Good afternoon, everyone. To those viewing on the webcast, welcome. Welcome to the Jefferies Industrial Conference and our fireside chat today with Taseko Mines. Today, I'm delighted to be joined by Stuart McDonald, the Chief Executive Officer of Taseko. Thank you for being here, Stuart.
Thanks very much, Chad. Happy to be here.
Great. I think we'll take this a similar way to most of the other fireside chats. We'll have a few questions from me, and then we'll open it up to the floor and take some questions from the field. High level, let's begin there. How would you describe Taseko to investors? What makes the platform unique, and where do you see yourself amongst the intermediate copper producers?
Sure. Maybe I can start with just a quick overview of what we are. I mean, we're a Canadian-based, really a North America-focused copper miner. We're building a multi-asset copper mining business. We've currently got one producing operation, our Gibraltar Mine in the center of BC . That's been our foundational asset. We've been operating that for 20 years now. We're a proven operator, and we're taking that and currently building our second mine in Arizona. It'll be our second copper asset. That's the Florence Copper Project. That'll be coming on stream in the next few months. It's a fully funded, fully permitted project that's just on the cusp of production. That is quite a transformative event for us. We've got very meaningful near-term growth coming at us within a North America-focused platform.
In the longer- term, we've got a great portfolio of longer-term development assets in Yellowhead and New Prosperity, and those are back in BrC . All in, 15 billion lbs of copper in reserve, proven and probable reserves. We are advancing those assets, de-risking them, and we believe for a relatively low market cap company, I think we're around $1 billion U.S. today, we have a very attractive profile and prospects going forward.
Absolutely. I think, to your point on the market cap size, where do you feel like you're undervalued and that the street doesn't understand what the real future is for the business?
I think a lot of investors obviously have a good understanding of our producing asset, right? Like the Gibraltar Mine has a long operating history. It's a stable operation there. We produce around typically 120- 130 million lbs of copper. I think that's a well-understood asset. It's been cash flowing for a while. Where I think there is perhaps less understanding and maybe an opportunity still for investors is with our development assets, in particular, the Florence Copper Project. As I said, it's fully permitted. We're 95% of the way through construction. We're financed, and it's going to give us very meaningful growth here in the next one or two years. I think that's the piece where there's a big re-rate coming and there's a big opportunity coming for investors, which really isn't broadly understood.
Makes complete sense. Building out on the broader copper demand complex, where do you see that going, and how do you take advantage of that demand that we all expect from electrification, infrastructure, and the like?
Yeah, it's, you know, for us being a North America-focused copper business, we're well positioned. A lot of the growth, you know, we're starting to hear, I mean, in past years, we've heard about energy transition, and of course, copper is the middle of electricity. It's essential. It's all around us. For a 100 years, it's been growing annually at around 1% or 2%. I think going forward, maybe the latest, you know, a bit of excitement for demand is on AI and the build-out of data centers. That could be very meaningful for demand right here in the U.S. When you look at our Florence Project, it's coming on stream at a perfect time for that to meet that market demand. It's important that it's actually producing refined copper.
Most copper mines will produce a copper concentrate that needs to go to smelters in Asia to be refined, and then here in North America, we import the refined metal back. The U.S. is a net importer. Florence will become one of the few U.S.-based producers of refined metal, at a perfect time. There's lots of interest in that asset, lots of interest from off-takers and end users, and yeah, we're very excited to be bringing that on stream here.
Yeah, exciting indeed. Maybe shifting to Gibraltar just to give an overview of that. I know you're doing some optimization, some pit work. What do you think the outcome is of that? How does that impact cash costs? Where do you see improvement coming from that operation?
Yeah, looking at the last year or so, we started out at Gibraltar mining early this year in a relatively low-grade section of the Connector Pit, which is the pit we're currently mining in, and actually a lot of waste mining, which pushed us into lower-grade mill feed, often supplemented by lower-grade stockpiles. That impacted our results in the first half of the year where we had only 40 million lbs roughly in the first half of the year. That we've now worked through. We've pushed deeper into the Connector Pit, and we're into much higher quality ore for the foreseeable future here. You're going to see significant improvements in both head grade and recovery and ultimately copper production here in the third quarter. Another step change in the fourth quarter and into 2026, it looks pretty good too.
We feel that we've worked through the issues, we're set up here, short-term issues that affected us for a few months there, but feel that we're set up in a very good place now. Looking ahead in the kind of medium term at Gibraltar, we see head grades in the range of 0.25% copper, which is effectively our reserve grade average, and production in the range of 120- 130 million lbs for the next four to five years. We don't have any major CapEx or capital requirements coming up. Looking forward to just having Gibraltar be a little bit boring, just generate good cash flow, and allow us to continue to develop our portfolio.
