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Operator: 00:03 Good morning. My name is Anas, and I will be your conference operator today. At this time, I would like to welcome everyone to Taseko’s 2021 Year-End Earnings and Production Conference Call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. 00:26 Taseko, you may begin your conference.

Brian Bergot: 00:29 Thank you, Anas.

Welcome, everyone and thank you for joining Taseko’s Fourth Quarter and Annual 2021 Results Conference Call. The news release announcing our financial and operational results was issued yesterday after market close and is available on our website at tasekomines.com. 00:48 On the call today with me is Taseko's President and CEO, Stuart McDonald; Taseko's Chief Financial Officer, Bryce Hamming; and our Senior VP of Operations, Richard Tremblay. 00:59 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. This information, by its nature, is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome.

For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our fourth quarter MD&A and the related news release, as well as the risk factors particular to our company. 01:29 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. After opening remarks, we will open the phone lines to analysts and investors for a question-and-answer session. 1:46 I'd now turn the call over to Stuart for his remarks.

Stuart McDonald: 01:50 Okay. Thanks, Brian, and good morning everyone and thanks for taking the time to join us today. I'm pleased to review what was a very successful year for Taseko. And in fact, in many respects it was the best year we've ever had as a company. Copper markets continued to defy expectations and the price remains near all-time highs.

I don't think there were many analysts a year ago that would have predicted an average copper price of $4.20 a pound for 2021 or that the price would level out near $4.50 a pound going into the new year. So it's a great environment right now for copper producers and I'm feeling very optimistic about where Taseko was at and our ability to grow over the next couple of years. 02:33 The fourth quarter wasn't without its challenges, but we still managed strong financial returns with $62 million of earnings from mining operations and $53 million of adjusted EBITDA. Adjusted earnings of $0.05 a share was net of a $6 million loss or $0.02 from our ongoing and prudent copper price protection program. The fourth quarter rounded out a great year where we achieved $200 million of adjusted EBITDA and over $200 million of cash flow from operations before working capital adjustments.

03:04 Two separate weather events impacted us in different ways in the fourth quarter. In November severe rain storms and flooding in Southern BC washed our highways and rail infrastructure, although it didn't -- although that didn't affect our mine production, it did prevent us from shipping our copper concentrate to customers at the port in Vancouver. And that caused a buildup in inventories and impacted our Q4 financials, although that situation will unwind itself in -- early in 2022 here. 03:36 In December, the mine was hit with a winter storm, which brought temperatures as low as minus 40 degree Celsius and an unusually heavy snowfall. The combination of extreme cold and snow at the same time is unusual and it had an impact on milling operations and mine production into January.

The mine has also been working through issues with ore in the upper benches of the Gibraltar pit where mining operations are now transitioning to. 04:01 As described in our production release, these upper benches of the Gibraltar pit contain both oxidized and high pyrite ore that negatively impacts metal recoveries. We're dealing with some of this ore, but as mining moves into lower benches in the coming months the quality and grade of ore will improve. From a cost perspective, average cash cost at Gibraltar last year were $1.90 a pound, which was very similar to the prior year. The main item where we've seen inflationary pressure is on diesel costs which have risen again since year-end and are currently about $0.07 or $0.08 per pound of copper higher than the average in 2021.

04:43 In the fourth quarter, we signed a new long-term labor agreement at Gibraltar. It's a three-year contract and the agreement escalators are fair and reasonable in the context of the current inflationary environment. Spot rates for ocean freight have fallen from the highs a few months ago and we recently took the opportunity to enter into a new long-term contracts. As always, we're going to continue to manage the costs that we can control, and that the upside take curve itself. 05:13 Looking ahead to 2022, we expect that first quarter will be a low production quarter, similar to Q1 last year.

Although, as I mentioned, we will get a positive earnings bump from higher sales volumes as we sell off excess inventory. In the second quarter head grades and ore quality should improve and the back half of the year will be higher production again. So really a similar profile to 2021. In 2023, we should see higher average grades for the year and copper production should trend back towards the life of mine average of 130 million pounds. We'll also be evaluating a potential restart of Gibraltar's SX/EW plant in 2024, which could further increase copper production for fairly nominal capital spend.

05:58 Lastly on Gibraltar, our engineering team is now well advanced on a reserve update and we expect to have that finalized in the second quarter. At that time, we should have more to say about a potential mine life extension. Changing over to Florence and we certainly were hoping that the EPA would have publicly issued the UIC permit by now and started the public comment period. That was certainly our expectation based on the time estimate that they have given to us previously. It may sound a bit like a broken record, when I say that the EPA process is still advancing with no significant issues, but that is in fact the case.

