Taseko Mines, Ltd.

Hello, everyone, and welcome to Taseko Mines' 2024 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star-1-1 on your telephone, and then you will hear a message advising your hand is raised. To withdraw the question, simply press star-1-1 again. Please be advised that today's conference is being recorded. Now, it's my pleasure to turn the call over to the Vice President of Investor Relations, Brian Bergo. Please proceed.

Thank you, Carmen. Welcome, everyone, and thank you for joining the SECO's 2024 Fourth Quarter Annual Results Conference Call. The news release and regulatory filing announcing our financial and operational results was issued yesterday after market closed, and is available on our website, TesecoMines.com and on CR Plus. I'm joined today in Vancouver by Teseco's President and CEO, Stuart McDonald, Teseco's Chief Financial Officer, Grace Hammond, and our Chief Operating Officer, Richard Trombley. As usual, before we get into opening remarks by management, I would like to remind our listeners that our comments and answers to your questions will contain forward-looking information, and this information by its nature is subject to risks and uncertainties. As such, actual results may differ materially from the views expressed. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our fourth quarter MDMA and the related insurance, as well as the risk factors particular to our company. These documents can be found on our website and also on Cedar Plus. I would also like to point out that we will use various non-GAAP measures during the call. You can find explanations and reconciliations regarding these measures in the related news release. And finally, all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified. Following opening remarks, we will open the phone lines to analysts and investors for questions. I will now turn the call over to Stuart for his remarks.

Thanks, Brian, and good morning, everyone. Thanks for joining us for the fourth quarter of annual earnings. As you can tell, I'm struggling with the bad voice. I'm going to give slightly abbreviated remarks today and pass the call over to Richard to talk about our operations and projects in more detail. But just a couple of reflections looking back on the last year. You know, we're very happy with the progress that we've made across our business. I think that Gibraltar was a busy and at times quite challenging year. We've had a million disruptions. We had major maintenance. We moved an intake pressure. We had a labor strike for 18 days in June. And we overcame all of those challenges successfully, showed a strong fourth quarter and strong annual financial results. We've also made great strides at Florence. Construction is advancing smoothly, and that's soon to become our second producing operation. And through all of that, we've also maintained a solid balance sheet. We opportunistically refinanced our bonds earlier in the year, and we ended 2024 with over $330 million of available equity, and that's after a significant capital expenditure at Florence during the year. Taking a closer look at our financial results, we generated $224 million of adjusted EBITDA and $233 million of cash flow from operations. Those results are notable improvements over 2023 as a result of a slightly higher copper price and also our increased stake in Gibraltar as we stepped up to 100% ownership in March last year. And that was obviously a very accretive transaction for us. So before I lose my voice completely, I'm going to now pass the call to Richard Tomlinson.

Thanks, Stuart. Gibraltar produced 106 million pounds of copper and 1.4 million pounds of molybdenum in 2024. Scheduled project work and maintenance plus the unexpected labor strike resulted in lower mill operating hours for the year, amounting to roughly 15 million pounds of lost copper production. That is roughly equivalent to the shortfall from 2023 production levels, and we should be able to get those pounds back in 2025 with normalized mill availability. The operation finished the year with a solid quarter, producing 29 million pounds of copper in Q4 at a cash cost of 242 US per pound. Mill throughput averaged 89,700 tons per day, exceeding the design capacity of 85,000 tons per day. And that was actually the best quarter in Gibraltar's history as we benefited from softer ore in the connector pit. Mill recoveries in the quarter were impacted from the transition ore which has higher oxide content as we continue to mine the upper benches of the connector pit. We expect to have mined our way through this material by the second half of this year. Moly production of nearly 600,000 pounds in Q4 was the highest quarter since 2021. The connector pit has better moly grades than the Gibraltar pit, so we expect production to remain at the current levels for 2025. and combined with continued strong MOLLE prices will provide us with a valuable byproduct credit, which was 42 cents per pound in the fourth quarter. Going forward with no major mill downtime or planned in 2025, we are looking to return to the life of mine average production levels. Our guidance is 120 to 130 million pounds for the year, but it is important to note that the production profile is weighted to the second half of the year. We expect roughly a 40-60 split between the first half and the second. The first quarter will be the weakest quarter of the year as we initiate a new pushback in the connector pit. And during this period, mine door will be supplemented with low-grade stock. Head grades in the first quarter will be below 0.2%, and we expect to see some improvement in the second quarter. And then in the second half of the year, we should see head grades quite a bit higher than our 0.25% reserve grade. and actually higher than we have mined from a sustained basis in quite a few years. So we just need to get through the first quarter and then we'll see a steady ramp up of production. The SXEW plant at Gibraltar, which has been idle for nearly 10 years, is currently being refurbished and ready for restart. There was an oxide cap on the connector pit and we have recharged the leach pads with this ore. We expect to restart the SXEW plant in the second quarter of this year which will provide some incremental production on top of copper concentrate production. This year, we would expect between 3 to 4 million pounds of capital production, and then going forward, that should increase to 4 to 6 million pounds per year. So an important future revenue stream for us. On to Florence, where construction is progressing smoothly and on schedule. We provided a thorough construction update a few weeks ago, so there isn't too much new information to provide today. Construction and surface infrastructure and well-filled drilling activities are continuing to advance smoothly on schedule and in line with our previous cost guidance. The overall project completion today is a little over 60%, and we're now about 10 months away from first production, which will be a very significant milestone for the company. Through the first year of construction, our capital spend related to commercial facility has been 155 million US. This quarter will be a peak construction and spending, and then activity and spending will begin to slow down through the fourth quarter when we transition into operations. There will be a ramp up period for Florence, which will be most of 2026, and we anticipate producing 40 to 50 million pounds in 2026 and for 2027. Production levels should be up to 80 million pounds or higher. It is a very exciting time for us, but we still have a lot of work ahead of us. Fully executing at Florence means ramping up to the 85 million pound annual production capacity. To finish off, I wanted to give a quick update on our longer term projects. Our Yellowhead project represents a major growth opportunity for Toseco's North American copper business, and we will be advancing project permitting this year. It's an interesting time in Canada with the threat of US tariffs, and here in BC, the government is clearly focused on how to respond and bolster our economy. One of the initiatives that BC has underway is a focus on shortening permitting timelines. This is an initiative that could benefit Yellowhead and an opportunity that we are monitoring very closely. We're also aiming to publish an updated technical report for Yellowhead in the second quarter of this year. The current technical report is five years old now, and the metal price assumptions we use were $3.10 U.S. per pound copper, $1,350 per ounce gold, and $18 U.S. per ounce silver, which are well below current long-term price estimates. Excuse me. So we will update metal prices and also update capital and operating costs in the new report. Another significant change is the new Canadian tax credit available for copper mine development, and this will be incorporated into the updated technical report as well, and we expect it will have a very positive impact on the project economics. Finally, just a quick update on new prosperity. If you recall, we've been in a dialogue with the Chakot Nation and the BC Provincial Government. These discussions had made meaningful progress last summer, but were paused into the BC provincial election in October. We have recently re-engaged and remain optimistic that we can reach a successful conclusion to that dialogue. And now I'll turn the call over to Bryce.

