quarter improved to 83%, an 8% increase over the prior quarter due to better quality ore."

Mr. McDonald added, "The quarterly production profile in 2023 is expected to be less variable than the last two years and we believe there is potential for mill throughput to average above design capacity. An in-pit crusher move is scheduled for the third quarter which will partially shut down ore processing for approximately two weeks. We expect annual copper production at Gibraltar Mine to increase to 115 million pounds (+/-5%) in 2023."

"Yesterday we announced an agreement with Sojitz Corporation to acquire their 12.5% interest in Gibraltar Mine, which increases our economic interest to 87.5%. This is an attractive transaction that provides immediate production and earnings growth, and we maintain the financial capacity to fund the construction of our Florence Copper project. The acquisition price includes a minimum amount of C$60 million payable over a five-year period and potential contingent payments based on Gibraltar mine revenues and copper prices over the next five years. An initial C$10 million will be paid to Sojitz upon closing and the remaining minimum amount will be paid in C$10 million annual instalments over the next five years (see news release dated February 22, 2023 for details about the transaction)."

"We've also recently announced several key financing initiatives for the Florence copper project, and we expect to start construction in the coming months, upon receipt of the final Underground Injection Control permit. Under the terms of our strategic partnership agreement with Mitsui & Co. (USA), they will make an initial investment of US$50 million for a 2.67% copper stream. Mitsui also retains an option to invest an additional US$50 million (for a total of US$100 million ) to convert the copper stream into a 10% equity interest in Florence Copper. We are very pleased to have completed this transaction which validates the significant value of this project and also highlights the marketing advantages of low impact mining and US produced copper," continued Mr. McDonald.

Mr. McDonald concluded, "We are very excited about the long-term fundamentals of our North American copper business. Production growth from Gibraltar and continued robust copper pricing is setting Taseko up for a year of strong financial returns. The important permitting catalyst for our Florence Copper project is on the near horizon, which we believe will unlock the significant value of that project."

2022 Annual Review

Earnings from mining operations before depletion and amortization* was $106.2 million , Adjusted EBITDA* was $109.0 million , and cash flows from operations was $81.3 million ; Adjusted net income* was $1.7 million ( $0.01 per share) and GAAP Net loss was $26.0 million ( $0.09 per share) for the year; Total operating costs (C1)* for the year were US$2.98 per pound produced; The Gibraltar mine produced 97.0 million pounds of copper and 1.1 million pounds of molybdenum in 2022. Copper recoveries were 79.5% and copper head grades were 0.20%; Gibraltar sold 101.3 million pounds of copper for the year (100% basis) which contributed to revenue for Taseko of $391.6 million , Taseko's second highest revenue year after 2021. Average realized copper prices before hedging gains were US$3.96 per pound for year, compared to the LME average price of US$3.99 per pound; The Company had a cash balance of $121 million and has approximately $190 million of available liquidity at December 31, 2022 , including its undrawn US$50 million revolving credit facility; In September 2022 , the EPA concluded its 45-day public comment period for the draft Underground Injection Control ("UIC") permit for Florence Copper. The project received overwhelming support from business organizations, community leaders and state-wide organizations in written submissions and as voiced at the public hearing; and Development costs incurred for Florence Copper were $101.3 million in the year and included further payments for the major processing equipment being delivered for the solvent extraction and electrowinning ("SX/EW") plant, other pre-construction activities and ongoing site costs.

