Taseko Mines Limited

Ladies and gentlemen, thank you for standing by. Hello, and welcome to Teseco Mines' 2026 First Quarter Earnings Conference Call. Please note that this call has been placed on mute to prevent any background noise. Thank you. I would now like to turn the conference over to our Vice President of Investor Relations, Brian Burgot. Please go ahead.

Thank you, Dustin. Welcome, everyone, and thank you for joining Teseco's First Quarter 2026 Conference Call. The news release and regulatory filing announcing our financial and operational results was issued yesterday after market close and is available on our website at TesecoMines.com and on CDAR+. I am joined today in Vancouver by Teseco's President and CEO, Stuart MacDonald, Teseco's Chief Financial Officer, Bryce Hamming, and our COO, Richard Tremblay. 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 today. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our first quarter MD&A and the related news release, as well as the risk factors particular to our company. These documents can be found on our website and also on CDAR+. 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.

Thank you, Brian, and welcome everyone to our first quarter earnings call. As usual, I'll start with an overview of our recent operating results, and Bryce can then review the financial performance. It was an exciting quarter for us, obviously, with the start-up at Florence and first copper from that new operation. But I'll start today with our Gibraltar mine, which had another solid quarter. Steady production that we saw in the second half last year continued into the first quarter. The mine produced 30 million pounds of copper, and just over 700,000 pounds of molybdenum, which was generally in line with our expectations. Head grade of 0.25% was slightly above our life of mine reserve grade, and copper recoveries of 83% also benefited from the higher quality ore from the lower benches of the connector pit. Mill throughput was slightly lower this quarter as we focused on optimizing copper recoveries from the higher grade ore, and we also had some unplanned mill downtime. But overall, it was a good production quarter at Gibraltar. We did see some operating cost increases in the period as Gibraltar's C1 cash costs increased to $2.63 per pound produced. That's about 6% higher than the previous quarter and was impacted by inflation in a few areas, most notably diesel prices and explosives. With the situation in the Middle East, diesel prices have increased about 50 cents per litre compared to last year. Those are Canadian cents, which represents 15 US cents per pound of copper at Gibraltar. We're also seeing higher costs for explosives as the market for ammonium nitrate has been affected by a plant outage in the US. And repairs and maintenance was also this higher this quarter, although that was more of a timing issue for some key repairs, and we don't expect that level of spend to continue for the rest of this year. Offsetting those factors was a strong quarter from molybdenum production, which continues to provide a meaningful byproduct credit, and we expect similar moly grades for the remainder of this year. And Gibraltar's SXEW plant also contributed 733,000 pounds of copper cathode production in Q1. and we were able to keep that plant running through the winter months, which was a positive. We stopped leaching operations at Gibraltar in April to complete the tie-in of a second leach pad, and that should support higher cathode production going forward. Turning to Florence now, and it was a major milestone that we achieved in late February with first copper cathode production. This is a testament to the perseverance and technical expertise that our project team has demonstrated over the last decade to bring this project through the PTF test program, permitting through a well-executed capital project, and now finally into commercial production. In Q4, we started injection of solutions into the well field, and the initial flow rates were higher than expected. This allowed for faster acidification of the ore body. and solution grades increased faster than planned, reaching targeted levels in January. The commissioning of the SXEW plant was completed in mid-February. That was a few weeks behind schedule, and by that time we had built up an inventory of copper in solution, and we harvested 1.5 million pounds of cathode over the remainder of Q1. In recent weeks, our operating team has done an excellent job of stabilizing the whole circuit from well field through to cathode production. We now have approximately 90 production wells producing copper at a consistent daily rate in the range of 55 to 60,000 pounds a day. This is in line with our expectations for the initial wells at this stage and represents another significant de-risking step for the project. Now our focus is on ramping up. which means expanding the well field to increase flow rates and copper production. We currently have five drill rigs operating. And after a slow start, we have seen drilling productivities improve in the last few weeks. This month, an additional 20 production wells will come online. Then later in the summer, an additional group of 26 new wells will begin producing. And then further groups of wells will be added every month for the remainder of the year. As the wellfield expands, we will see higher solution flows and PLS grade, which will allow us to achieve a 30 to 35 million pound target for the year. It's important to note that production will not be perfectly correlated with the number of wells, as each core block has a slightly different ramp-up profile, and the new wells added to the perimeter of the wellfield will improve the performance of the existing inner wells. We continue to expect 30 to 35 million pounds of copper production from Florence this year, with production weighted to the second half as new wells are put into production. And our target is still to achieve 80 to 85 million pounds of copper production next year in 2027, which is a steady state capacity of Florence. Lastly, I can give a quick update on Yellowhead. Our project team remains quite busy advancing the environmental assessment work. And following on from the community open houses that we hosted last fall, we're now incorporating feedback from stakeholders to complete the detailed project description. We expect to file that this summer, which will lead towards a readiness decision and the next phase of work. Also, just last week, the government of British Columbia announced the addition of new major projects to its priority projects list, and yellow head copper was included. This is a clear message that the province recognizes the value of our yellowhead project and we're continuing to work closely with the first nation, province of BC, and the government of Canada to move the permitting process forward as efficiently as possible. With that, I'll now turn the call over to Bryce.

