EX-99.1 2 exhibit99-1.htm EXHIBIT 99.1 Taseko Mines Limited: Exhibit 99.1 - Filed by newsfilecorp.com

Condensed Consolidated Interim Financial Statements
March 31, 2023
(Unaudited)


TASEKO MINES LIMITED
Condensed Consolidated Balance Sheets
(Cdn$ in thousands)
(Unaudited)

                   
          March 31,     December 31,  
    Note     2023     2022  
                   
ASSETS                  
Current assets                  
  Cash and equivalents         102,265     120,858  
  Accounts receivable          16,018     13,223  
  Inventories   9     108,725     92,846  
  Other financial assets    10     5,353     9,013  
  Prepaids         4,316     4,931  
          236,677     240,871  
                   
Property, plant and equipment   11     1,134,920     1,029,240  
Inventories   9     5,656     –  
Other financial assets    10     9,248     2,989  
Goodwill          5,574     5,584  
          1,392,075     1,278,684  
                   
LIABILITIES                  
Current liabilities                  
  Accounts payable and other liabilities         77,036     66,716  
  Current portion of long-term debt    12     25,511     18,409  
  Current portion of deferred revenue   13     12,643     12,065  
  Current portion of other financial liabilities   14     15,262     –  
  Interest payable on senior secured notes         4,731     14,221  
  Current income tax payable         334     1,227  
          135,517     112,638  
                   
Long-term debt   12     583,537     568,160  
Provision for environmental rehabilitation ("PER")         131,945     113,725  
Deferred and other tax liabilities         73,722     76,255  
Deferred revenue   13     47,569     47,620  
Other financial liabilities   14     59,358     3,877  
          1,031,648     922,275  
                   
EQUITY                  
Share capital   15     484,209     479,926  
Contributed surplus         52,143     55,795  
Accumulated other comprehensive income ("AOCI")         25,740     26,792  
Deficit         (201,665 )   (206,104 )
          360,427     356,409  
          1,392,075     1,278,684  
                   
Subsequent event    12b              
Commitments and contingencies   17              

The accompanying notes are an integral part of these consolidated interim financial statements.

1

TASEKO MINES LIMITED
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Cdn$ in thousands, except share and per share amounts)
(Unaudited)

          Three months ended March 31,   
    Note     2023     2022  
                   
Revenues   4     115,519     118,333  
Cost of sales                  
  Production costs   5     (74,380 )   (75,560 )
  Depletion and amortization   5     (12,027 )   (13,506 )
Earnings from mining operations         29,112     29,267  
                   
General and administrative         (3,300 )   (2,701 )
Share-based compensation expense   15b     (3,385 )   (3,080 )
Project related expense         (325 )   (168 )
Loss on derivatives   6     (4,216 )   (9,833 )
Other income         434     337  
Income before financing costs and income taxes         18,320     13,822  
                   
Finance expenses, net   7     (11,388 )   (11,989 )
Foreign exchange gain         863     4,450  
Income before income taxes         7,795     6,283  
                   
Income tax expense   8     (3,356 )   (1,188 )
Net income          4,439     5,095  
                   
Other comprehensive income (loss):                  
Items that will remain permanently in other comprehensive income (loss):        
Gain (loss) on financial assets          (385 )   912  
Items that may in the future be reclassified to profit (loss):                   
Foreign currency translation reserve         (667 )   (3,577 )
Total other comprehensive loss          (1,052 )   (2,665 )
                   
Total comprehensive income          3,387     2,430  
                   
Earnings per share                  
  Basic   16     0.02     0.02  
  Diluted   16     0.02     0.02  
                   
Weighted average shares outstanding (thousands)                  
  Basic   16     288,007     285,768  
  Diluted   16     291,039     289,500  

The accompanying notes are an integral part of these consolidated interim financial statements.

2

TASEKO MINES LIMITED
Condensed Consolidated Statements of Cash Flows
(Cdn$ in thousands)
(Unaudited)

          Three months ended March 31,  
    Note     2023     2022  
                   
Operating activities                  
Net income for the period          4,439     5,095  
Adjustments for:                  
Depletion and amortization         12,027     13,506  
Income tax expense    8     3,356     1,188  
Finance expenses, net   7     11,388     11,989  
Share-based compensation expense    15b     3,609     3,273  
Loss on derivatives   6     4,216     9,833  
Unrealized foreign exchange gain          (950 )   (4,398 )
Amortization of deferred revenue         (1,372 )   (1,721 )
Other operating activities         (249 )   (577 )
Net change in working capital    18     (8,465 )   13,565  
Cash provided by operating activities         27,999     51,753  
                   