06:35 We continue to have frequent communication with the regulator and based on those discussions we believe the remaining work is mainly administrative and that there are no substantive issues outstanding. We continue to expect the draft permit to be publicly issued very soon. In the meantime, we continue to advance the technical aspects of the project that we can control. Detailed engineering is complete and procurement of key long lead-time items is well advanced with approximately $45 million incurred or committed. 07:05 We want to be sure that we're ready to go as soon as our final permit is issued and major components are now being fabricated in Europe, Asia and South America.

Looking back at 2021, it was a year of many accomplishments. Our production base at Gibraltar allowed us to capitalize on the strong copper price and produce the best ever financials for the company. In February, we took advantage of a hot bond market to refinance an upside or high yield notes at a reduced interest rate. And later in the year we added a $50 million revolver. 07:37 These two transactions combined with over $200 million in operating margin and cash flow from Gibraltar in the year have put us in a great position to move forward with development of the commercial facility at Florence.

We also recently extended our copper price protection program to secure a minimum price of $4 a pound for almost all of this year's production and Bryce can talk more about that in a minute. 08:02 At Yellowhead we continued important community relations work in preparation for the upcoming environmental assessment process, which we expect to commence this year with the support of local communities. We spun out the Harmony Gold project, which is idle in Taseko for many years. It's now in the hands of JDS. We retained a 15% carried interest and a 2% NSR and I'm optimistic that, that will create value for Taseko shareholders in the future.

08:31 At New Prosperity, the confidential facilitate a dialog with the province in the TNG is ongoing. And while I can't provide any further details at this time, I think the fact that all the parties wanted to extend that agreement and continue the dialog is a very positive sign. So we've had a lot on the go and very much looking forward to this next year, which we believe will be a pivotal one for the company as we move into construction of our second producing asset. 08:55 I'll now turn the call over to Bryce to give you some additional color on the financials.

Bryce Hamming: 09:00 Thanks, Stuart.

And good morning everyone. I'll start this portion of the earnings call with a review of our 2021 annual financial results before talking more specifically about the quarter. In 2021, we realized $433 million in revenue on sales of $105 million pounds of copper, 26% increase from 2020. This result was greatly assisted by the copper price, we saw an LME average price of $4.23 per pound in 2021. And after factoring in positive provisional payments due to the rising copper price trend, our average realized price at Gibraltar was $4.31 per pound.

09:42 We also benefited from the Canadian dollar that averaged US to Canadian FX rate of $1.25. The last time copper were at these levels a decade ago, the Canadian dollar was at parity to the US dollar. So in Canadian dollar terms these are truly record high copper prices, which are continuing to benefit us as a Canadian mine into 2022. We are also very proud of the fact that COVID did not have any notable negative impact on our operations in 2021 or on our supply chains and that we were able to operate Gibraltar mine continuously, despite many waves of the pandemic that were thrown at us. So was the weather events that Stuart touched on.

10:24 C1 operating costs were steady near our life of mine average $1.90 per pound and benefited from capitalized stripping in Pollyanna and the Gibraltar pit being deferred, which was higher at $60 million for the year on a 75% basis. Sustaining capital also increased by $8 million over 2020 levels due to scheduled component replacements with notable work programs on some of the shovels. Healthy operating margin contributed to the record adjusted EBITDA of $201 million, which was 85% greater than in 2020 when the average copper price was only $2.80 per pound. It's really illustrates Gibraltar's operating leverage to the copper price. 11:05 GAAP earnings was $0.13 per share and adjusted earnings was $0.16 a share.

Our cash flow statement highlights that our operating cash flow from Gibraltar continued to fund our ongoing financing costs as well as our investment in Florence. Cash flow from operations was $175 million and funded capital expenditures at Gib of $88 million and our Florence copper cash spend of $43 million. Cost per Florence included spend on detailed engineering, which is now complete, as well as deposits on lead order equipment items for the commercial scale SX/EW plan. These purchases from our 2021 financings have allowed us to protect the Florence project execution schedule, as well as against inflation and supply chain risks. 11:53 We finished the year with $300 million in liquidity and our cash balance was $237 million.