Thank you, Richard and Stuart. Maybe I'll start and reflect further on the 2024 year and then cover some of our quarterly financial highlights. For the year, we had sales of 108 million pounds of copper, which generated revenues of $608 million, which is the highest the SECO has ever recorded, and that can be attributed to our growth in Gibraltar, to now only 100% of it, coupled with a healthy average copper price of $4.17 a pound in the year. We posted a gap net loss of $13 million for the 2024 year, or $0.05 loss per share. However, on an adjusted basis, we had $57 million of net income, or $0.19 per share, which was a $0.04 per share increase over the prior year. A couple of items to note. The weaker Canadian dollar has created an unrealized loss on our U.S. dollar denominated bonds and other debt. That totals 52 million Canadian for the year. We adjust for that in our adjusted earnings. The offset to that, of course, is our investment of our U.S. dollars into Florence. And those are tax moves, those are foreign currency translations. and OCI, so there's kind of an accounting mismatch. So we normalized for that and given the weakness in the Canadian dollar, this move was more significant in the year. $19 million of our costs were expensed for site care and maintenance due to the labor strike. We had $2.5 million in June, as well as the completion of our primary crusher relocation project. That project totaled $16 million. That included costs for the demolition of the whole station, outlays for the physical move, and then there was a non-cash write-off of some conveyor equipment that was in the fourth quarter, which was made redundant with the crusher move. So these capital project costs are all expensed under IFRS, and we adjusted for those earnings as well. Total site costs at Gibraltar, they totaled $414 million in the year. That's on a 100% basis. We do provide a note on that in our MD&A. That was actually $17 million lower than 2023 due to the lower input costs, notably diesel prices were lower than the prior year and the impact of our labor strike in June that reduced our site operating costs in the second quarter. Capitalized stripping costs. They were 32 million in the year, and that was 23 million less than last year. And we do expect capitalized stripping costs to increase in 2025, and that's associated with the connector pit pushing, as Richard mentioned, that's occurring in the first half of this year. So we'll have capitalized stripping more in line with 2023 run rates of around 40 to 50 million, with most of that in the first half of the year. Costs on a per pound basis, they were 266 per pound US, And that was higher in 2023, and that was due to the lower production levels we saw in 2024 with our mill downtimes. But we also had less capitalized strip. That was offset, of course, by improved MOLLE by-product credit and then lower off-property costs and some lower input costs. And as we've mentioned, there will be significantly more MOLLE production in 2025 in the connector pit, which will help keep our C1 costs down. In the second half of 2024, we started to benefit from new sales contracts we signed at Travolta. Those had notably lower TCRC charges. For the year, TCRCs accounted for $0.09 per pound of property costs, and with new off-date contracts covering 2025 and 2026, we expect our average TCRCs to be actually slightly below zero for those years going forward. For the quarter, we achieved 56 million in adjusted EBITDA, and that was on 27 million pounds of sales. Production finished the year strong, and we ended with a bit more inventory. That increased to 4 million pounds at the end of the year. Adjusted earnings was 10.5 million, or 3 cents per share. At Florence, the project is progressing on plan, as we've highlighted, and we'll hit peak construction spending this quarter, Q1 of 2025. Capital spend was 58 million US in the fourth quarter, and our total spend to date on the Florence commercial facilities, US 155 million. We expect to incur about 20 million US per month through this first quarter, and then we'll begin to taper. We ended the year with 173 million of cash, and we have our 110 million revolving credit facility that's currently undrawn. And so that gives us our total liquidity of approximately 330 million Canadian. And finally, as a reminder, given the volatility in the markets, notably in copper price as well, we do have copper price protection in place for 2025. It's a minimum price of $4 per pound. These are color contracts, so they have a ceiling price, and that ceiling price average is 520 per pound. So those colors and price protection should provide stable operating margins for Gibraltar and theatre progresses. And we can, of course, always look to extend copper price and protection into 2026 if the markets are favorable and they continue on the current positive trends. So with that, operator, I'll hand it back to you and open the phone line for questions. Thank you.