Investing activities                  
Gibraltar capitalized stripping costs    11     (12,721 )   (15,142 )
Gibraltar sustaining capital expenditures    11     (4,691 )   (3,572 )
Gibraltar capital project expenditures   11     (7,338 )   (3,590 )
Florence Copper development costs   11     (9,874 )   (20,958 )
Other project development costs    11     (273 )   (41 )
Acquisition of Cariboo Copper Corp., net   3,14     2,948     -  
Purchase of copper price options   6     -     (4,295 )
Other investing activities         (19 )   (258 )
Cash used for investing activities         (31,968 )   (47,856 )
                   
Financing activities                  
Interest paid          (20,725 )   (18,678 )
Repayment of equipment loans and leases         (5,737 )   (5,049 )
Revolving credit facility advance   12b     13,518     -  
Settlement of performance share units         (1,922 )   (1,927 )
Proceeds from exercise of stock options          291     534  
Cash used for financing activities         (14,575 )   (25,120 )
Effect of exchange rate changes on cash and equivalents         (49 )   (2,817 )
Decrease in cash and equivalents         (18,593 )   (24,040 )
Cash and equivalents, beginning of period         120,858     236,767  
Cash and equivalents, end of period         102,265     212,727  
                   
Supplementary cash flow disclosures   18              

The accompanying notes are an integral part of these consolidated interim financial statements.

3

TASEKO MINES LIMITED
Consolidated Statements of Changes in Equity
(Cdn$ in thousands)
(Unaudited)

     Share       Contributed                     
     capital       surplus       AOCI       Deficit       Total   
                               
Balance at January 1, 2022   476,599     55,403     6,649     (180,133 )   358,518  
Share-based compensation   -     2,277     -     -     2,277  
Exercise of options    814     (280 )   -     -     534  
Settlement of performance share units   2,217     (4,144 )   -     -     (1,927 )
Total comprehensive income for the period    -     -     (2,665 )   5,095     2,430  
Balance at March 31, 2022   479,630     53,256     3,984     (175,038 )   361,832  
                               
Balance at January 1, 2023   479,926     55,795     26,792     (206,104 )   356,409  
Share-based compensation   -     2,262     -     -     2,262  
Exercise of options   450     (159 )   -     -     291  
Settlement of performance share units   3,833     (5,755 )   -     -     (1,922 )
Total comprehensive income (loss) for the period    -     -     (1,052 )   4,439     3,387  
Balance at March 31, 2023   484,209     52,143     25,740     (201,665 )   360,427  

The accompanying notes are an integral part of these consolidated interim financial statements.

4

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

1. REPORTING ENTITY

Taseko Mines Limited (the "Company" or "Taseko") is a corporation governed by the British Columbia Business Corporations Act. These unaudited condensed consolidated interim financial statements of the Company as at and for the three month period ended March 31, 2023 comprise the Company, its subsidiaries and its 87.5% effective interest in the Gibraltar joint venture. The Company is principally engaged in the production and sale of metals, as well as related activities including mine permitting and development, within the province of British Columbia, Canada and the State of Arizona, USA. 

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting and follow the same accounting policies and methods of application as the Company's most recent annual consolidated financial statements. These unaudited condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and should be read in conjunction with the consolidated annual financial statements of the Company as at and for the year ended December 31, 2022, prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

These unaudited condensed consolidated interim financial statements were authorized for issue by the Company's Audit and Risk Committee on May 3, 2023.

(b) Use of judgments and estimates

In preparing these unaudited condensed consolidated interim financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies, including the accounting for the Cariboo acquisition (Note 3) and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgments made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those applied to the annual consolidated financial statements as at and for the year ended December 31, 2022. 

(c) IFRS Pronouncements

Several new accounting standards, amendments to existing standards and interpretations have been published by the IASB. Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the new standard.

New standards, amendments and pronouncements that became effective for the period covered by these statements have not been disclosed as they did not have a material impact on the Company's unaudited condensed consolidated interim financial statements.

5

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

3. ACQUISITION OF CARIBOO COPPER CORPORATION

On March 15, 2023 ("Acquisition Date"), the Company completed the acquisition of an additional 12.5% interest in the Gibraltar Mine from Sojitz Corporation ("Sojitz"). Gibraltar is operated through a joint venture which is owned 75% by Taseko and 25% by Cariboo Copper Corporation ("Cariboo"). Under the terms of the agreement, Taseko has acquired Sojitz's 50% interest in Cariboo and now holds directly and indirectly an effective 87.5% interest in the Gibraltar Mine.