What’s the life there? Is there step-out exploration? Walk through how that evolves.
Yeah, we've got 20, 20 years of reserves remaining. We have not done much exploration in recent years around that mine. We've really been allocating and focusing our capital on getting the second mine going in Arizona. I think there are opportunities. There could be opportunities there to go and look at exploration. You know, broadly, it's a big, a big lower grade mine that's going to run and produce very good cash flows at these copper prices. I think one of the real, people look at the mine and think, oh, 0.25%, that's a pretty low grade ore body. The reason we are successful with it is we're a very low-cost operation as well. You know, we can get a ton of ore through the mill for about CAD 13 a ton. Excellent labor force productivity, low-cost hydroelectric power in the center of BC , and excellent infrastructure too, right? The mine's right on the highway, right on the road. It's a pretty solid operation for us. Yeah, it's going to continue to perform well going forward.
Excellent. Yeah, moving to Florence, I mean, it is the, you know, the latest and probably the first new copper mine that I can think of in my career. You tell us about that project and what, you know, what's the technology being employed and sort of how that shapes up because it is very different than traditional open pit or underground operation.
No, you're absolutely right. It is unique, you know, that we have a new U.S.-based copper mine starting here. That doesn't happen. It's been at least a decade, I think, since we had a commercial copper mine startup here. As you know, it is a different mining method. What we're doing at Florence is in-situ copper recovery. We're not, it's not open pit. We're not tunneling underground. We're actually drilling a well field into the ore body and injecting our mining solutions into the copper ore. We have an oxide copper ore body that is highly fractured and also saturated with water. Those are the perfect conditions for solution mining. We've been at this now for, Taseko's owned this asset for 11 years. We've done extensive test work. One of the big de-risking steps that we took was in 2018 to build a production test facility.
We actually drilled 13 production wells and built a smaller scale SXEW plant on surface. It was a great success. We produced over a 1 million lbs of copper cathode and really showed the market that we could produce copper feasibly here and also showed the regulators that we could do this mining method in compliance with our permits. We're moved from that test phase, Phase 1 of our development. Now we're into a commercial expansion. We're going to spend roughly $250 million, $260 million on this construction project that's just completing here. We'll be able to ramp up from a, call it a pilot scale or a test scale up to a commercial facility. When we're on day one of our commercial operation in a few months, we'll have 110 production wells running. That's going to allow us to ramp up, start the ramp up in 2026.
We'll probably produce 30 or 40 million lbs next year. We'll continue to add new wells as we go. Next year, we're going to drill another 80- 100 wells. That puts us in a position in 2027 to be running at close to design capacity of this asset, which is 85 million lbs. It's low-cost mining also. I should note that we're going to be producing copper cathode here at a C1 cost of around $1.11 a pound. That's first quartile production cost. Very attractive operation economics here. For the amount of copper we can produce and the CapEx we're putting in it, it's a very exciting project. I think our IRRs on our feasibility study was close to 50% at today's prices.
No, it's really, it's been fun to watch the process and you're what, about 90% complete now?
We're 95% complete on the construction. We're actually entering, we're actually shifting our focus right now into more of a commissioning phase for the next couple of months here. We've got the plant built, but, you know, we're into testing and turning things on and making sure everything's starting up as expected. We will be doing that work through the fall here. In September, October, we're going to be doing our first injection of leach solutions, you know, our first injection. That's a very significant milestone. That sets, that's important because we need to do about roughly three months of time of injection to acidify the well field. Slowly over that three months, you see the copper grade in solution come up to a certain point. We expect in December, around the end of the year, December, January, that we can turn on the plant and be producing first copper.
Excellent. You mentioned the, you know, that pipeline before, but, you know, beyond Florence, what projects look the most attractive today and maybe walk through, you know, both of those projects at Yellowhead and New Prosperity.
Yeah, our Yellowhead Project is another open pittable greenfield project back in British Columbia. It's about two hours southeast of Gibraltar Mine. We acquired that roughly five years ago. You know, we really thought it was an attractive opportunity for Taseko. It's a very similar sized mine to Gibraltar when you look at, you know, roughly 80,000 or 90,000 tons a day of mill throughput. Mining rate is similar. The mining method is very conventional and similar to what we're already doing at Gibraltar. We were shareholders of the asset for many years before we acquired it, and we ultimately acquired it in 2019. Re-engineered it, have published two updates to the economics since then. The most recent update was just in July here, and that outlined a project with, I think it's a 25-year mine life.