Thank you so much. And as a reminder to our audience, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. to withdraw yourself from the queue, press star one again. Please stand by while we compile the Q&A roster. That is star one one. Okay, we do have a question. One moment, please. Hi, guys, and thanks for taking my questions.

Just a couple. The first one is I just wanted to know what was behind the high and sustaining cap expenditure in the fourth quarter, and what do you think for FY25? And then the second piece was just around Florence. So have you put in place any contracts for the acquisition of acid so that you're ready to acidify the fields when the drilling is complete in the second quarter?

Yeah, I'll take the first half of that question, Alex. It's just regarding the safe saving capital, really nothing of note. Sometimes it's really just due to the timing of certain repairs and maintenance. and replacements of engines and other components on our mobile fleet up in Gibraltar. So I wouldn't highlight really anything that specific there. In the capital projects, we do separate from sustaining capital our capital project costs, and we did have some write-off of equipment that I mentioned for about $4 million. I think going forward, we expect it to be in the more ordinary sort of levels, and that's sort of $20 million to $30 million range for sustaining capital. And again, most of that's focused around our maintenance and the mining fleet. One second question, and maybe I'll pass that to Richard. He can talk about the ACID strategy.

Yeah, sounds good. Thanks, Bryce.

Yeah, regarding the ACID, we've been in ongoing dialogue with four ACID suppliers, traders in the U.S., And there continues to be great interest in providing an asset for the site. And we'll be issuing an RFP here this quarter and start formalizing securing future asset supply with that RFP. That's the process we're undertaking.

Okay, fantastic. Thanks, Richard. Just one more. How has it been looking so far this quarter in terms of throughput at Gibraltar? Are you still seeing it pretty high because of the soft connector fit before?

Yeah, you know, Gibraltar throughput, you know, needs to be strong. Connector is softer, as we highlighted and saw in Q4, and We'll continue to see that here into this year. But as we highlighted, production is weighted to the second half of the year, and Q1 will be our worst quarter just due to the fact we're supplementing or feed with stockpile material.

Yeah, I think that's been well-flagged. Okay, thanks, guys. Appreciate it. Yeah, thank you.

Thank you. And as a reminder, that is star 11 to get in the queue. Our next question is from Duncan Hay with Penmore Liberum. Please proceed.

Yeah, thank you. A couple of questions. First one, just on the well costs, I saw the, yeah, you updated on the number of wells you'd put in at Florence. Just how the costs were tracking and the sort of the rate and, you know, how that was looking versus your forecast going forward. And then the second one, I missed the end of Alex's question, so he may have asked this, but just about ACID, what the situation was going to be for ACID and securing that and how pricing was looking in the region as well. Thank you.

Yeah, regarding the drilling, drilling performance, you know, it continues to be a strong area of focus for the site team and continue to look for opportunities to keep improving overall performance. uh we've been quite happy with how things have been progressing and continue to see opportunities for improvement and continue to refine kind of the efficiency and cost associated with putting in wells so quite uh quite pleased with how that's performing and you know that will serve as well on a long-term basis regarding us so just just before you get onto the asset is the plan um still to sort of transition to doing that in-house eventually the drilling yeah you know eventually it would be something we would uh look at look and assess about bringing in-house uh but you know for the the near term here uh we definitely would remain utilizing external parties to provide the drilling And we have a strong owners team that we've recruited and put in place through the construction here, which will stay on into operations. Because I described drilling at Florence really as the mining activity at a conventional site. So we need to have a strong management team overseeing the drilling activity. But we will be relying on third parties in the near term here. Okay, thanks.

Thank you. As I see no further questions in queue, I will turn it back to management for final remarks.

Okay. Thanks, everyone, and we look forward to speaking again at the end of our first quarter and reviewing our programs.

And with that, we conclude today's program. You may now disconnect.