The acquisition price consists of a minimum amount of $60 million payable over a five-year period and potential contingent performance payments depending on Gibraltar mine copper revenues and copper prices over the next five years. An initial $10 million has been paid to Sojitz upon closing and the remaining minimum amount will be paid in $10 million annual instalments over the next five years. There is no interest payable on the minimum amounts.

Taseko acquired Sojitz's 50% interest in Cariboo and become a party to the existing Cariboo shareholders agreement with Dowa Metals & Mining Co., Ltd (25%) and Furukawa Co., Ltd (25%). There will be no change to the offtake contracts established in 2010 and Dowa and Furukawa will continue to receive 30% of Gibraltar's copper concentrate offtake. There will be no impact to the operation of the Gibraltar Joint Venture.

The contingent performance payments are payable annually for five years only if the average LME copper price exceeds US$3.50 per pound in a year. The payments will be calculated by multiplying Gibraltar mine copper revenues by a price factor, which is based on a sliding scale ranging from 0.38% at US$3.50 per pound copper to a maximum of 2.13% at US$5.00 per pound copper or above. Total contingent payments cannot exceed $57 million over the five-year period, limiting the acquisition cost to a maximum of $117 million.

The total purchase consideration was discounted to determine fair value and the amounts as at the Acquisition Date are estimated as follows:

Fixed instalments payable    51,387  
Performance payments payable   28,010  
Total fair value of consideration payable   79,397  

The Company has joint control over Cariboo which is a joint arrangement and as such proportionately consolidates its 50% portion of all the Cariboo assets, liabilities, income and expenses. The purchase consideration has been allocated to the assets acquired and liabilities assumed, based upon their estimated fair values at the date of acquisition. The following sets forth the allocation of the preliminary purchase price: 

Cash and cash equivalents   13,467  
Accounts receivable and other assets   1,525  
Reclamation deposits   6,262  
Inventory   15,860  
Property, plant and equipment   72,304  
Deferred tax asset   5,594  
Accounts payable and other liabilities   (8,535 )
Debt   (9,144 )
Provision for environmental rehabilitation   (17,936 )
Total fair value of net assets acquired   79,397  

6

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

From the Acquisition Date to March 31, 2023, $1.3 million of the Company's consolidated net income relates to its share of Cariboo.

The values of assets and liabilities acquired are based on preliminary fair values, which are subject to change upon finalization of a complete valuation.  Based on the complete valuation, the Company will also determine whether the consideration paid compared to the fair value of assets and liabilities acquired results in a bargain purchase. If the acquisition had taken place at the beginning of the year, the unaudited consolidated revenue for the three-month period ended March 31, 2023 would have been approximately $130,546 and net earnings of the Company would have been approximately $6,507.

4. REVENUE

    Three months ended
March 31,		  
    2023     2022  
Copper contained in concentrate   109,123     114,455  
Copper price adjustments on settlement   (202 )   660  
Molybdenum concentrate   7,749     4,070  
Molybdenum price adjustments on settlement   1,831     102  
Silver (Note 13)   1,532     1,519  
Total gross revenue   120,033     120,806  
Less: Treatment and refining costs   (4,514 )   (2,473 )
Revenue   115,519     118,333  

5. COST OF SALES

    Three months ended
March 31,		  
    2023     2022  
Site operating costs   74,438     59,859  
Transportation costs   5,104     5,115  
Changes in inventories of finished goods   399     7,577  
Changes in inventories of ore stockpiles   (5,561 )   3,009  
Production costs   74,380     75,560  
Depletion and amortization   12,027     13,506  
Cost of sales   86,407     89,066  

Site operating costs include personnel costs, non-capitalized waste stripping costs, repair and maintenance costs, consumables, operating supplies and external services.

6. DERIVATIVE INSTRUMENTS

During the three month period ended March 31, 2023, the Company purchased zero cost copper collar contracts for 42 million pounds of copper with maturity dates ranging from July through to December 2023, with a minimum copper strike price of US$3.75 per pound and a ceiling price of US$4.70 per pound.

During the three month period ended March 31, 2023, the Company purchased fuel call options for 12 million litres of diesel with maturity dates ranging from July to December 2023, at a total cost of $941.

The Company recognized a net realized loss of $1,488 on copper collar contracts for 15 million pounds with a minimum strike price of US$3.75 per pound and a ceiling price of US$4.72 per pound, that expired out-of-the-money during the three month period ended March 31, 2023.

