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Lower grades at Gibraltar mine dent Taseko results

Gibraltar copper mine in British Columbia. (Image courtesy of Taseko Mines.)

Canada’s Taseko Mines (TSX: TKO)(NYSE-AM: TGB)(LON: TKO) saw its finances shaken in the second quarter of the year due to lower mined grades at its 75%-owned Gibraltar open pit copper mine in British Columbia.

The company posted adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of C$1.7 million (about $1.32m) for the three months ended June 30, a 96% drop when compared to the almost C$48 million it reported in the same quarter last year.

President and CEO Stuart McDonald noted that while the Gibraltar mill operated at design capacity in the second quarter, lower head grades contributed to lower recoveries, resulting in copper output of 21 million pounds. The figure represents a 22% decline in production from the same quarter last year.

Rene Cartier, mining analyst at BMO Capital Markets, said Taseko overall earnings were “well below” the bank’s estimate and market consensus.

“Copper production missed our forecast with higher costs weighing on results. Adjusted EBITDA of $1.7 million was well below our forecast of $24.7 million and consensus of $25.1 million,” Cartier wrote.

Mining operations are now advancing deeper into the Gibraltar pit where higher-grade ore is located. As a result, the company expects “significantly higher” copper production in the second half of the year.

Taseko reiterated its 2022 copper production guidance of 115 million pounds, but given the more challenging conditions in the first half of the year, it now expects to be at the lower end of that range.

Like most miners this year, the Vancouver-based company was hit by higher fuel prices. During the second quarter, diesel prices climbed by 23% quarter-over-quarter, and nearly 70% from the same period in 2021.

“Although total operating C1 costs per pound of copper has been driven higher by the lower production in the second quarter, these unit costs will drop significantly in the second half of 2022 as production increases,” Taseko said.

Financials were also impacted by a decline in the international copper price late in the quarter.

The Gibraltar mine produced 20.7 million pounds of copper in the quarter, below the expected 22.4 million pounds. Grade and recovery were 0.17% and 77.3%, respectively, both below BMO’s estimates for the quarter of 0.19% and 82%.

Taseko is waiting for US Environmental Protection Agency (EPA) to begin the public comment period for a draft underground injection control permit for its Florence project in Arizona. The consultation is expected to take 45 days.

The company has pegged Florence’s probable reserves of 345 million tonnes, grading 0.36% copper. The project was recently nominated for two environmental awards.