Thank you, Stuart. Good morning, everyone. Despite some cost inflation at Gibraltar, the strong production and sales translated to another strong financial performance in the quarter. As Stuart mentioned, Gibraltar copper sales were 27 million pounds in the quarter and lower than the 30 million pounds that we produced due to shipment timing. This included 938,000 pounds of cathode sales. So this buildup of concentrate inventory is expected to be sold in the second quarter. MOLLE sales were 708,000 pounds and benefited from higher MOLLE grade in the connector pit. Together, copper and MOLLE sales generated 237 million of revenue in the quarter, which is the highest quarterly revenue generation for the company to date. MOLLE revenues were more than double the same period in 2025, benefiting from the higher production levels and roughly 25% higher MOLLE price, and today it's over $20 per pound. Total site costs in the first quarter were $142 million, which includes $15 million of capitalized stripping costs. This is 13% higher than Q4 last year, and includes the cost inflation that we talked about. For the quarter, Tesico generated $94 million of adjusted EBITDA, $115 million of earnings from mining operations, and $94 million in cash flow from operations. Net income in the quarter was $17 million, or $0.05 per share, and on an adjusted basis was $28 million, or $0.08 per share, after removal of unrealized fair value adjustments. Financial performance and adjusted earnings was impacted by the copper callers we currently have in place. We put these callers in place last year to support our project finance and our ramp-up of Florence Copper. These callers reduced our effective selling price to $5.40 per pound in the current quarter, as compared to the LME callers. which averaged around 583 in the quarter. As a reminder, these callers roll off at the end of June with 27 million pounds remaining for the second quarter, at which point we'll begin realizing the full LME price up to a much higher level of 750 and 850 US per pound. And there's no limit after Q3 at the moment. It's also worth noting that as Florence begins to generate free cash flow later this year, we will likely revert to our previous practice of just purchasing out of the money copper price puts with shorter time horizons, say a quarter or two out, which is to protect against shorter term copper price volatility. And that lower strike will have a modest payment of premium to provide that downside protection. And that strategy of purchasing copper puts outright doesn't limit our copper price upside. now that we're getting to the end of our development and ramp-up of Florence. Florence Copper reported sales of 600,000 pounds of cathode in the quarter, with a balance of production of 900,000 in finished inventory. We also had 600,000 pounds of copper in solution, as what we call work-in-progress inventory. Direct costs associated with the cathode production at Florence in the quarter was 10 million, which is split across these inventory amounts. So our operating segment note, referred to Note 22 in our financials, now shows our revenue and cost of production at Florence, and it showed $4.5 million for the quarter. So no initial profit was recognized on our first sales of Florence cathode. In the first quarter, we capitalized $21 million of commissioning and startup costs incurred at Florence. We also capitalized well field development costs of $18 million for new wells being constructed. These drilling and well development costs will continue to be capitalized as sustaining capital throughout the operation's mine life, and they'll be depreciated over the useful life of the well on a units of production basis from the copper recovered. Next quarter, with increasing production from Florence's SXEW facility, we will see much less capitalized site operating costs, with most of the operating costs expensed as cost of production as cathode is sold. We ended the quarter with total available liquidity of $322 million. including $169 million of cash. With stable cash flow being generated from Gibraltar, combined with our rising production and cash flow from Florence, our liquidity should be maintained in the second quarter and begin increasing in the second half. As our liquidity grows, we'll look to begin at opportunities to reduce debt and delever later this year. With that, I'll pass it back to the operator for questions. Thanks.

Thank you. Quick reminder before we start the Q&A, if you'd like to ask a question, please press star and the number one on your top on keypad to raise your hand and enter the queue. If you'd like to adjourn a question, simply press star one again. And we will take our first question from Dodson Barreto from Canaccord Genuity. Please go ahead.