7

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

    Three months ended
March 31,		  
    2023     2022  
Net realized loss on settled copper options   1,488     2,347  
Net unrealized loss on outstanding copper options   1,644     7,461  
Realized loss on fuel call options   538     -  
Unrealized loss on fuel call options   546     25  
    4,216     9,833  

Details of the outstanding copper price option contracts at March 31, 2023 are summarized in the following table:

  Quantity Strike price Period Cost Fair value
Copper collar contracts 15 million lbs US$3.75/per lb
US$4.72/per lb		 Q2 2023 1,488 368
Copper collar contracts 42 million lbs US$3.75/per lb
US$4.70/per lb		 H2 2023 Zero-cost 2,686

7. FINANCE EXPENSES

    Three months ended
March 31,		  
    2023     2022  
Interest expense   11,541     10,182  
Amortization of financing fees   671     508  
Finance expense - deferred revenue (Note 13)   1,473     1,373  
Accretion on PER   504     92  
Less: interest expense capitalized   (1,880 )   -  
Finance income   (921 )   (166 )
    11,388     11,989  

For the three month period ended March 31, 2023, interest expense includes $406 (2022 - $324) from lease liabilities and lease related obligations.

8. INCOME TAX

    Three months ended
March 31,		  
  2023     2022  
Current income tax expense   544     519  
Deferred income tax expense   2,812     669  
    3,356     1,188  

8

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

9. INVENTORIES

    March 31,     December 31,  
    2023     2022  
Ore stockpiles   61,913     45,306  
Copper contained in concentrate   11,350     12,105  
Molybdenum concentrate   773     417  
Materials and supplies   40,345     35,018  
    114,381     92,846  

Included in the ore stockpiles inventory is oxide ore at a cost of $5,656 that is classified on the balance sheet as a long-term asset.

10. OTHER FINANCIAL ASSETS

    March 31,     December 31,  
    2023     2022  
Current:            
Marketable securities   2,183     2,568  
Copper price options (Note 6)   3,054     6,184  
Fuel call options (Note 6)   116     261  
    5,353     9,013  
Long-term:            
Investment in private companies    1,200     1,200  
Reclamation deposits   6,696     434  
Restricted cash   1,352     1,355  
    9,248     2,989  

The Company holds strategic investments in publicly-traded and privately owned mineral exploration and development companies, including marketable securities. Marketable securities and the investment in privately owned companies are accounted for at fair value through other comprehensive income.

9

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

11. PROPERTY, PLANT & EQUIPMENT

The following schedule shows the continuity of property, plant and equipment net book value for the three months ended March 31, 2023:

    Three months
ended March 31,
2023		  
Net book value January 1, 2023   1,029,240  
Additions:      
Gibraltar capitalized stripping costs   14,408  
Gibraltar sustaining capital expenditures   4,758  
Gibraltar capital projects   7,338  
Cariboo acquisition (Note 3)   73,611  
Florence Copper development costs   14,520  
Yellowhead development costs   130  
Aley development costs   143  
Other items:      
Right of use assets   5,959  
Rehabilitation costs asset   36  
Disposals   27  
Foreign exchange translation and other   (704 )
Depletion and amortization   (14,546 )
Net book value at March 31, 2023   1,134,920  

 
 
Net book value		   Gibraltar
Mine 		    Florence
Copper		     Yellowhead     Aley     Other     Total  
At December 31, 2022   610,399     380,987     21,950     14,873     1,031     1,029,240  
Cariboo acquisition (Note 3)   73,611     -     -     -     -     73,611  
Net additions   32,490     14,520     130     143     -     47,283  
Changes in rehabilitation cost asset   36     -     -     -     -     36  
Depletion and amortization   (14,480 )   23     -     -     (89 )   (14,546 )
Foreign exchange translation   -     (704 )   -     -     -     (704 )
At March 31, 2023   702,056     394,826     22,080     15,016     942     1,134,920  

For the three month period ended March 31, 2023, the Company capitalized development costs of $14,520 for the Florence Copper project, which includes $1,880 of capitalized borrowing costs. Since its acquisition of Florence Copper in November 2014, the Company has incurred and capitalized a total of $292.4 million in project development and other costs.

Non-cash additions to property, plant and equipment of Gibraltar include $1,687 of depreciation on mining assets related to capitalized stripping.

Since January 1, 2020, development costs for Yellowhead of $5,840 have been capitalized as mineral property, plant and equipment.

10

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

Depreciation related to the right of use assets for the three month period ended March 31, 2023 was $2,249 (2022: $1,057).