Produces in the initial years, we'll produce over 200 million lbs of copper in concentrate at a cash cost below $2. So again, very attractive economics. The NPV is close to $2 billion. It's a very good looking project for us. We do need to do some permitting work. We've just entered into that permitting process officially within the last few months in Canada, British Columbia and Canada. That's, you know, we're looking at three, four years of work there. That's fine for us. You know, if you look at Taseko's cash generation here, that gives us plenty of time to ramp up Florence, you know, get the two assets running, potentially delever a little bit, and then we're in a good position to be potentially, you know, making an investment decision several years in the future here on the third mine. That's the plan at Yellowhead.
New Prosperity is a little bit of a different story. That one actually goes way back with Taseko. It was Taseko's original asset all the way back to the '90s. This is one of the largest copper gold porphyries in the world, undeveloped. It's a huge resource, a 1 billion ton resource. It's roughly 0.6% copper equivalent. It's actually, at today's prices, it's actually more of a gold deposit. It's a huge gold resource there, 13 million ounces of gold in- situ. Very, very valuable asset. It has had some, you know, it's had permitting challenges for sure in the past. I think the news there that we reached in June, that we announced, that we'd reached an arrangement with a local Indigenous nation and the province of BC , and we've, through that, I think we've taken a good step to resolving the historical conflict and the historical opposition. We believe there's a pathway in the future to develop a mine there. It's not a sure thing. Nothing's a sure thing, but we've got still a lot of work with the community to do, but there's huge value there that could be unlocked.
Sure.
If you look at our equity today, you know, this is not an asset we get any value for. It's really, I think from a shareholder perspective, you know, effectively you're getting this for free right now when you buy, when you invest in Taseko. Yeah.
Yeah, I think we were talking about it earlier. I would agree with you there. Maybe shifting just a little bit to more, you know, corporate related areas, you know, clearly you have a pipeline, clearly you have Florence, but you know, how do we, how should we think about, you know, potential M&A or, you know, deployment of cash to delever, as you mentioned, or even share buybacks and things of that nature.
Yeah, we're definitely, you know, I think the conversations we've had with investors here at the conference and this week here in New York have much been focused, seems to be turning to not, you know, execution on Florence, but more, you know, what are you going to do with the cash you're generating? That's a good thing, I suppose. You know, we still got some work to do to ramp up Florence, but fast forward two years from where we are today, and the combined company could be doing $600 or $700 million of EBITDA, Canadian dollars, and there will be excess cash flow. You know, we'd like to delever a little bit. We've got a fair amount of leverage on the balance sheet that we've taken to develop Florence.
We'd like to delever a little bit, but I think there's scope to delever and also look to shareholder returns, and potentially shareholder buybacks a couple of years out. One of the things I noted, the timeline with Florence or with Yellowhead, we're fortunate we don't have a near-term kind of use for capital, right? Within our portfolio, permitting at Yellowhead is a fairly low-cost activity. We've got a window here between when Florence starts producing cash and when we may be in a position to make an FID decision at Yellowhead. There's a window there to really, yeah, buy back shares, do things, some things that are creative.
The way that our stock trades, the way we've seen with Florence, if we're not getting value for development assets, I think that's a great time to be buying back shares and really creating value, because Yellowhead and New Prosperity are not reflected, right? In terms of acquisitions, look, again, we don't see going on an acquisition spree here. We've got a very attractive portfolio of assets that we already own. We think the best way to add value is to continue to de-risk those assets, continue to close that value gap between the way the market views them and the true intrinsic value. We continue to focus on that, and we think that's a much better way to add value than going out and buying a bunch of development assets.
Operating mines, you know, are not really in copper, at least are not really for sale, or at least the ones that are for sale tend to have some warts. We don't see that as a viable approach either. We stick to our projects here and we think we're going to do well.
Absolutely. I think it makes perfect sense. It's tough to take away from what the portfolio is to look outside the shop. Maybe the last one for me, and I think we can probably open some questions. You know, what's your message to institutional shareholders over the next three to five years? I think you hit on it a little bit, but, you know, how do you think about getting that inbound interest and what would you tell somebody looking to invest here?
I think you compare us in the kind of the mid-tier peer group. I think we've got a portfolio here that has existing production, that has a lot of near-term growth at Florence and longer-term growth options as well, all within great mining jurisdictions, British Columbia and Arizona. In North America focused business, right? I think that in copper, you don't see that. You tend to see a lot of the growth projects in Central Africa or Kazakhstan or Pakistan or Indonesia and some riskier places, right? Certainly, we're happy to be operating in the right zip codes.