Fourth Quarter Review

In December 2022 , the Company signed agreements with Mitsui & Co. (U.S.A.) Inc. ("Mitsui") to form a strategic partnership to develop Florence Copper. Mitsui has committed to an initial investment of US$50 million which is conditional on receipt of the final UIC permit, with proceeds to be used for construction of the commercial production facility. The initial investment will be in the form of a copper stream agreement on 2.67% of the copper produced at Florence Copper. In addition, Mitsui has the option to invest an additional US$50 million (for a total investment of US$100 million ) for a 10% equity interest in Florence Copper; Fourth quarter earnings from mining operations before depletion and amortization* was $37.7 million , Adjusted EBITDA* was $35.2 million , and Adjusted net income* was $7.1 million ( $0.02 per share); Gibraltar produced 26.7 million pounds of copper for the quarter. Head grades were 0.22% and were similar to the prior quarter. Lower mill throughput and lower than expected grades due to mining dilution, impacted production in the quarter; Average mill throughput in the fourth quarter was 79,000 tons per day, as production in December was negatively impacted by unplanned mill downtime arising from a sitewide power outage caused by an extreme cold weather event; Copper recoveries were 83.4% for the quarter in line with expectations and a significant improvement over the prior quarters in 2022; Total site costs* in the fourth quarter was $5.6 million higher than the average for the last nine months due to higher diesel costs and timing of equipment repairs and maintenance; Gibraltar sold 25.5 million pounds of copper in the quarter (100% basis) at an average realized copper price of US$3.66 per pound; GAAP net loss was $2.3 million ( $0.01 loss per share) and reflected an unrealized loss on derivatives of $20.1 million due to the recovery in copper prices, and net of a foreign exchange gain of $4.6 million due to a strengthening Canadian dollar; The Company has copper collar contracts in place to protect a minimum copper price of US$3.75 per pound until the end of December 2023 for the majority of the Company's needs. The Company also has 24 million litres of fuel call options in place to provide a ceiling cost for its share of diesel over the same period; In December 2022 , Gibraltar entered into an equipment loan refinancing with the Company's share of net proceeds being $25.7 million . The Company also secured a commitment for US$25 million from Banc of America Leasing & Capital, LLC to fund costs associated with the SX/EW plant for the Florence Copper commercial production facility; In February 2023 , the Company entered into an agreement to extend the maturity date of the undrawn revolving credit facility by an additional year to July 2026 . In addition to the one-year extension, the lender has also agreed to an accordion feature, which will allow the amount of the credit facility to be increased by US$30 million , for a total of US$80 million , subject to credit approval and other conditions; and The standstill agreement between the Tŝilhqot'in Nation and Taseko was most recently extended for a fourth one-year term in December 2022 , with the goal of providing time and opportunity for the Tŝilhqot'in Nation and Taseko to negotiate a final resolution. The dialogue process has made tangible progress in the past 12 months but is not complete. In agreeing to extend the standstill through 2023, the Tŝilhqot'in Nation and Taseko acknowledge the constructive nature of discussions to date, and the future opportunity to conclude a long-term and mutually acceptable resolution of the conflict that also makes an important contribution to the goals of reconciliation in Canada .

| *Non-GAAP performance measure. See end of news release. |

HIGHLIGHTS

| Operating Data (Gibraltar - 100% basis) | Three months ended December 31, | Year ended December 31, | | | | | | | 2022 | 2021 | Change | 2022 | 2021 | Change | | Tons mined (millions) | 22.9 | 23.3 | (0.4) | 88.7 | 105.4 | (16.7) | | Tons milled (millions) | 7.3 | 7.4 | (0.1) | 30.3 | 29.2 | 1.1 | | Production (million pounds Cu) | 26.7 | 28.8 | (2.1) | 97.0 | 112.3 | (15.3) | | Sales (million pounds Cu) | 25.5 | 23.8 | 1.7 | 101.3 | 104.9 | (3.6) |

| Financial Data | Three months ended December 31, | Year ended December 31, | | | | | | (Cdn$ in thousands, except for per share amounts) | 2022 | 2021 | Change | 2022 | 2021 | Change | | Revenues | 100,618 | 102,972 | (2,354) | 391,609 | 433,278 | (41,669) | | Earnings from mining operations before depletion and amortization * | 37,653 | 61,916 | (24,263) | 106,217 | 230,392 | (124,175) | | Cash flows (used for) provided by operations | (946) | 37,231 | (38,177) | 81,266 | 174,769 | (93,503) | | Adjusted EBITDA * | 35,181 | 52,988 | (17,807) | 109,035 | 200,733 | (91,698) | | Adjusted net income * | 7,146 | 13,312 | (6,166) | 1,723 | 44,745 | (43,022) | | Per share - basic ("Adjusted EPS") * | 0.02 | 0.05 | (0.03) | 0.01 | 0.16 | (0.15) | | Net income (loss) (GAAP) | (2,275) | 11,762 | (14,037) | (25,971) | 36,472 | (62,443) | | Per share - basic ("EPS") | (0.01) | 0.04 | (0.05) | (0.09) | 0.13 | (0.22) |

| *Non-GAAP performance measure. See end of news release. |

REVIEW OF OPERATIONS

Gibraltar mine (75% Owned)