12. DEBT

    March 31,     December 31,  
    2023     2022  
Current:            
  Lease liabilities (d)   10,590     7,613  
  Secured equipment loans (e)   9,373     8,489  
  Lease related obligations (f)   5,548     2,307  
    25,511     18,409  
Long-term:            
  Senior secured notes (a)   533,626     534,118  
  Revolving credit facility (b)   12,396     (925 )
  Lease liabilities (d)   11,023     7,408  
  Secured equipment loans (e)   26,492     24,550  
  Lease related obligations (f)   -     3,009  
    583,537     568,160  
Total debt   609,048     586,569  

(a) Senior secured notes

On February 10, 2021, the Company completed an offering of US$400 million aggregate principal amount of senior secured notes (the "2026 Notes"). The 2026 Notes mature on February 15, 2026 and bear interest at an annual rate of 7.0%, payable semi-annually on February 15 and August 15. A portion of the proceeds were used to redeem the outstanding US$250 million 8.75% senior secured notes due on June 15, 2022. The remaining proceeds, net of transaction costs, call premium and accrued interest, of approximately $167 million (US$131 million) were available for capital expenditures, including at its Florence Copper project and Gibraltar mine, working capital and for general corporate purposes.

The 2026 Notes are secured by liens on the shares of Taseko's wholly-owned subsidiary, Gibraltar Mines Ltd., and the subsidiary's rights under the joint venture agreement relating to the Gibraltar mine, as well as the shares of Curis Holdings (Canada) Ltd. and Florence Holdings Inc. The 2026 Notes are guaranteed by each of Taseko's existing and future restricted subsidiaries. The 2026 Notes also allow for up to US$145 million of first lien secured debt to be issued and up to US$50 million of debt for equipment financing, all subject to the terms of the note indenture. The Company is also subject to certain restrictions on asset sales, issuance of preferred stock, dividends and other restricted payments. However, there are no maintenance covenants with respect to the Company's financial performance.

The Company may redeem some or all of the 2026 Notes at any time on or after February 15, 2023, at redemption prices ranging from 103.5% to 100%, plus accrued and unpaid interest to the date of redemption. On a change of control, the 2026 Notes are redeemable at the option of the holder at a price of 101%.

(b) Revolving credit facility

On October 6, 2021, the Company closed a secured US$50 million revolving credit facility (the "Facility"). The Facility is secured by first liens against Taseko's rights under the Gibraltar joint venture, as well as the shares of Gibraltar Mines Ltd., Curis Holdings (Canada) Ltd., and Florence Holdings Inc. The Facility will be available for capital expenditures, working capital and general corporate purposes.

11

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

The Facility has customary covenants for a revolving credit facility. Financial covenants include a requirement for the Company to maintain a leverage ratio, an interest coverage ratio, a minimum tangible net worth and a minimum liquidity amount as defined under the Facility. The Company was in compliance with these covenants as at March 31, 2023.

On February 1, 2023, the Company entered into an agreement to extend the maturity date of the Facility by an additional year to July 2, 2026. In addition to the one-year extension of the Facility, the lender has also agreed to an accordion feature, which will allow the amount of the Facility to be increased by US$30 million, for a total of US$80 million, subject to credit approval and other conditions.

Amounts outstanding under the facility bear interest at the Adjusted Term SOFR rate plus an applicable margin and have a standby fee of 1.00%. As at March 31, 2023, a total of $13,518 was advanced under the Facility, which was subsequently repaid on April 17, 2023.

(c) Letter of credit facilities

The Gibraltar joint venture has in place a $15 million credit facility for the purpose of providing letters of credit ("LC") to key suppliers of the Gibraltar mine to assist with ongoing trade finance and working capital needs. Any LCs issued under the facility will be guaranteed by Export Development Canada ("EDC") under its Account Performance Security Guarantee program. The facility is renewable annually, is unsecured and contains no financial covenants. As at March 31, 2023, a total of $3.75 million in LCs were issued and outstanding under this LC facility (December 31, 2022 - $3.75 million).

On April 8, 2022, the Company closed a US$4 million credit facility for the sole purpose of issuing LCs to certain key contractors in conjunction with the development of Florence Copper. Any LCs to be issued under this facility will also be guaranteed by EDC. The facility is renewable annually, is unsecured and contains no financial covenants. 

(d) Lease liabilities

Lease liabilities include the Company's outstanding lease liabilities under IFRS 16.

(e) Secured equipment loans

The equipment loans as at March 31, 2023 are secured by some of the existing mobile mining equipment at the Gibraltar mine and commenced between August 2019 and December 2022 with monthly repayment terms of 48 months and with interest rates ranging between 6.4% to 8.9%.