Yep, absolutely. I open the floor for any questions.
Hi, Stuart. Thank you for the presentation. On Florence, it's good that you have 95% done with the construction and you're shifting gears now into commissioning. I'm just trying to think about it because it's the first in-situ copper recovery project in copper that I've, you know, that's probably going to be online. Can you tell us how you differentiate your project compared to your peers? You know, probably the peer I'm talking about when they had a project they were working on and they tried to do it and they said, oh, low flow rates was probably the kill of the project. How have you de-risked your project relative to them and in terms of the deposits, what was different?
Yeah, I think you're probably referring to the Gunnison P roject in Arizona and certainly we get that question and that comparison is natural, right? I think ISR mining is obviously a commonly used method in uranium, but not as common in copper. If you compare the deposits, they're very different, right? We have a porphyry copper deposit at Florence, which is highly fractured. Highly fractured oxidized copper, our drill core, you pull it out and it's like rubble. It's gravel almost. That's very important for porosity and for getting solutions through the rock. It's also saturated with water, and that also is very important because that allows us to pull through hydraulic pressure in the well. That allows us to pull our mining solutions back and forth through the ore. Very different from the other asset you're referring to.
I think probably the biggest difference though is the approach we've taken to development. We think it's been a very prudent approach. We invested a significant amount of capital in that production test program that I talked about. We've actually mined it. We've proven it already in our view where we've operated ISR mining within this deposit. We've produced a 1 million lbs of copper, and we didn't have any of the problems that they had at Gunnison. That's probably the approach, that long-term patient approach, I think is the way we have success on these types of assets.
Is your partner for the stream Mitsui, I believe.
Yeah.
Do they still have the option to change their stream into ownership of the project? If it's still available, have there been any discussions of length or on that?
Yeah, no, I think the Mitsui partnership that we established a couple of years ago is very important. I think good validation for the project. You know, they did a lot of work and due diligence. They're a reputable group and a conservative group with a lot of experience in copper mining. Great to have them invest capital. They put $50 million into our construction, and with that, that investment came in the form of a copper stream. They got off-take rights for three years, for the initial three years. As you noted, they've got an option to invest an additional $50 million. If they do that, that total $100 million of capital converts into a 10% ownership interest. They've got three years to do that.
They obviously were structured that way to allow them to step in and watch, at a lower risk, investment structure and allow them to watch the ramp up. When things go according to plan, we fully expect they're going to convert. If you look at the economics of that deal, it may be in their interest to convert before the end of the three years. We'll see, but that's in their court. No firm predictions on that yet.
After three years, that doesn't convert?
Yeah, after three years, if they don't exercise, then that option falls away and Taseko has the right to buy back the copper stream as well at a fairly attractive price. It's kind of meant as a temporary structure. Yeah. Yeah.
Shifting gears into New Prosperity, congratulations on doing the deal with the First Nations. I think it's a relatively high-grade operation compared to, let's say, Yellowhead.
Yeah.
Given the deal that you've created and you've got some money from the BC government, like $70 million, I believe, if you need to, 0.5% stake. What needs to be done to get the project shovel ready? Do you need permitting, like in terms of engagement with local communities? What sort of engagement needs to be done, and how, if at all, would they take a long time to do?
Yeah, I mean, I think that you touched on it there. It's that community engagement and that community acceptance of mining that is the biggest hurdle here that needs to be overcome to get that project moving forward. The next step in that regard is the Tsilhqot'in Nation and the province of BC are entering into a bit of an engagement process, a land use planning process. We'll see where that plays out. There's no specific timeline on that right now. We'll do our best to share the word and the potential benefits that could come to their community from mining. Ultimately, it's going to be their decision about whether they want to mine in their territory or not. It is a fantastic economic opportunity for the local community and for Taseko shareholders. Yeah.
The final one for me, since you're at the leading edge of technology with the in-situ copper recovery in terms of copper mining, how do you think of opportunities for companies like Newton Technologies when they're coming to do the bioleaching? Do you see opportunities to work with such companies on your projects?