We started the year with $85 million and benefited from 2 notable financings. The first being our $400 million 2026 senior notes, which were issued at 7% coupon, that generated $170 million in net proceeds after repayment of the 2020 new nodes. And then the closing of the 3.5 year $50 million revolving credit facility with National Bank. And these are all part of our funding plans for Florence. 12:26 Our current copper prices and with their ending balance sheet, we are in a very strong position to fully fund Florence and our other capital programs with their own means.

That said, we are still considering ancillary financing options, should we need it, and where the cost of capital is supportive of our strategic plans. For Gibraltar, the major capital program in 2022 will be the planning underway for the move of the in-pit crusher that currently sits over the Connector Pit. We're planning to spend about $15 million on a 75% basis this year to prepare for this crusher move, which will be moved in 2023. 13:06 With respect to the fourth quarter itself, as Stuart mentioned, we only sold 24 million pounds of the 29 million pound that we produced and we carried higher than average inventories at the end of the year, just shy of 10 million pounds. We are working through the extra concentrate inventory this quarter to get it shipped and expect Q1 ending inventory to be back to more normal levels, which should bolster Q1 earnings relative to Q1 production.

Despite the challenges with realizing sales, we still achieved $103 million in revenue in the fourth quarter based on the robust copper price, which has averaged $4.37 per pound, our best average price so far. 13:47 With operating cost of $1.94 per pound we were able to generate strong operating margins, albeit on lower sales volumes in the fourth quarter. Costs in the fourth quarter also benefited from a strong byproduct credit from moly, which averaged just shy of $19 per pound and to shy of 500,000 pounds of sales, as well as low oxide cost of $0.22 per pound due to lower treatment and refining charges on our copper concentrate. This quarter we realized some of the lowest TCRCs that the Gibraltar Mine has ever seen as a result the tight physical market conditions and the fact that Gibraltar has a very desirable clean concentrate. 14:29 Adjusted EBITDA for the quarter was robust at $53 million.

Although due to the growing ending inventory exceeded our cash flow from operations by $16 million. Our cash position in the quarter was relatively neutral from where it ended in Q3 with cash flows from operations of $37 million, funding our CapEx of $33 million and our debt service costs of $6 million. And that CapEx included our Florence spend. 14:57 GAAP net income was $11.8 million or $0.04 per share and after excluding unrealized losses on derivatives and unrealized FX gains, adjusted net income was $13 million or $0.05 per share. Not adjusting, the earnings was realized losses arising from the premiums paid on protection for the fourth quarter.

Adding this back would have increased earnings by an additional $6 million or $0.02 per share. During rises in the price of spot copper, which we saw at various times during the year, we were able to execute on our long-standing hedging practice of securing minimum copper prices. We are extremely pleased that as of today we have at least 90% of our share of 2022 estimated production to be covered with a minimum $4 floor price. 15:42 We have covered 85 million pounds at $4 with the ceiling of $5.60 to June and then the $5.40 ceiling for the second half of the year. Through the use of these copper callers, we were able to continue to provide significant upside to our shareholders, while ensuring we can execute on our capital investment program.

We will continue to look for these opportunities in the coming months for further copper price protection for 2023 near these similar 2022 levels as we prepare for starting the construction of Florence. 16:13 With that, I'll now turn it back to the operator for any questions.

Operator: 16:18 Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question your first question comes from Orest Wowkodaw with Scotiabank.

Please go ahead.

Orest Wowkodaw: 16:45 Yes, good morning. I'm wondering if you could provide us more color on your 2022 guidance of copper production of 150 million pounds. Specifically if you could give us some of the assumed component in that number in terms of average grade or throughput would be helpful. Thank you.

Stuart McDonald: 17:06 Hi, Orest. It's Stuart speaking. Maybe I'll start with that and pass it through. But generally now we're seeing grades that are going to be slightly below our reserve grade average. It's a 0.25 reserve as you know, it will be below that this year.

And in terms of grade and recovery, I think we want to be a little bit cautious about what we say there, certainly moving into the Gibraltar Pit. As we've talked about in the past, there are opportunities to push throughput and push tons above the 85,000 tons a day, but I would say, we're still working through that and trying to figure out the best way to optimize throughput and recoveries and some of the recovery challenges that we've seen. So, I don't know Richard, if you have anything to add.

Richard Tremblay: 17:55 Yeah. No, I think that covered it pretty well, Stuart.

The only, I guess, part I'd add is that the Gibraltar is definitely softer and there seems to be or there is a lot of upside on the throughput piece that we're just working through the how best to optimize the overall copper production.