(f) Lease related obligations

Lease related obligations relate to a lease arising under a sale leaseback transaction on certain items of equipment at the Gibraltar mine. The lease commenced in June 2019 and has a term of 54 months. At the end of the lease term, the Company has an option to renew the term, an option to purchase the equipment at fair market value or option to return the equipment. The lease contains a fixed price early buy-out option exercisable at the end of 48 months.

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TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

(g) Debt continuity

The following schedule shows the continuity of total debt for the three months ended March 31, 2023:

Total debt as at January 1, 2023   586,569  
Revolving credit facility advance   13,518  
Lease additions   6,043  
Lease liabilities and equipment loans repayments   (5,737 )
Lease and equipment loans from Cariboo acquisition (Note 3)   9,144  
Unrealized foreign exchange gain   (1,160 )
Amortization of deferred financing charges   671  
Total debt as at March 31, 2023   609,048  

13. DEFERRED REVENUE

    March 31,     December 31,  
    2023     2022  
Current:            
  Customer advance payments (a)   6,882     6,456  
  Osisko - silver stream agreement (b)   5,761     5,609  
Current portion of deferred revenue   12,643     12,065  
Long-term portion of deferred revenue (b)   47,569     47,620  
Total deferred revenue   60,212     59,685  

(a) Customer advance payments

At March 31, 2023, the Company received advance payments from a customer on 1.7 million pounds (100% basis) of copper concentrate inventory (December 31, 2022 - 2.0 million pounds).

(b) Silver stream purchase and sale agreement

The Company has entered into a silver stream purchase and sale agreement with Osisko Gold Royalties Ltd. ("Osisko"), whereby the Company received upfront cash deposit payments totalling $52.7 million for the sale of an equivalent amount of its 75% share of Gibraltar payable silver production until 5.9 million ounces of silver have been delivered to Osisko. After that threshold has been met, 35% of an equivalent amount of Taseko's share of all future payable silver production from Gibraltar will be delivered to Osisko. The Company receives no further cash consideration once silver deliveries are made under the agreement.

13

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

The following table summarizes changes in the Osisko deferred revenue:

Balance at December 31, 2022   53,229  
Finance expense (Note 7)   1,473  
Amortization of deferred revenue   (1,372 )
Balance at March 31, 2023   53,330  

14. OTHER FINANCIAL LIABILITIES

 
 		   March 31,
2023		     December 31,
2022		  
Long-term:            
  Fixed consideration payable to Sojitz (Note 3)   41,387     -  
  Performance payments payable to Sojitz (Note 3)   28,010     -  
  Deferred share units (Note 15b)   5,154     3,877  
  Restricted share units (Note 15b)   69     -  
Balance at March 31, 2023   74,620     3,877  
Less current portion:            
  Fixed consideration payable to Sojitz (Note 3)   9,346     -  
  Performance payments payable to Sojitz (Note 3)   5,916     -  
Long-term portion of other financial liabilities    59,358     3,877  

15. EQUITY

(a) Share capital

    Common shares
(thousands)		  
Common shares outstanding at December 31, 2022   286,493  
  Common shares issued under PSU plan   1,597  
  Exercise of share options   327  
Common shares outstanding at March 31, 2023   288,417  

The Company's authorized share capital consists of an unlimited number of common shares with no par value.

In January 2023, the Company issued 1,597,177 common shares as part of settlement of the performance share units that vested.

14

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

(b) Share-based compensation

     Options
(thousands)		     Average price  
Outstanding at January 1, 2023   9,288     1.62  
  Granted   2,629     2.38  
  Exercised   (327 )   0.89  
  Cancelled/forfeited   (72 )   2.44  
  Expired   (1,166 )   2.86  
Outstanding at March 31, 2023   10,352     1.69  
Exercisable at March 31, 2023   7,950     1.47  

During the three month period ended March 31, 2023, the Company granted 2,629,000 (2022 - 2,113,000) share options to directors, executives and employees, exercisable at an average exercise price of $2.38 per common share (2022 - $2.58 per common share) over a five year period. The total fair value of options granted was $3,575 (2022 - $2,979) based on a weighted average grant-date fair value of $1.36 (2022 - $1.41) per option.