Thank you, operator. Good morning, Stuart and team. I'm trying to unpack this whole diesel and acid exposure a little bit more. I know you've got some context on that. Let's start with the diesel, though. I know you highlighted the impact on C1 costs, but outside of that, when you look at your cap strip at Gibraltar and then the wellfield deployment at Florence, what sort of impact would you anticipate there?

Thank you. Hi, Dalton. It's Stuart here. In total, across Gibraltar, Gibraltar, we're using roughly 40 million litres of diesel a year across capital operating. We've seen a 50 cent Canadian per litre increase, 20 million Canadian dollars roughly. It's kind of year over year what you're seeing across that. And of course at Florence, a very different type of operation. We don't really use any diesel or any fuel to speak of. So yeah, that's the impact on diesel.

And then just on the assets, Stuart, it's great to see you guys are locked up over the rest of this year. Are you starting to have conversations with your suppliers about next year yet, both around availability as well as around pricing?

Yeah, Dalton Richard here. We've maintained contact with our current supplier, and obviously discussions around next year are obviously on the agenda, but nothing in any kind of formal or detailed or specific way, but definitely watching the market and seeing what's happening.

But have you been given any comfort around availability? I'm assuming pricing is a separate conversation, but just around availability?

Yeah, yes, and that availability seems like it will be there. It will be more of a price discussion.

Great. Thanks, guys. That's all for me.

Thank you. Again, if you'd like to ask a question, please press star and the number one on your telephone keypad. Again, that is star and the number one on your telephone keypad. And we will take our next question from Craig Hutchison from TD Cowan.

Please go ahead. Mr. Hutchinson, you might be muted on your device.

Good morning, guys. Thanks for that. Just on Florence, I appreciate you guys have given some guidance around back half weighted, but can you provide any more kind of clarity in terms of what we can expect here for the cadence? Should we expect a kind of material uplift in Q2 or something similar to kind of Q1? Just kind of anything in terms of what we should be kind of modeling from a cadence perspective would be appreciated. Thanks.

Yeah, I think, hi Craig, it's Stuart. As I mentioned in my remarks there, we're running right now at a daily production rate around 55,000, 60,000 a day, 1.5 to 1.8 million pounds a month. We will have new wells, so that's kind of April and May. We will have new wells coming on this month, which will start to produce copper in June. But generally, I wouldn't expect a major uplift in production in Q2 from that kind of monthly rate. I think you'll start to see a much bigger increase in Q3 and Q4 when we have additional big portions of the well field starting to open up. So yeah, that's kind of why we've indicated it's quite heavily weighted to the second half of the year.

Okay, great. Maybe shifting focus to Yellowhead, you guys mentioned it's on the new major list project for British Columbia. What does that mean from your perspective? Does that mean there's going to be some kind of effort to fast-track permitting? Is there certain financial support you'll get from the province? And I guess you also mentioned dialogue with the federal government as well, just anything in terms of and where you see, I guess, permitting going and what kind of support you guys are receiving from different levels of government. Thanks.

Yeah, yeah, thanks. Yeah, certainly, you know, appreciate it was good recognition to be included on that list. You know, but the reality, I think, is we don't see any significant change in the permitting process. You know, we've been working closely with all levels of government here in the last, you know, for the last couple years. And I think between the first nation, the province of BC, government of Canada, everyone focused on trying to have an efficient permitting process and not have duplication of work across different agencies. So that's really where our focus has been. We don't see much changing on the permitting track as a result of that announcement. On government, more broadly on government support, we do think we've got good support from the province and government of Canada. We have some dialogue ongoing as well. Certainly, Yellowhead would be a major new copper mine. It's got the potential to be the second biggest copper mine in Canada, and that, of course, is getting attention. But nothing to really... nothing tangible yet to announce, but certainly progressing on some good discussions across governments.

Okay, great. There was one last question for me. Just new prosperity. Anything new on that front in terms of moving that project forward?

Thanks. No, nothing. No major updates to report. We're focused on expanding our relationship with with the Chilcotin Nation, you know, continuing to work with them following on, you know, the dialogue that we completed last year, but no, otherwise, no significant updates there.

All right. Thank you, guys.

Thank you. We have reached the end of the Q&A session. I will now turn the call back over to the management for closing remarks.

Great. Okay. Well, thanks, everyone, for joining today, and we will talk to you next quarter. Thank you.

The meeting has now concluded. Thank you all for joining, and you may now disconnect.