| Operating data (100% basis) | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | YE 2022 | YE 2021 | | Tons mined (millions) | 22.9 | 23.2 | 22.3 | 20.3 | 23.3 | 88.7 | 105.4 | | Tons milled (millions) | 7.3 | 8.2 | 7.7 | 7.0 | 7.4 | 30.3 | 29.2 | | Strip ratio | 1.1 | 1.5 | 2.8 | 2.6 | 2.2 | 1.8 | 2.5 | | Site operating cost per ton milled (Cdn$)* | $13.88 | $11.33 | $11.13 | $11.33 | $9.94 | $11.89 | $9.21 | | Copper concentrate | | | | | | | | | Head grade (%) | 0.22 | 0.22 | 0.17 | 0.19 | 0.24 | 0.20 | 0.23 | | Copper recovery (%) | 83.4 | 77.1 | 77.3 | 80.2 | 80.4 | 79.5 | 82.4 | | Production (million pounds Cu) | 26.7 | 28.3 | 20.7 | 21.4 | 28.8 | 97.0 | 112.3 | | Sales (million pounds Cu) | 25.5 | 26.7 | 21.7 | 27.4 | 23.8 | 101.3 | 104.9 | | Inventory (million pounds Cu) | 5.4 | 4.2 | 2.7 | 4.0 | 9.9 | 5.4 | 9.9 | | Molybdenum concentrate | | | | | | | | | Production (thousand pounds Mo) | 359 | 324 | 199 | 236 | 450 | 1,118 | 1,954 | | Sales (thousand pounds Mo) | 402 | 289 | 210 | 229 | 491 | 1,131 | 2,000 | | Per unit data (US$ per pound produced) * | | | | | | | | | Site operating costs * | $2.79 | $2.52 | $3.25 | $2.95 | $2.02 | $2.85 | $1.91 | | By-product credits * | (0.40) | (0.15) | (0.15) | (0.18) | (0.30) | (0.23) | (0.27) | | Site operating costs, net of by-product credits * | $2.39 | $2.37 | $3.10 | $2.77 | $1.72 | $2.62 | $1.64 | | Off-property costs | 0.36 | 0.35 | 0.37 | 0.36 | 0.22 | 0.36 | 0.26 | | Total operating costs (C1) * | $2.75 | $2.72 | $3.47 | $3.13 | $1.94 | $2.98 | $1.90 |

_ Full Year Results _

Gibraltar produced 97.0 million pounds of copper for the year compared to 112.3 million pounds in 2021. Head grades for the year averaged 0.20% copper, compared to 0.23% in 2021. The copper head grades were impacted by higher than expected mining dilution. Copper recoveries for 2022 were 79.5%, compared to 82.4% in 2021.

A total of 88.7 million tons were mined in the year compared to 105.4 million tons mined in the prior year period. The strip ratio of 1.8 was lower than the prior year as mining operations were focused in the Gibraltar pit in 2022 which has a lower strip ratio than the Pollyanna pit.

Total site costs* at Gibraltar of $301.8 million (which includes capitalized stripping of $32.0 million ) for Taseko's 75% share were $40.0 million higher than 2021, primarily due to higher diesel prices (55% higher than 2021) and increased diesel volume consumed (21% higher than 2021) due to the longer hauls and higher truck hours and with grinding media and other input costs also increasing due to inflationary pressures.

| *Non-GAAP performance measure. See end of news release. |

REVIEW OF OPERATIONS – CONTINUED

Molybdenum production was 1.1 million pounds in the year compared to 2.0 million pounds in the prior year. Molybdenum prices strengthened in 2022 with an average molybdenum price of US$18.73 per pound, an increase of 18% compared to the 2021 average price of US$15.94 per pound. By-product credits per pound of copper produced was US$0.23 in the year compared to US$0.27 in the prior year. The higher molybdenum price and favorable provisional price adjustments at year end were offset by lower molybdenum sales in 2022 compared to the prior year.

Off-property costs per pound produced* were US$ 0.36 for the year, which is US$0.10 higher than the prior year. In 2021 the Company benefited from lower benchmark treatment and refining charges ("TCRC") and realized lower TCRCs for spot tenders due to tight copper market conditions last year. Ocean freight costs also increased in 2022 as the Company entered into a new contract at a higher rate earlier in the year. Also contributing to the increased off-property costs per pound produced in 2022 is the fact that sales of copper exceeded production by 4.3 million pounds.