Orest Wowkodaw: 18:13 Okay. And when I look back over the last couple of quarters, throughputs has been below 85,000 tons a day. I think for -- but the last year half or so, should we expect that now to approach that throughput design as you're transitioning pits? Or what's the timeline on that?

Stuart McDonald: 18:34 Yeah. So in the previous quarters, the ore was all coming from Pollyanna pit, which is significantly hardened ore and a more challenging or more energy intensive to grind and process.

And as we transition into Gibraltar pit, the limit -- we will not be Power Limited, we will be more metallurgically limited in terms of optimizing overall plant performance is what's going to be the optimum point for us to operate at.

Orest Wowkodaw: 19:06 Okay. And then could you also give us an estimate on plan spending related to deferred stripping and sustaining capital at Gibraltar this year?

Stuart McDonald: 19:18 I think in terms of capital strip last year 2021, I think we are around $80 million for the year, give or take. And that we're thinking that will be lower moving into 2022 hear, something closer to $60 million on the capital strip. And then as Bryce mentioned in his comments that there is a capital project we have to take on to move an in-pit crusher.

Our share of that is going to be about $15 million this year. And that move will take place in 2023, but we got to spend money this year to get started on that project. Beyond that, I think our all other sustaining CapEx will be at normal levels that you've seen in in the last year or two.

Orest Wowkodaw: 20:04 Okay. So sort of like $30 million plus extra $15 million give or take?

Stuart McDonald: 20:11 For sustaining CapEx.

I don't know, Bryce --

Bryce Hamming: 20:14 Yeah. That's probably more on a 100% basis. Just to clarify, when Stuart said $80 million for capitalized stripping, he talked about 100% basis. And I think we're expecting that to be down by $20 million on 100% basis. And then sustaining capital levels that we saw previously which would probably be in that $25 million to $30 million on 100% basis.

Orest Wowkodaw: 20:38 Okay, thank you.

Operator: 20:44 Thank you. Your next question comes from Ed Brucker with Barclays. Please go ahead.

Ed Brucker: 20:50 Hey guys, thanks for the call and thanks for taking my question.

So I wanted to ask about the cost in the fourth quarter. Can you kind of explain that especially versus the third quarter, which is a bit higher. Was it all diesel costs or rising input costs, or was it mostly from operating leverage from lower production? And then should we expect higher costs like that through first quarter 2022 kind of due to the lower production or could there be some offset from the unwind of inventory?

Stuart McDonald: 21:26 Yeah, I think Q3 over Q4, obviously the big change there was the production. So the copper production is going to be end of grade and things like that are going to be the biggest driver of our unit costs. I think total spending, it doesn't change much from quarter to quarter.

Yeah, moving -- and then moving forward into 2022. I think you'll see a similar profile where it kind of mirrors our production, so we will have lower production in Q1 and therefore higher C1 costs and then that will kind of -- those costs will come down as we get later on in the year. But something in the range of $1.90 a pound, $1.92 a pound, that's kind of where we're going to be on an operating basis here. That's an average level for Gibraltar that we're going to expect to see going forward.

Ed Brucker: 22:25 Got it.

That's helpful. And then just could you give us a reminder on your thoughts on the cadence of the Florence capital spend? I know you've done a bit of work on it, but do you plan to really ramp up production or -- not production, construction immediately after receiving the UIC permit after the 45-day comment period?

Stuart McDonald: 22:50 Yeah. So after -- I mean, we are continuing to advance work to be ready to hit the ground running the minute we do get the UIC permit. So we're really positioning ourselves to be able to do that and we're continuing to try to look to do all of the items that we can ahead of time. And then when we have the permit be able to really advance and not have any -- not have a slow ramp-up in construction hit the ground running hard.

Ed Brucker: 23:23 Got it. And then last one from me. Just the cost of the hedge program. Should we think about it, it's kind of the $5 million to $6 million like we saw in this quarter that you just implemented for the rest of the year 2022.

Stuart McDonald: 23:41 Yeah.

Generally we target -- when we look at purchasing protection, we're generally targeting sort of that $0.05 to $0.07 per pound range. I think, the one that we executed were sort of in that order of magnitude with the call. So if we're looking beyond 2022, that's kind of typically the budget we have set aside when the opportunities arise. And then we set the calls, depending on what that amount of budget can buy us.

Ed Brucker: 24:13 Great.

Thanks for the questions and congratulations on the good year.