The fair value of options was measured at the grant date using the Black-Scholes formula. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the Black-Scholes formula are as follows:

Expected term (years)   5.0  
Forfeiture rate   0%  
Volatility   66%  
Dividend yield   0%  
Risk-free interest rate   2.9%  
Weighted-average fair value per option   $1.36  

Deferred Performance and Restricted Share Units

    RSUs
(thousands)		     DSUs
(thousands)		     PSUs
(thousands)		  
Outstanding at January 1, 2023   -     1,958     2,500  
  Granted   350     343     830  
  Settled   -     -     (1,375 )
Outstanding at March 31, 2023   350     2,301     1,955  

During the three month period ended March 31, 2023, 342,750 DSUs were issued to directors (2022 - 172,000) and 830,000 PSUs to senior executives (2022 - 595,000). The fair value of DSUs and PSUs granted was $4,344 (2022 - $2,532), with a weighted average fair value at the grant date of $2.38 per unit for the DSUs (2022 - $2.58 per unit) and $4.25 per unit for the PSUs (2022 - $3.51 per unit).

During the three month period ended March 31, 2023, the Company established a non-executive employee Restricted Share Units ("RSUs") plan for employees as long-term incentive compensation and granted 350,000 units, with a weighted average fair value at grant date of $2.38 per unit for the RSUs.

15

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

Share-based compensation expense is comprised as follows:

    Three months ended
March 31,		  
    2023     2022  
Share options - amortization    1,718     1,430  
Performance share units - amortization   545     848  
Restricted share units - amortization   69     -  
Change in fair value of deferred share units    1,277     995  
    3,609     3,273  

16. EARNINGS PER SHARE

Earnings per share, calculated on a basic and diluted basis, is as follows:

    Three months ended
March 31,		  
    2023     2022  
Net income attributable to common shareholders - basic and diluted   4,439     5,095  
(in thousands of common shares)            
Weighted-average number of common shares   288,007     285,768  
Effect of dilutive securities:            
  Stock options   3,032     3,732  
Weighted-average number of diluted common shares   291,039     289,500  
Earnings per common share            
Basic earnings per share   0.02     0.02  
Diluted earnings per share   0.02     0.02  

17. COMMITMENTS AND CONTINGENCIES

(a) Commitments

The Company is a party to certain contracts relating to service and supply agreements. Future minimum payments under these agreements as at March 31, 2023 are presented in the following table:

Remainder of 2023   9,760  
2024   13,586  
2025   5,463  
2026   960  
2027   -  
2028 and thereafter   -  
Total commitments   29,769  

16

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

As at March 31, 2023, the Company had commitments to incur capital expenditures of $7,372 (December 31, 2022 - $9,265) for Florence Copper and $3,785 (December 31, 2022 - $2,795) for the Gibraltar joint venture.

(b) Contingencies

The Company has guaranteed 100% of certain capital lease and equipment loans entered into by the Gibraltar joint venture in which it holds an 87.5% interest. As a result, the Company has guaranteed the joint venture partner's 12.5% share of this debt which amounted to $5,228 as at March 31, 2023.

The Company has also indemnified 100% of a surety bond issued by the Gibraltar joint venture to the Province of British Columbia. As a result, the Company has indemnified the joint venture partner's 12.5% share of this obligation, which amounted to $7,313 as at March 31, 2023.

(c) Mitsui Financing

On December 19, 2022, the Company signed agreements with Mitsui & Co. (U.S.A.) Inc. ("Mitsui") to form a strategic partnership to develop the Company's Florence Copper project (the "Project"). Mitsui has committed to an initial investment of US$50 million conditional on receipt of the final Underground Injection Control permit from the Environmental Protection Agency, with proceeds to be used for construction of the commercial production facility. The initial investment will be in the form of a copper stream agreement (the "Copper Stream") on 2.67% of the copper produced at Florence Copper and Mitsui to pay a delivery price equal to 25% of the market price of copper delivered under the contract.

In addition, Mitsui has acquired an option to invest an additional US$50 million for a 10% equity interest in Florence Copper (the "Equity Option"). The Equity Option is exercisable by Mitsui at any time up to three years following completion of construction of the commercial production facility. If Mitsui elects to exercise its Equity Option, the Copper Stream will terminate. If the Equity Option is not exercised by Mitsui by its expiry date, the Company will have the right to buy-back 100% of the Copper Stream, otherwise, it will terminate when 40 million pounds of copper have been delivered under the agreement.

As part of the arrangement, Taseko and Mitsui have entered into an offtake contract for 81% of the copper cathode produced at Florence during the initial years of production. The initial offtake agreement will cease and be replaced with a marketing agency agreement if the Equity Option is exercised by Mitsui. Mitsui's offtake entitlement would also reduce to 30% if the Equity Option is not exercised by its expiry date until the Copper Stream deposit has been reduced to nil.