Total operating costs per pound produced (C1)* were US$2.98 for the year, compared to US$1.90 in the prior year as shown in the bridge graph below :

[](https://mma.prnewswire.com/media/2009076/Taseko_Mines_Limited_TASEKO_REPORTS_FOURTH_QUARTER_AND_ANNUAL_EA.html)

Fourth Quarter Results

Gibraltar produced 26.7 million pounds of copper for the quarter, a 6% decrease over the third quarter. Copper production in December was impacted by unplanned mill downtime, including a sitewide power outage late in the month. Although the power outage was only 24 hours in duration, the severe cold temperatures of -35° Celsius (-31° Fahrenheit) immediately froze a number of essential systems in the mills. This extreme weather delayed the restart of milling operations for several days followed by a gradual return to full capacity by the end of December. Mill throughput in October and November averaged above design capacity at 88,000 tons per day, but mill throughput averaged only 63,000 tons per day in December. Head grades were in line with the prior quarter and management continues to work on reducing the mining dilution being experienced in the Gibraltar pit. Copper recoveries in the fourth quarter were 83%, an improvement over the prior quarters in 2022 due to improving ore quality as mining advances deeper into the Gibraltar pit.

| *Non-GAAP performance measure. See end of news release. |

REVIEW OF OPERATIONS – CONTINUED

A total of 22.9 million tons were mined in the fourth quarter. The strip ratio of 1.1 was lower than prior quarter and included some initial stripping activity in the Connector pit. The ore stockpiles increased by 3.8 million tons in the fourth quarter.

Total site costs* at Gibraltar of $79.7 million (which includes capitalized stripping of $3.9 million ) for Taseko's 75% share were $5.6 million higher than the average of the first three quarters of 2022 due to higher diesel costs, timing of repairs and maintenance and year-end wage related costs. Site operating cost per ton milled* was $13.88 was higher than the previous quarters in 2022 due to the higher site costs and lower mill throughput.

Molybdenum production was 359 thousand pounds in the fourth quarter. At an average molybdenum price of US$21.39 per pound and the impact of favorable provisional price adjustments of $3.9 million for Taseko's 75% share, molybdenum generated a by-product credit per pound of copper produced of US$0.40 in the fourth quarter.

Off-property costs per pound produced* were US$0.36 for the fourth quarter reflecting higher ocean freight costs (including bunker fuel) and increased treatment and refining charges (TCRC) compared to the same quarter in the prior year.

Total operating costs per pound produced (C1)* were US$2.75 for the quarter and was in line with the previous quarter.

GIBRALTAR OUTLOOK

Gibraltar is expected to produce 115 million pounds of copper (+/-5%) in 2023 on a 100% basis. The Gibraltar pit will be the sole source of mill feed in 2023 and the quarterly production profile is expected to be less variable than 2022 due to improving quality and consistency of ore as mining progresses deeper into the pit. Annual mill throughput is expected to exceed design capacity in 2023 due to the softer ore in Gibraltar pit.

Stripping activities are underway in the new Connector pit. While the strip ratio is expected to be in line with the LOM average, the allocation of costs to capitalized stripping in 2023 will be higher than in 2022. The primary crusher for mill 1 which overlays the Connector zone is scheduled to be moved to its new location in the third quarter of this year.

Strong metal prices combined with our copper hedge protection continues to provide tailwinds for robust financial performance and operating margins at the Gibraltar mine over the coming year. Copper prices in 2022 averaged US$3.99 per pound and have started the current year above these levels. Molybdenum prices are currently US$36.95 per pound, 97% higher than the average price in 2022.

The Company currently has copper price collar contracts in place that secure a minimum copper price of US$3.75 per pound for 72 million pounds of copper until December 31 , 2023. The Company has also executed price caps for its share of diesel purchases. Improving production combined with this copper hedge and diesel price protection program should continue to provide the foundation for stable financial performance and operating margins at the Gibraltar mine in 2023.

| *Non-GAAP performance measure. See end of news release. |

FLORENCE COPPER

The Company is awaiting the issuance of the final Underground Injection Control permit ("UIC") from the U.S. Environmental Protection Agency ("EPA"), which is the final permitting step required prior to construction commencing on the commercial production facility. The EPA is currently addressing comments that were received during the public comment period, which was held in the fall of 2022. Public comments submitted to the EPA have demonstrated strong support for the Florence Copper project among local residents, business organizations, community leaders and state-wide organizations.