Operator: 24:21 Thank you. [Operator Instructions] Your next question comes from Craig Hutchison with TD Securities. Please go ahead.

Craig Hutchison: 24:32 Hi, good morning.

I think a follow-up question just on Florence. I think the budget is $230 million. Can you just clarify how much of that budget has already been deployed in the spending that you guys had in 2021.

Stuart McDonald: 24:52 Sure. Yeah.

Craig, hi, it's Stuart here. I mean as I -- we've committed to about $45 million on the long lead-time items. We made those commitments, most of those commitments in the fourth quarter. Not all of that money is actually flow through as CapEx, it will kind of dribble through over the next quarter or two here in the New Year. But I consider that $45 million, essentially spent.

And then beyond that we’ve spent some money on detailed engineering, which is part of the original budget, and that would probably be in the range of $10 million. So that's essentially where we are on the overall spend.

Craig Hutchison: 25:39 Somewhere in the order of I guess $55 million?

Stuart McDonald: 25:44 Yeah.

Craig Hutchison: 25:45 And then just assuming you guys get the permits for the first half of this year. How long would to take to get to commercial production from the moment you guys sort of break ground on full construction?

Richard Tremblay: 26:01 Yeah.

We're looking at an 18-month kind of schedule to start -- completing construction and having production starting to ramp up at that point.

Craig Hutchison: 26:17 Okay. May be just one last question Rich. I just wanted to clarify, you said that the C1 costs for Gibraltar for this year, you think are going to be in the range of $1.90 to $2.00, is that correct?

Richard Tremblay: 26:32 Yeah, you're going to pin me to that. That was a general kind of comment.

But yeah, I think, that's the range. We're not expecting any kind of cost surprises. I think if you look at the last 2 years, we've been at $1.90, $1.92. So somewhere in that range. You'll see it -- you should see it continue.

Craig Hutchison: 26:50 Okay. Great, thanks guys.

Operator: 26:56 Thank you. Your next question comes from Mike Kozak with Cantor. Please go ahead.

Mike Kozak: 27:01 Yeah. Good morning everybody. Thanks for taking my questions. So at Florence, from the day you get the draft UIC it then starts the 45-day public comment period. My first question is, after that 45-day period concludes how long does it take for the draft UIC permit to convert to a final UIC permit? Is that something that you will have to be waiting on the EPA again for? Or is it just an automatic?

Stuart McDonald: 27:26 Yeah, it's really going to be a function of the comments received and how substantive materially they are and EPA will go through a process of reviewing the comments received or comments made at the public hearing that occurs at both the 30 day mark of the 45-day public comment period.

So that's going to take them some time. If they received no comments, then the drop permit issued for public comment essentially immediately converts and is issued as a final permit, but do expect there to be some comments and the EPA will take time to assess those. And so I'm going to be dependent on what level of comments they receive and what issues are raised, if any.

Mike Kozak: 28:10 Understood. Okay.

And then second question, Craig, kind of just asked it. But, so you're not going to be formally putting out 2022 cost guidance, but informally expected around $100, $92 bucks per pound. Is that correct?

Stuart McDonald: 28:23 Yeah, that's correct.

Mike Kozak: 28:24 Okay, great. And then the last one here, I think the last reserve calculation you did at Gibraltar, you used a copper price of $2.75 per pound for the reserve pit shells.

When -- how are you thinking about the recalculation is coming in Q2? Are you going to keep it there or maybe move it up a little bit. Because presumably there'll be a lot of slightly lower grade material that would convert?

Stuart McDonald: 28:48 Yeah, there is a lot of other material that in -- currently classified as a resource outside of our reserve. There's about 500 million tons of that. And certainly the engineering exercise that we're going through is to look at that material and with a higher copper price and with the new world that we're in, what portion of that resource can be brought over into reserve. And we believe there is a great opportunity there to extend the mine life, and that's what we're working on now and optimistic, as I said in my notes, we are optimistic that we can add several years -- add several years on to the end of the mine life without a major impact on life of mine grade, either the grade of that resources is fairly similar.

Mike Kozak: 29:44 Perfect. Thanks. That's it for me. Thanks guys.

Operator: 29:50 Thank you.

They are no further questions at this time. Taseko, you may proceed.

Stuart McDonald: 29:56 Great. Okay. Well, thanks everyone for joining this morning and we will talk to you again after the first quarter.

Thanks.

Operator*: 30:06 Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.