I think the biggest opportunity for Taseko, going forward, is to take the, in terms of ISR mining, to take our learnings from Florence and the expertise that we have and the know-how and potentially apply it to other copper deposits, right? I mean, there may well be other copper deposits that are amenable to this. They're not everywhere. We know that we have a very unique situation at Florence, but we've had some initial inquiries from other miners, major miners that, hey, maybe there's something, maybe there's something to be looked at in the longer term. I think it's early days. We haven't done a lot of work on that, but I think when we get Florence ramped up, those are the kind of things we can look at and probably better opportunities in trying to, yeah, you know, the other ones you mentioned. Yeah.
Any others?
Yeah, ratios, I think in copper mining are a little bit tough because the copper price goes up and down and our quarterly EBITDA can go up and down along with that. I think the way I look at it is kind of gross debt. We have right now a $500 million bond. We've got an undrawn corporate revolving credit facility. We've got some equipment debt as well. I'd like to get that debt paid down to something like maybe $400 million , something in that range, broadly $350 million, $400 million. At normalized run rates, that would take us well below one times debt to EBITDA. We think that's prudent for a cyclical business that's got two operating assets. Then we can kind of quickly move on from that to look at shareholder returns. That's kind of how we're thinking about it. Yeah.
Maybe just to follow up on financing then. If you think about how you finance a New Prosperity and Yellowhead, is that project level? Do you think that's project level? Do you think that's corporate level? Obviously, we're talking several years from now, but have you started to kind of think through how that structure looks?
At Yellowhead, that type of asset would line up very well for a JV Partner. It's a larger capital project. It's a $2 billion Canadian CapEx. We would likely look to JV that. The logical partners would potentially be some of the sovereign wealth funds that are around or some of the trading companies that are focused on off-take. We saw the recent one example of that would be the Mitsubishi transaction in Arizona with HUDB. That's kind of the model we would look to pursue. We've had obviously excellent success with JV Partners at both Gibraltar and now at Florence. We think that makes a lot of sense. You bring on a JV Partner, they buy in their interest, they fund their share of the capital, and then suddenly you've taken a big bite out of that CapEx.
With the two operating mines running, we'll also be generating good cash flows ourselves from our own assets. We've had good success in the high yield bond market and that could be there for us as well. That's kind of how we're thinking about it.
Great. Excellent. Any additional questions? No. Sure. Yeah.
Stuart, do you guys have a long history of going through the permitting process? You did that, you know, for New Prosperity. Obviously, there was some opposition from the locals. You also did that for Florence and you were successful.
Yeah.
What are some of the key lessons learned from the permitting processes that you went through that you will apply, is it to Yellowhead or maybe again to New Prosperity? What are some of those lessons that you learned from previous processes you did?
Yeah, I think it's a good question. I think obviously Florence and New Prosperity are very different, different situations, different jurisdictions, and different types of communities that we're in. The biggest thing, of course, is getting the community acceptance for your project, right? That's going to be the biggest success factor. If you look at what we achieved at Florence, over a decade, really, we really turned that community acceptance around. I mean, back in the early days, there was a fair amount of opposition in Arizona to our project. We persevered. We kept the doors open. We built our test facility. We had community members come through and see the good work that we're doing, and gradually over time, people got comfortable with it. Where we are today, we actually have very, very strong support locally and in the state. That's the biggest thing. That's the work.
That's the important work. That's the work we're doing now at Yellowhead. For the last three, four, or five years, that's probably been the most important work we've done, reaching out, connecting with the local community members, building a relationship with the local First Nation there. We're actually at Yellowhead participating in a formal assessment process that's being run by the Simpcw First Nation, which we've signed up for. We're doing that in parallel with the provincial environmental assessment. A lot of work. Every project is obviously different, but I guess, yeah, community acceptance is the biggest single, the biggest single thing that you need.
Finally, to crystallize some value from these assets like the New Prosperity and Yellowhead, where you think that the market is giving you no value at all for the assets in your portfolio, is there a possibility of spinning them out or doing something to create value for the shareholders?
We think the biggest way to, you know, the best way to create value is to show progress through the permitting, show the community partnership. In the case of Yellowhead at some point here, potentially bring on a JV P artner that may be a couple of years down the road. That's another way we can kind of crystallize value at some point. Yeah, that's the way we're approaching it. We like having those assets. New Prosperity, a little different. We would look at potentially divesting that if there was another operator that was, you know, willing to pay, to pay value. We're not, we don't have to be the operator of every one of our assets. Our job is to obviously create value. We're open to those kinds of opportunities as well.
Excellent. I really appreciate you being here. This was really, really interesting for me and I think for David as well. I really appreciate you showing up for the conference and giving us your time.
Great. Thank you very much Chad .
Thanks, Stuart.
Thanks to Jefferies for hosting us here.