For accounting purposes, the Mitsui agreements include derivatives that are required to be fair valued at each reporting period. The Company has determined that the fair value of the derivatives is negligible as of March 31, 2023 based on the contingent nature of the Mitsui agreements and the consideration of other relevant factors.

17

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

18. SUPPLEMENTARY CASH FLOW INFORMATION

    Three months ended
March 31,		  
    2023     2022  
Change in non-cash working capital items:            
  Accounts receivable   (1,546 )   2,862  
  Inventories   (5,612 )   8,194  
  Prepaids   672     1,028  
  Accounts payable and accrued liabilities1   (1,090 )   8,341  
  Advance payment on product sales   426     (5,297 )
  Interest payable   (130 )   (63 )
  Mineral tax payable   (1,185 )   (1,500 )
    (8,465 )   13,565  
Non-cash investing and financing activities            
  Cariboo acquisition, net assets (Note 3)   65,930     -  
  Assets acquired under capital lease   69     164  
  Right-of-use assets    5,959     122  

1Excludes accounts payable and accrued liability changes on capital expenditures.

19. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value, by reference to the reliability of the inputs used to estimate the fair values.

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair values of the senior secured notes are $492,531 and the carrying value is $533,626 at March 31, 2023. The fair value of all other financial assets and liabilities approximates their carrying value.

The Company has certain financial assets and liabilities that are measured at fair value on a recurring basis and uses the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, with Level 1 inputs having the highest priority.

18

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

    Level 1     Level 2     Level 3     Total  
March 31, 2023                        
Financial assets designated as FVPL                        
  Derivative asset copper put and call options   -     3,054     -     3,054  
  Derivative asset fuel call options   -     116     -     116  
    -     3,170     -     3,170  
Financial assets designated as FVOCI                        
  Marketable securities   2,183     -     -     2,183  
  Investment in private companies   -     -     1,200     1,200  
  Reclamation deposits   6,696     -     -     6,696  
    8,879     -     1,200     10,079  
December 31, 2022                        
Financial assets designated as FVPL                        
  Derivative asset copper put and call options   -     6,184     -     6,184  
  Derivative asset fuel call options   -     261     -     261  
    -     6,445     -     6,445  
Financial assets designated as FVOCI                        
  Marketable securities   2,568     -     -     2,568  
  Investment in private companies   -     -     1,200     1,200  
  Reclamation deposits   434     -     -     434  
    3,002     -     1,200     4,202  

There have been no transfers between fair value levels during the reporting period. The carrying value of cash and equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value as at March 31, 2023.

The fair value of the senior secured notes, a Level 1 instrument, is determined based upon publicly available information.

The Company's metal concentrate sales contracts are subject to provisional pricing with the selling price adjusted at the end of the quotational period. At each reporting date, the Company's settlement receivable on these contracts are marked-to-market based on a quoted forward price for which there exists an active commodity market. At March 31, 2023, the Company had net settlement payables of $100 (December 31, 2022 - settlement payables of $209).

The investment in private companies, a Level 3 instrument, are valued based on a management estimate. As this is an investment in a private exploration and development company, there are no observable market data inputs. At March 31, 2023, the determination of the estimated fair value of the investment includes comparison to the market capitalization of comparable public companies.

Commodity price risk

The Company is exposed to the risk of fluctuations in prevailing market commodity prices on the metals it produces.  The Company enters into copper put and collar option contracts to reduce the risk of short-term copper price volatility. The amount and duration of the hedge position is based on an assessment of business-specific risk elements combined with the copper pricing outlook. Copper put and collar option contracts are typically extended adding incremental quarters at established put strike prices to provide the necessary price protection. 

19

TASEKO MINES LIMITED

Notes to Condensed Consolidated Interim Financial Statements

(Cdn$ in thousands - Unaudited)

Provisional pricing mechanisms embedded within the Company's sales arrangements have the character of a commodity derivative and are carried at fair value as part of accounts receivable.

The table below summarizes the impact on revenue and receivables for changes in commodity prices on the provisionally invoiced sales volumes.

 

As at March 31,

 

2023

Copper increase/decrease by US$0.10/lb.1

510

1The analysis is based on the assumption that the period-end copper price increases/decreases US$0.10/lb, with all other variables held constant. At March 31, 2023, 3.8 million pounds of copper in concentrate were exposed to copper price movements. The closing exchange rate at March 31, 2023 of CAD/USD 1.35.

The sensitivities in the above tables have been determined with foreign currency exchange rates held constant.  The relationship between commodity prices and foreign currencies is complex and movements in foreign exchange can impact commodity prices. The sensitivities should therefore be used with care.


20