Taseko Mines: Gibraltar Mine Life Extended By 6 Years
Summary
- Gibraltar's mine life has been extended by around six years with the updated plan.
- This would put the end of mine life at 2044 now instead of 2038.
- At current (roughly US$4.75) copper prices, Gibraltar's after-tax NPV8 (75% basis) is around US$1.6 billion with the updated plan.
- The permitting process for Florence Copper continues to move slowly.
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Taseko Mines (NYSE:TGB) announced a significant increase in the reserves at Gibraltar, resulting in an estimated mine life that was extended by approximately six years.
An improved outlook for long-term copper prices has allowed Taseko to update the pit designs at Gibraltar, adding around 200 million tons of reserves to the life of mine plan. While the process of getting Florence Copper approved remains very slow (although I expect it to get the final permit later this year), the increased reserves at Gibraltar adds value to Taseko's operational asset. With the updated mine plan and current (US$4.75) copper prices, Taseko's 75% share of Gibraltar has an after-tax NPV8 that is estimated at around US$1.6 billion.
Increased Reserves
Taseko now reports 706 million tons of reserves at Gibraltar (as of the end of 2021) with an average copper grade of 0.25% and an average molybdenum grade of 0.08%. The reserves are based on a US$3.05 copper price, which is a $0.30 increase compared to the US$2.75 copper price that it used in 2019.
Updated Reserves At Gibraltar (tasekomines.com)
This compares to the 538 million tons of reserves (also with an average 0.25% copper grade and 0.008% molybdenum grade) that Taseko reported at the end of 2020 (updated from the 2019 technical report).
Previous Reserves At Gibraltar (tasekomines.com)
Taseko is now looking at Gibraltar operating until 2044 compared to a previous expectation that it would operate until 2038.
New Plan For Ore Milling By Year (tasekomines.com)
The additional years of mine life appears to largely come from accessing additional ore at the Extension and Pollyanna pits towards the end of Gibraltar's lifespan.
Old Plan For Ore Milling By Year (tasekomines.com)
Copper production at Gibraltar (100% basis) is now expected to average 128 million pounds per year between 2022 and 2026, 129 million pounds per year between 2026 and 2031, 130 million pounds per year from 2032 to 2036, 146 million pounds between 2037 and 2041, before tailing off to 103 million pounds per year during the final three years of mine life.
New Production Schedule (tasekomines.com)
The strip ratio from the new plan increases a bit from 1.9 to 2.4, while Taseko estimates an after-tax NPV8 (75% basis) of CAD1.1 billion or US$0.9 billion at long-term copper prices of US$3.50 per pound. At current copper prices (around US$4.75 per pound) instead, the after-tax NPV8 (75% basis) increases to around CAD2.0 billion or US$1.6 billion.
Florence Copper
The Florence Copper permitting process continues to be a waiting game as the 45-day public comment period doesn't appear to have started yet. There haven't been any major issues in the permitting process over the years, so I'd still expect final approval to be granted later this year.
With the continuing slow speed of the permitting process, I'd expect Florence Copper first production to now end up starting around late 2023 to early 2024 timeframe.
The relatively limited pipeline of new copper projects coming online after 2023 should help keep copper prices reasonably strong when Florence Copper starts producing though.
Conclusion
The improvement in long-term copper price expectations has allowed Taseko to update its mine plan for Gibraltar. This has resulted in it adding close to 200 million tons of reserves (at a similar copper grade to existing reserves), and extending the end of mine life from 2038 to 2044. At current copper prices, Gibraltar has significant value, with the updated plan resulting in an estimated after-tax NPV8 (75% basis) of around US$1.6 billion.
In terms of other potential catalysts, Taseko is still waiting for further progress in the permitting process for Florence Copper. I expect this to continue to advance forward (as it has for the past few years), although at a slow pace as usual. Thus it may be better to assume a late 2023 to early 2024 first production date for Florence Copper now.
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